The Companies Income Tax Act (CITA) requires companies to file their income tax returns and pay their income taxes within six months after their accounting year-end. Most companies have their accounting period spanning from 1 January to 31 December and as such are required to file their income tax returns and pay their income taxes on or before 30 June of the following year. It is common practice for companies to file along with their income tax other corporate taxes such as National Information Technology Development Agency Levy (NITDA Levy), National Agency for Science and Engineering Infrastructure Levy (NASENI Levy), Police Trust Fund Levy (PTF Levy), and Tertiary Education Tax (TET).
In this TaxThursday Publication, we succinctly present salient factors to consider when filing corporate taxes in Nigeria.
Tax Rate Section 9(1) CITA Section 40(1) CITA Section 105 CITA
Tax is chargeable on the profits of a company derived in, brought into, or received in Nigeria (provided such profits are not subject to tax under the Capital Gains Tax Act, Petroleum Profits Act, or Personal Income Tax Act). The applicable tax rates are indicated below. 20% of total profits of companies that earn gross turnover greater than N25,000,000 but less than N100,000,000. 30% of total profits of companies that earn a gross turnover of N100,000,000 or above. Companies that earn a gross turnover of N25,000,000 or less are exempt from CIT.
Tax relief on Interest on foreign loans Section 11(1) CITA
Interests payable on foreign loans are partially exempt from tax as shown in the table below. RepaymentPeriodGrace Period Including MoratoriumTaxExemption Above 7 years Not less than 2 years 70% 5-7 years Not less than 18 months 40% 2-4 years Not less than 12 months 10% Below 2 years Nil Nil Repayment period means the agreed tenor of the loan facility provided that where the loan is paid before expiration of the agreed time, the tax exemptions provided under the CITA would be adjusted accordingly. Moratorium refers to the period at the beginning of the loan term during which the borrower is not expected to make any repayment of principal or interest.
First Thoughts: The World Is In Flames, And It’s Tempting To Scream!
Week after week, we’re presented with the evidence of a fast-sinking world: the climate-change crisis, our fragile economies, a pandemic that has killed and infected a lot of people, and now Russia is invading Ukraine! So yes, I understand why you’d want to scream. But here’s the thing: Screaming isn’t working. We have been screaming for decades about all these kinds of stuff, but the world is still falling apart.
A registered business in Nigeria that earns a legitimate income is captured under the Company Income Tax Act (CITA), Cap C21, LFN 2004 (as amended) to pay the tax due from all its revenue sources.
However, the provision of the Company Income Tax Act (CITA), Cap C21, LFN 2004 (as amended) exempts income or profits earned from some particular sources from CIT.
As an organization, it is almost a norm to incur bad debts in the process of running a business. Bad debt can be defined as an expense arising from the company’s account receivables becoming unretrievable/ uncollectible. This is an operational and financial risk associated with the daily running of a business and the account receivables should be assessed for impairment on a forward-looking basis and reported in the financial statements for each year at the financial year-end in line with International Reporting Standards (IFRS) 9 which is on “Financial Instruments”. A lot of reasons can be factored into account receivables becoming uncollectible thus becoming bad such as:
Treating taxes as an afterthought can lead to some expensive mistakes. People who fail to plan and end up paying more than they should on their taxes feel frustrated when that happens. There are a lot of ways to avoid these issues from arising, and tax planning is one of them.
Tax planning entails a financial strategy designed for tax efficiency. The goal is to reduce one’s tax liabilities and maximize the use of tax exemptions, tax rebates, and benefits. In addition, tax planning involves making financial and business decisions that reduce the tax burden. By taking advantage of all beneficial provisions under tax laws, you can legitimately reap the maximum benefits.
I’ve been there, and I’m sure you have too. You knew something was up, but you didn’t listen to your gut and now you’re regretting it.
Telling yourself that you are “just being paranoid” or “paranoid for no reason” doesn’t help, it only makes you feel worse.
The reality is that your gut is never wrong. Your gut is a completely dependable source of information about what is going on around you. It may not be consciously accessible, but it is always there, assessing what is going on around you. And it knows before your conscious mind does, whether something feels right or not.
