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 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.
Taxes That Concerns Businesses in Nigeria
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 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. 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, 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 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.
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.