If you are reading this article, you likely are one of the many
Nigerian entrepreneurs and business owners that are interested in
finding out the number and kinds of taxes they are expected to
pay.
No doubt, if you decide to pay taxes in other to be the friend
of the government of Nigeria and the state(s) that you have a
business presence, you have made the right decision. As a business
person, you already know that a significant part of your business
is a tax liability. This, therefore, makes it vital that you have a
clear image of the tax administration[1]
that concerns your business.
That being said, the various taxes that all businesses in
Nigeria must pay to be in the “good book” of the Nigerian
government are explained below.
Table of Contents
1. Companies Income Tax (CIT)
Other than firms or companies involved in petroleum operations,
other registered firms in Nigeria are to pay companies income tax[2]
on their incomes. This tax is charged every year. It is, however,
worth noting that companies whose annual gross turnover does not
exceed ₦25 million are exempted from this type of tax.
2. Personal Income Tax (PIT)
Individual persons and registered companies are mandated to pay
the personal income tax[3]. Besides, companies
registered under Part A of the Companies and Allied Matters Act
1990 (incorporated companies), other registered businesses and
partnerships are obliged to pay this tax. The tax is remitted to
the State Inland Revenue Service (IRS). Businesses also have to
deduct this tax from their employees’ wages or salaries
accordingly, and pay to relevant tax authorities, a process known
as “Pay as You Earn (PAYE).”
3. Value Added Tax (VAT)
Every Nigerian consumer must pay a tax of 7.5% of the amount
spent on every product or service they buy. While registered firms
or companies do not pay value added taxes[4], they must collect VAT
from their customers or client on behalf of the government. This
tax is then remitted to the right tax authorities upon
collection.
4. Capital Gains Tax
This is a 10 percent tax charged from capital gains generated
from the exchange and sale of properties called chargeable assets.
A capital gain is simply the profit an investor makes after selling
a capital asset for an amount exceeding the purchase price. This
type of tax is only payable after a successful sale of assets.
5. Withholding Tax (WHT)
This is a means of taxation where the source of an income pays
the tax payable on behalf of the earner. The tax payment receipt or
withholding tax[5]
note is then presented to the earner, which he keeps with him as
evidence of payment. An example of a withholding tax is the tax
deducted on dividends.
6. Education Tax
This tax is charged on every registered firm in Nigeria and is
sent to the purse of the Education Tax Fund. It is an obligation
for every Nigerian registered company to pay a tax of 2 percent
into the Education Tax Fund.
Conclusion
The tax you pay as an individual is different from what you pay
as a business owner. There are taxes you are not expected to remit
as an individual, but that you are obliged to pay as a business
venture. As such, it is necessary to know what those taxes are;
hence, the purpose of this article. With this article, you should
have learned which taxes your company or business is to pay and
those your customers are to pay. It is, therefore, necessary that
you make provisions for these types of taxes you are expected to
collect and remit on behalf of your customers.