Companies Income Tax Act, Cap C2, LFN 2004 (“CITA”) is the general income-tax administrative framework for companies in Nigeria.
However, due to the peculiarity of the insurance business, Section 16 of CITA is particularly dedicated to companies operating in the insurance sector. Section 16 of CITA explicitly addresses the specific income-tax administrative needs of the insurance companies.
You would agree with us that 2021 was an interesting year, and indeed a busy one. Just as the country was tackling its battles, the FIRS was also swamped with a few legal battles. Worthy of mention was the bid of some states majorly championed by Rivers State and Lagos State to get control over the collection and appropriation of VAT within their jurisdiction, and we all witnessed how this turned out. Additionally, just before the end of 2021, the FG released the Nigeria Finance Act of 2021, which introduced new taxes, levies, and tariffs.
Nigeria’s Federal Inland Revenue Service (FIRS) has issued a Public Notice[BO1] to lift its May 2021 suspension of Local Filing of Country-by-Country (CbC) Reports by Constituent Entities in Nigeria. Constituent Entities are the Nigeria-based subsidiaries and branches of Multinational Enterprises. Relevant Constituent Entities are now to, with effect from January 1, 2022, duly make their CbC Reports Local Filing with FIRS in compliance with Regulation 4 of the CbC Regulations 2018 (CbC Regulations).[BO2] You may recall that the obligation placed on relevant Ultimate Parent Entities (UPEs) under Regulation 3 of the CbC Regulations was never suspended.
Stamp duty is a levy on written and electronic documents or instruments. Stamp duties are levied on instruments on either Ad-valorem or flat rate basis and the body in charge of the administration of stamp duties is either the federal Inland Revenue Service (FIRS) (duties on instruments for transactions between corporate bodies and individuals, group, or body of individuals) or the State Internal Revenue Service (duties on instruments for transactions between individuals).
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Integrated with TaxiTPay® to enable seamless disbursement of VAT to the RTA or other VAT collection agent.
Cloud-based Technology: Work from anywhere and anytime.
Notifications & Reminders: Built-in real-time notifications and alert system to help you stay compliant and keep up with your obligations.
Mobile Compatibility: Work from your mobile device.
Instant Data Import: The built-in data import tools make data migration into TaxiTVAT® painless thereby giving you a smooth onboarding experience.
Fraud Control: Checks against fraud and illicit financial transactions with the user-role console to set-up administrators, approvers, and disbursers functions.
Data Security: Highly private, confidential, secure and encrypted data including soft token generation.
User Intelligence Experience: Analytical and interactive dashboard interface displaying a general awareness and overview of when and how vendor payments and tax obligations are met.
With no upfront software costs, you wouldn’t need to break the bank to afford TaxiTVAT®
There’s no software installation hassle and TaxiTVAT® updates automatically.
You can automatically export your TaxiTVAT® information into spreadsheets as the relevant general ledger.
TaxiTVAT® is scalable; it expands as your business grows, allowing you to undertake complex VAT computation, including Input and Output Tax computations.
Taxit Withhold
Direct Disbursement: Sorts out payment to vendors and RTAs and disburses payments directly to their individual bank accounts instantly.
Integrated with TaxiTPay® to enable seamless disbursement of payments to vendors and RTAs.
Automatic Payment Processing: Retains and sorts out all obligations to vendors, computes withholding tax (WHT) and ensures scheduled payments to vendors and RTAs.
Cloud-based Technology: Work from anywhere and anytime.
Notifications & Reminders: Built-in real-time notifications and alert system to help you stay compliant and keep up with your obligations.
Mobile Compatibility: Work from your mobile device.
Instant Data Import: The built-in data import tools make data migration into TaxiTWithhold® painless thereby giving you a smooth onboarding experience.
Fraud Control: Checks against fraud and illicit financial transactions with the user-role console to set-up administrators, approvers, and disbursers functions.
Data Security: Highly private, confidential, secure and encrypted data including soft token generation.
