How to Remit Your Tax in Nigeria

How to Remit Your Tax in Nigeria

Tax in Nigeria

Tax payments, in simple terms, are the funds you owe to the government based on your income, business ventures, or any other financial activities. If you’re reading this, chances are you’re navigating the complicated situation of tax in Nigeria for the first time and need more help to understand it all.

Luckily, this article will walk you through the steps to fulfil all your tax obligations and leave you confident enough to pay your taxes from the comfort of your home.

What does it mean to Remit Taxes? – When a company remits sales tax to the government, it simply means they are sending the cash to the government.

Types of Taxes and their Penalties:

There are different taxes for different groups of individuals in Nigeria, and the Federal Inland Revenue Service (FIRS) acknowledges 10 tax types. They are:

1.   Companies Income Tax (CIT):

CIT is a tax on the profits of incorporated companies, and it applies to both local and foreign companies operating in Nigeria.

Who Needs to Pay Company Income Tax?

All companies registered in Nigeria, whether locally or foreign, are obligated to pay Companies Income Tax. This includes businesses engaged in various sectors such as manufacturing, services, natural resource extraction etc.

When should you pay Company Income Tax?

For newly Started Companies: File your taxes within 18 months (about 1 and a half years) of when you started or within 6 months after your financial year ends, whichever comes first.

Existing Companies: File within 6 months after your financial year ends.

Self-Assessment Option: If you choose to assess your taxes, you can start paying in installments before the due date, but finish within two months after the deadline.

Companies Over 4 Years Old: Most companies operating for more than 4 years must pay a minimum tax unless the law specifically says they don’t have to.

2. Value Added Tax (VAT):

VAT is paid when goods are bought, or services are rendered. It’s a multi-stage tax, meaning it’s applied at various stages of production and distribution, and its burden ultimately falls on the final consumer.

How VAT Works:

   – Businesses add VAT to the price of goods and services they sell.

   – They collect this VAT from their customers.

   – Businesses deduct the VAT they have paid on their inputs (purchases) from the VAT they have collected from their sales.

   – The net amount is remitted to the tax authorities.

Who Pays VAT?

All goods and services must be registered for VAT, whether they are produced locally or imported. However, some goods and services, like non-oil exports, are zero-rated.

Special Cases:

Under the Nigerian VAT regime, three groups of taxpayers deduct and remit VAT directly to the tax authority. These are:

1. Nigerian companies in VATable transactions with non-resident companies.

2. Government ministries, statutory bodies, and other government agencies.

3. Companies in the oil and gas sector.

When to Pay VAT

Monthly VAT returns should be filed no later than the 21st day following the month of the transaction.

Let’s say your business makes sales and provides services during the entire month of October. Now, before the 21st day of November, this business needs to gather all the details about what it sold and did in October and hand it over to the FIRS. It’s like a monthly report on your sales and services for the tax authorities.

3. Personal Income Tax (PIT)

Personal Income Tax is a tax you must pay on the money you earn, and the Personal Income Tax Act establishes it.

As opposed to Company Income tax, which is taken from the profits of the income, PIT is taken directly from the money you earn, most likely your salary or other forms of income.

Who pays Personal Income Tax?

PIT is paid by salaried individuals, corporate sole or body of individuals, pensioners, self-employed individuals, communities, families, and trustees or executors of any settlement.

How PIT Works:

The normal method is for employers to withhold PIT from employees’ salaries using the PAYE system. While self-employed individuals calculate their PIT liability based on their income and file tax returns.

Note: PIT is often progressive, meaning that the higher your income, the higher percentage of your income is taxed.

When to Pay PIT:

For individuals:

If you’re an individual and you pay Personal Income Tax (PIT), you need to submit your tax returns by the 31st of March each year. This involves providing details about your income and other relevant information to the tax authorities.

For companies:

If you’re an employer deducting Pay As You Earn (PAYE) from your employees’ salaries, you are required to send that deducted tax amount to the tax authorities. This needs to be done by the 10th day of each following month.

You also must make a report detailing the total earnings and the amount of tax deducted from each employee’s salary for the previous year by the 31st of January each year. This helps tax authorities track income and ensure accurate tax collection.

Penalties for not paying PIT:

A person who fails to file a return may face a fine of N5,000 and an additional N100 for every day of non-compliance or imprisonment of six (6) months or both.

Employers failing to file a return may be liable to a penalty of N500,000 for a body corporate and N50,000 for an individual.

4. Tertiary Education Tax

Tertiary Education Tax is imposed on the assessable profits of companies registered in Nigeria and is specifically designed to fund tertiary education institutions.

Who Needs to Pay Tertiary Education Tax?:

All companies registered in Nigeria are required to pay Tertiary Education Tax. This includes both local and foreign companies operating within the country.

When to pay TET?

The due date for filing returns for Tertiary Education Tax (EDT) is the same as that for Companies Income Tax and Petroleum Profits Tax.

