For ease of reference this item will address the enabling legislation, the taxpayer, how to pay the tax and where to pay the tax.
The taxes collected by the Federal Inland Revenue are as follows:
- COMPANIES INCOME TAX (CIT).
- PETROLEUM PROFITS TAX (PPT)
- VALUE ADDED TAX (VAT)
- PERSONAL INCOME TAX (PIT)
- WITHHOLDING TAX (WHT)
- EDUCATION TAX (EDT)
- STAMP DUTIES (STD)
- CAPITAL GAINS TAX (CGT)
- NATIONAL INFORMATION TECHNOLOGY DEVELOPMENT FUND (NITDEF) LEVY
COMPANIES INCOME TAX (CIT).
Applicable tax law- Companies Income Tax Act. Persons subject to the Companies Income Tax:
- All companies incorporated in Nigeria with the exception of companies engaged in petroleum operations.
- All non-resident (foreign) companies that earn or derive income from Nigeria.
- All organizations limited by guarantee (institutions of public character or charitable organizations) engaged in profit making activities other than the promotion of their primary objects.
- The liquidator, receiver, or agent of liquidator or receiver of any taxable company or organization.
Where to pay the Companies Income Tax:
- Companies incorporated in Nigeria and organizations limited by guarantee pay Companies Income Tax through any of the designated banks. Once payment has been captured by the bank collecting system, an e-ticket is issued is issued the company, this e-ticket is proof of payment and when presented at the Integrated Tax Office with jurisdiction an e-receipt will be issued.
- Non-resident companies make payment through remittance of tax deducted at source to the designated banks.
How to pay the Companies Income Tax
- Resident companies and organizations prepare and submit annual self-assessment tax returns as specified by FIRS accompanied by the evidence of the payment of the full amount or first installment of the tax due. Payment is made to designated banks
- Non-resident companies are subject to Withholding Tax (WHT) deductions on the income they earn from Nigeria. This becomes their tax upon filing returns
PETROLEUM PROFITS TAX (PPT)
Applicable tax law- Petroleum Profits Tax Act. Persons subject to the Petroleum Profits Tax:
- Companies engaged in petroleum exploration and production operations in Nigeria (up-stream operations)
- A person resident in Nigeria employed in the management of the petroleum operations carried on by a non-resident company
- The liquidator, receiver, or agent of liquidator or receiver of any company carrying on petroleum operations in Nigeria.
Where to pay the Petroleum Profits Tax:
Companies carrying on petroleum operations in Nigeria make offshore payments to JP Morgan Chase Bank, the bank then advises the Central Bank of Nigeria to enable the bank credit FIRS accordingly.
How to pay the Petroleum Profits Tax
Every company engaged in petroleum operations prepares and submits annual returns as specified by the Petroleum Profits Tax Act within five months of the end of each assessment year. Payment is in two segments beginning with filing of estimated annual return not later than ending of February of each year. Payment for the tax due is then made in twelve monthly installments beginning from March of each year. Where the actual tax liability arising from the annual tax returns exceeds the cumulative estimated tax, a 13th month installment is payable and where the contrary is the case, a refund is due.
VALUE ADDED TAX (VAT)
Applicable tax law- Value Added Tax Act. Persons subject to the Value Added Tax:
Any individual, corporation sole, group, body corporate or organization that consumes buys, procures or imports taxable goods or services is liable to pay the tax. How to pay the Value Added Tax
- During direct sales or open market transactions, the buyer or consumer shall pay the tax to the seller together with the cost of the goods or services bought. The seller then nets off the VAT paid at the time of purchase of the stocks sold from the VAT collected on the stocks sold and credit the balance to FIRS.
- Where the goods or services were supplied to a government Ministry, Department or Agency (MDA) or a company engaged in oil operations, the VAT payable by the MDA or oil company is deducted or withheld at source (at the point of payment). It is then credited directly to FIRS on behalf of the supplier
- VAT payments are made on a monthly basis not later than 21days of every subsequent month. Tax payers prepare and submit monthly VAT returns accompanied by evidence of payment of the tax due at designated banks
Where to pay the Value Added Tax
VAT remittances may be made at any designated bank, an e-ticket is immediately issued as evidence of payment. This e-ticket may be presented at the ITO and an e-receipt will be issued the taxpayer.
PERSONAL INCOME TAX (PIT)
Applicable tax law- Personal Income Tax Act (PITA)
- Persons subject to the Personal Income Tax Individuals resident in the Federal Capital Territory, Abuja
- Families, communities, trustees and estates resident in the Federal Capital Territory
- Persons employed in the Nigerian Army, Nigerian Navy, Nigerian Air Force and Nigeria Police other than in civilian capacity.
- A person resident outside Nigeria who derives income or profit from Nigeria
- Officers of the Nigerian foreign service
Where to pay the Personal Income Tax
- Persons employed in the Nigerian Army, Nigerian Navy, Nigerian Air Force and Nigeria Police, other than in civilian capacity, pay income tax at the designated banks
- Individuals and enterprises in FCT pay at the designated banks, obtain an e-ticket and may request an e-receipt at the Individual and Enterprise Tax Office, Abuja.
