According
to Obinna (2004), taxes are defined as involuntary contribution levied on
private units like the person properties, or business for support of
government. This include government capital from borrowing, gift repatriation,
user charges, fees, fines and postal rates. There are basically two categories
of taxes and they are direct and indirect tax.
DIRECT TAX: On the other hand, indirect tax is that tax
levied on a thing and it is paid by an individual by virtue or association with
that thing. Example of indirect tax include custom duties quotas etc.
TAX AND FISCAL REGULATION: Taxation in Nigeria is enforced by three tiers of
government i.e. Federal, State and Local Governments, each with its sphere
clearly spelt out in taxes and levies (Approved list for collection) Act of
1998. of importance, here are tax regulation pertaining to investors both
foreign and local. The importance of tax regulation can not be over-emphasizing
as most transaction with any government ministry department or agency can not
be concluded without evidence of tax clearance certificate certifying that all
taxes due for three immediacy proceeding years of assessment have been settled in
full. The following are some of relevant
tax regulation in the country.
VALUED ADDED TAX (VAT): Value added
tax (VAT) was introduced by the VAT act no 2 of 1993, to replace the old sales
tax. Value added tax is a consumption chain and born by the final consumer. It
requires a taxable person registering with the Federal board of Inland Revenue
(FBIR) to charge and collect VAT at the rate of 5 percent of all invoiced of
taxable goods and services. All business (old and new) are required to be
registered with VAT office as VAT collection agents.
CAPITAL GAIN TAX (CGT): All gains
accruing to a tax payer from the sale, lease or other transfer of property
right in a chargeable interest are subject to capital gain of 10 percent. Such
chargeable assets may be cooperate or incorporate and it does not matter that
such asset is not situated in Nigeria. Where taxpayer is a non-resident company
or individual, however, the tax will only be levied against the amount received
or brought into Nigeria.
EDUCATION TAX: An educational tax of 2 percent of accessible profit
imposed on all companies incorporated in Nigeria. This tax is viewed as a
social obligation placed on all companies in ensuring that they contribute
their quota in developing educational faculties in the country.
PERSONAL INCOME TAX: The legal basis for this tax is found in the
provision of the personal income tax decree No. 109 of 1993. Thus every tax is
liable to pay tax on the aggregate amount on the aggregate amount of his income
whether derived within or outside Nigeria, the salaries, wages, fees, allowance
and other gained or benefited, given or granted to an employee are chargeable
to tax.
The employee of labour are deemed to
be agents of the authorities for the purposes of remitting taxes deducted from
salaries due to employees.
Residency of tax payer determines
the extent of a tax payer liabilities in Nigeria. A person’s place of residence
for this purpose is defined as place available for his domestic use in Nigeria
on relevant day, excluding hotels and rest houses.
A person is deemed resident in
Nigeria if resides in Nigeria for 183 days in any 12 month period.