Penalties for not paying TET:

If you break the rules under the Tertiary Education Trust Fund Act for the first time and get caught, you might have to pay a fine of N1,000,000 or go to jail for six months, or both.

If you do it again, the penalty gets even heavier: a fine of N2,000,000 a year in jail, or both.

5. Petroleum Profits Tax (PPT):

 Petroleum Profit Tax is a tax on the profits of companies engaged in petroleum operations. It is specific to the oil and gas industry and is designed to ensure that companies operating in this sector contribute a portion of their profits to the government.

Who Needs to Pay PPT?

Companies involved in petroleum operations, including exploration, drilling, and oil and gas production, must pay Petroleum Profits Tax. This typically includes both local and foreign companies operating within the petroleum industry in Nigeria.

When to Pay PPT:

Petroleum Profit Tax (PPT) in Nigeria is payable in instalments throughout the year based on a company’s accounting period. However, companies that are part of a Joint Venture (JV) may be required to pay PPT monthly.

Penalties for Non-Compliance:

Late submission or non-compliance with PPT regulations can result in penalties and interest charges.

6. Capital Gains Tax:

Capital Gains Tax is a tax imposed on the profit or gain realized from the sale or disposal of capital assets.

It’s a tax on the money you make from selling things like properties, stocks, or other investments. The government takes 10% of the extra money you earn when you sell these things compared to what you originally paid for them.

Who Needs to Pay CGT?

All individuals or entities disposing of chargeable assets at a gain are subject to Capital Gains Tax. If you sell something like land or anything valuable and make money from it, you must pay Capital Gains Tax. It doesn’t matter if it is in Nigeria or somewhere else.

When to Pay CGT:

The due date for filing returns and payment of Capital Gains Tax is the same as in Companies Income Tax.

7. Stamp Duties (SD):

Stamp Duties are fees on paper, and they can be either a set amount (like on payment receipts) or change based on factors (like the value of Share Capital or a Deed of Assignment)

Types of Documents and Transactions Subject to Stamp Duties:

1. Property Transactions:

   – Deeds of conveyance, sale, or transfer of real estate.

   – Leases and tenancy agreements.

2. Financial Transactions:

   – Bills of exchange, promissory notes, and cheques.

   – Loan agreements and mortgage bonds.

3. Business Transactions:

   – Agreements and contracts.

   – Share certificates and transfer of shares.

4. Legal Documents:

   – Power of attorney.

   – Court orders and judgments.

5. Insurance Policies:

   – Insurance policies and endorsements.

Who Needs to Pay Stamp Duties:

The responsibility for paying Stamp Duties may vary based on the type of transaction and the parties involved. In some cases, it may be the buyer, seller, or both parties sharing the duty. The specific regulations and requirements depend on the jurisdiction.

When do we pay stamp duties?

Stamp duties must be paid before documents are executed, meaning before they are officially signed or put into effect.

 

8. National Information Technology Development Levy (NITDL):

NITDA Levy is a specific tax applied to companies operating in certain sectors related to information technology.

Who Pays NITDL

Companies with an annual turnover of ₦100,000,000 (One Hundred Million Naira) and above are obligated to pay the NITDA Levy. Such companies include:

      – GSM Service providers and all Telecommunication Companies

      – Cyber Companies and Internet Providers

      – Pensions Managers and Pension-related Companies

      – Banks and other Financial Institutions

      – Insurance Companies

9. National Agency for Science and Engineering Infrastructure (NASENI) Levy:

NASENI Levy supports various purposes, from funding education and technology development to regulating specific industries and ensuring government revenue.

Who pays the NASENI Levy?

The levy applies to companies and firms with turnovers of N100,000,000 and above in the following sectors:

   – Banking

   – Mobile Telecommunications

   – Information and Communications Technology (ICT)

   – Aviation

   – Maritime

   – Oil and Gas

When to pay the LASENI tax

NASENI levy returns are filed along with income tax returns by the provisions of the Companies Income Tax Act (CITA).

Payment can be made in instalments, provided that the payments begin before the due date of filing, and the final instalment is paid on or before the due date of filing.

10. Withholding Tax (WHT)

Withholding Tax (WHT) is a system designed to gather Income Tax in advance.  It’s a way to collect a portion of your income upfront, and this amount is deducted right at the source of the transaction before you receive the money.

Who Pays WHT:

WHT is paid by individuals or entities involved in specific transactions, and the responsibility for deducting and remitting the tax typically lies with the party making the payment.

When is WHT Paid:

The deduction of WHT happens at the time of the transaction. The due date for filing WHT returns, which includes reporting the deducted tax, is the 21st day of every succeeding month (like in VAT).

Penalties for Not Paying Withholding Tax on Time:

Failure to file WHT returns on time incurs penalties. For the first month of non-compliance, there is a penalty of N25,000. But, if the failure continues into subsequent months, an additional penalty of N5,000 is imposed for each month that the non-compliance persists.