User Intelligence Experience: Analytical and interactive dashboard interface displaying a general awareness and overview of when and how vendor payments and tax obligations are met.
With no upfront software costs, you wouldn’t need to break the bank to afford TaxiTWithhold®
There’s no software installation hassle and TaxiTWithhold® updates automatically.
You can automatically export your TaxiTWithhold® information into spreadsheets as the relevant general ledger.
Information available in formats sufficient for filing monthly WHT Schedules
TaxiTWithhold® is scalable; it expands as your business grows, allowing you to add as many vendors or pay cycles as you like.
Tbook
TBook® allows taxpayers to manage their tax affairs and have access to online real time information about their taxes and other statutory obligations.
Notifications: Built-in real-time notifications and alert system to help you always stay informed of payments made to or on your behalf including receiving your TaxiTPaySlip®.
Ideal for all employees of organizations that use TaxiTPayroll® or persons who receive payments via TaxiTPay®.
Data Security: Highly private, confidential, secure and encrypted data including password access
User Intelligence Experience: Analytical and interactive functions to enable you to generate choice information.
At no cost, TBook® is freely available as long as your smartphone has sufficient data. TBook®’s data usage is very minimal.
There’s no software installation hassle and TBook® updates automatically.
You can automatically export your TBook® information into spreadsheets as your personal ledger.
Information is available in formats sufficient for filing your personal income tax returns.
Taxit Pay
One Stop hub for all payments, tax computations and deductions E-banking is the now the norm. To keep tabs on all tax deductions, organisations need a platform that can help track all transactions and keep track of all tax liabilities reducing the stress of computing a huge block of transaction annually.
Time Sensitive: Tax and related payments made in timely and stress-free fashion
Multi-application: Optimized for making diverse forms of payments and remittances which include net salaries, vendor payments, pensions, and major tax obligations.
Receipting: Integrated instant receipt-generating function that gets you your tax and related receipts straight from the RTAs
Generate employee pay slips (TaxiTPaySlips®) from TaxiTPay®
Integrated with TaxiTPayroll®, TaxiTWithhold®, TaxiTVAT® to allow their users smooth and seamless disbursement of relevant payments.
Cloud-based Technology: Work from anywhere and anytime.
Mobile Compatibility: Work from your mobile device.
Fraud Control: Checks against payment frauds and illicit financial transactions with the user-role console to set-up administrators, approvers, and disbursers functions.
Data Security: Highly private, confidential, secure and encrypted data including soft token generation.
User Intelligence Experience: Analytical and interactive dashboard interface displaying a general awareness and overview of when and how payments are made.
With no upfront software costs, you wouldn’t need to break the bank to afford TaxiTPay®
There’s no software installation hassle and TaxiTPay® updates automatically.
TaxiTPay® is scalable; it expands as your business grows, allowing you to undertake as many payments as you like.
Taxit Payroll
TaxiTPayroll® provides the most robust solution for payroll taxes and tax obligations in Nigeria. TaxiTPayroll® offers an easy to use online application that supports entrepreneurs and small businesses. Accessible 24/7 online, it allows you to grow your business and offers a simple way to get things done.
With no upfront software costs, TaxiTPayroll® won’t break the bank.
There are no software installation hassle and your payroll software updates automatically.
With our smart online payroll solution, your payroll expands and shrinks as your business grows, allowing you to add as many employees or pay cycles as you like.
You can automatically update your payroll general ledger.
Direct Disbursement: Sorts out the remuneration of employees and disburses payments directly to their individual bank accounts instantly.
Automatic Tax Processing: Retains and sorts out all statutory payroll obligations, computes payroll taxes and remits all at once and instant payment to the relevant agencies and agents (RTAs, PFAs, NHF, NSITF, ITF etc.) as payments fall due.
Cloud based Technology: Work from anywhere and anytime.
Notifications & Reminders: Built in real-time notifications and alert system to help you stay compliant and keep up with your payroll obligations.
Mobile Compatibility: Work from your mobile device.
Instant Data Import: The built-in data import tools make data migration into TaxiTPayroll® Painless thereby giving you a smooth onboarding experience.