- Organizations, companies and MDAs pay at designated banks, obtain their e-tickets and may request for the e-receipts at the Large Tax Office (LTO) Abuja.
How to pay the Personal Income Tax
Persons on paid employment pay their personal income tax through the Pay As You Earn (PAYE) system. Under the system, employers deduct the prescribed tax from workers’ salaries and pay directly to the FIRS through the designated banks on behalf of the employees on a monthly basis
Any individual, corporation sole, group, body corporate or organizationSelf-employed individuals and enterprises prepare and submit annual self-assessment tax returns as specified by FIRS accompanied with evidence of payment of the full amount or first installment of the tax due. All payments are made at the designated banks.
WITHHOLDING TAX (WHT)
Applicable tax law
Withholding Tax (WHT) is not a distinct tax type and therefore has no legislation of its own. It is only a mechanism for the collection of other taxes. Consequently, its application is provided for in the enabling law of other tax types i.e. Section 81 of Company Income Tax Act, Section 54 of Petroleum Profit Tax Act, Section 73 of Personal Income Tax Act and Section 13 of Value Added Tax Act
Persons subject to the Withholding Tax
Persons subject to the various tax types may be subject to Withholding Tax deductions for the purpose of offsetting their tax liabilities. WHT deductions are regarded as advance payments (or payments on account) of the relevant tax liability that will arise from the tax returns of the period concerned.
Where to pay the Withholding Tax:
Where the person benefiting from the payment and the income are taxable, Withholding Tax (WHT) is paid (deducted) at the point of making payment. It is withheld by the payee and the net amount is then paid to the beneficiary through the designated bank(s).
How to pay Withholding Tax
The amount deducted at the point of payment is remitted directly to FIRS through a designated bank in a prescribed format in the name of the person subject to the deduction.
EDUCATION TAX (EDT)
Tertiary Education Trust Fund (Establishment, Etc) Act, 2011. Persons subject to the Education Tax
All companies liable to Companies Income Tax are also liable to Education Tax. In other words, all companies registered or resident in Nigeria are liable to pay Education Tax.
Where to pay the Education Tax:
Education Tax is paid at the point of payment of Companies Income Tax or Petroleum Profits Tax
How to pay the Education Tax
As part of the annual Companies Income Tax self-assessment returns, taxable persons also compute and submit their Education Tax liabilities and make payment at the designated bank
STAMP DUTIES (STD)
Stamp Duties Act. Persons subject to Stamp Duties
The items and persons subject to stamp duties are instruments (written documents) relating to matters executed between a company and an individual, group or body of individuals. Instruments which may be subject to stamp duties include financial instruments/transactions, company memorandums and articles of association, statements of share capital ownership, bonds, conveyances on sale, depositions, lease agreements, mortgage bonds, debentures, etc.
Where to pay Stamp Duties
Stamp duties on eligible instruments can be paid through designated banks
How to pay the Stamp Duties
Companies and persons issuing or dealing with all chargeable instruments shall submit such instruments to the Stamp Duties Office for stamping. The Commissioner of Stamp Duties shall then assess the instruments submitted in line with the provisions of the Stamp Duties Act and specify the duties payable. The duties are then paid to FIRS at the designated bank
CAPITAL GAINS TAX (CGT)
Capital Gains Tax Act. Persons and properties subject to the Capital Gains Tax
All companies incorporated in Nigeria which earn any capital gains or gains on the disposal of all forms of assets. All forms of property (whether situated in Nigeria or not) that are liable to capital gains tax include:
- Options, debts and incorporeal property generally;
- Any currency other than Nigerian currency; and
- Any form of property created by the person disposing of it, or otherwise coming to be owned without being created
Where to pay the Capital Gains Tax
Capital Gains Tax is paid at the designated at which the company making the chargeable capital gain pays its Companies Income Tax.
How to pay the Capital Gains Tax
In line with the provisions of the Capital Gains Tax Act and the self-assessment regulations presently in operation, a company shall compute the gains on the disposal of all forms of assets in each year of assessment and submit same together with its Companies Income Tax returns. The returns shall also be accompanied by evidence of the payment of the full amount or first installment of the tax due. Payment is made to the designated bank.
NATIONAL INFORMATION TECHNOLOGY DEVELOPMENT FUND (NITDEF) LEVY
National Information Technology Development Agency Act, 2007. Persons subject to the NITDEF Levy
Companies and enterprises with an annual turnover of N100,000,000.00 and above operating as:
- GSM Service Providers or telecommunications companies;
- Cyber companies and internet providers;
- Pensions managers and pension related companies;
- Banks and other financial institutions;
- Insurance companies.
Where to pay the NITDEF Levy
The levy is paid through the designated bank at which the chargeable companies pay their Companies Income Tax
How to pay the NITDEF Levy
As part of its Companies Income Tax returns, a company shall compute 1% of the profit before tax of each year of assessment. The tax due shall then be paid to FIRS through the designated bank.