Tax Rates in Nigeria

S/NTAX NAMERATE
1Company Income Tax30% of total profit
2Personal Income Tax7% to 24% depending on individual

1% for individuals earning less than 300k p.a
3Withholding Tax2.5% -10%
4Value Added Tax7.5%
5Stamp Duty

6Capital Gains Tax10%
7National Information Technology Development Levy1%
8Tertiary Education Tax2% of accessible profit
9National Agency for Science and Engineering Infrastructure (NASENI) Levy:0.25%
10Petroleum Profits Tax50% or 65%


How to Remit your Tax Payments in Nigeria. 

Step 1: Get your TIN.

Before you can think of paying your taxes either as an individual or a business, you must ensure you’ve registered and acquired your Taxpayer Identification Number (TIN). To do this go to your nearest tax office to get the number.

Step 2: Choose a payment method
Once accepted, you should choose the relevant channel you wish to pay with. The FIRS e-Tax payment platform has provided 3 methods:

  1. Remita
  2. Interswitch
  3. e-tranzact

Tax Payment through Remita

On the Remita page, you have three options: Pay once, Set up recurring payments, or Pay e-invoice.

Select the option that best describes your situation, then proceed to fill in the required information as prompted.

Pay Tax Remita
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Tax Payment through Interswitch

Here you’d be using the Interswitch platform to pay for your taxes. Click on the FIRS TAXPROMAX option and log into your account using your email address/mobile phone number and payment reference number.

Then, you can fill in the necessary tax returns.

Pay Tax Interswitch

Note: To use this method, you must first be registered on the TAXPROMAX portal on the FIRS website.

Click here to register for TAXPROMAX.

Tax Payment through Bank

At the bank, the Bank Teller logs in and selects “Make FIRS Payment.”

You then enter your TIN and choose the tax type. The system validates your TIN, shows your details, and requests your email and mobile number. You have the option to choose between a Single Payment or file upload.

After verifying the information, you can select your preferred payment method—whether it’s cash, cheque, or direct debit. Once the payment is successful, you’ll receive a printable receipt, and an electronic receipt (e-ticket) will be sent to your email for your records.

STEP 3: Presentation of E-ticket:

You must show the e-ticket to receive official receipts from the Federal Inland Revenue Service (FIRS).

Step 4: Processing Tax Clearance Certificate
After you’ve received your official receipts from the FIRS, you can then proceed with the processing of your Tax Clearance Certificate.

Do NGOs Pay Tax in Nigeria?

If an NGO makes any form of profit, it becomes subject to income tax.

NGOs, by their nature, are not part of any government and are not conventional profit-making entities. However, if an NGO engages in activities for profit, the derived profit will be subjected to income tax.

Also, NGOs operating in the country are required to register and obtain a Taxpayer Identification Number (TIN) free of charge from the nearest tax office to their registered address as soon as they are registered by the Corporate Affairs Commission.

Tax Obligations of NGOs in Nigeria:

1. Personal Income Tax Returns:

2. Pay-As-You-Earn Returns:

3. Value Added Tax:

4. Withholding Tax Returns:

Common Tax Mistakes to Avoid

1. Not Getting Your Tax Returns in On Time (Section 55 of CITA):

Don’t forget to send in your tax returns within the timeframe set out in the Companies Income Tax Act (CITA).

2. Angering FIRS:

When the Federal Inland Revenue Service (FIRS) crew is on official duty, be calm and help them out with any information they may need.

3. Not playing by the Tax Rulebook:

Stick to the tax laws and rules laid down by the government. It’ll keep you out of trouble and away from those unnecessary penalties.

4. Not keeping Tax Authorities Updated:

If your business undergoes some big changes, give the tax authorities a heads-up. It helps them keep their records straight.

5. Unorganized Bookkeeping:

Keep your financial records in check. It makes sure your tax returns are spot on and makes any audits way less stressful.

6. Not being Timely with VAT, WHT, and PAYE:

If you’ve got responsibilities for VAT, WHT, or PAYE, make sure you handle them on time.

7. Not having Your TIN:

If you’re an individual or a tax agent, get yourself a Taxpayer Identification Number (TIN). It’s like your tax ID, and you need it.

8. Paying for Your TIN:

You can get your Taxpayer Identification Number (TIN) without spending a dime. Simply head on to the FIRS website and check the necessary steps.

9. Not asking for your TCC:

If you settle your tax debts, you should get a Tax Clearance Certificate (TCC). If they say no, they must tell you why within two weeks.

10. Not Getting a Refund for Extra Taxes Paid:

If you end up paying more tax than you should, you have the right to get that extra cashback within 90 days.

Conclusion

In a nutshell, paying taxes doesn’t have to be a head-scratching, nerve-wracking experience. It’s the money you owe the government based on your income and business dealings.

We hope with this article, you can now confidently handle your tax duties right from the cozy confines of your home. So, fear not this upcoming tax season – tackle it with knowledge and ease!

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