Tax Administration & Collection in Nigeria – All You Need to Know

Tax Administration and Collection in Nigeria

Tax administration in Nigeria. The three major tiers of government: Federal Government, State Government and Local Government have been saddled with the responsibility of collecting tax in Nigeria.

The Federal Government uses the Federal Inland Revenue Service (FIRS) to deal with taxes that are paid by companies and Federal Capital Territory. They ensure that all taxes collected are duly remitted to the Federal Government. It is their responsibility.

The State Board of Internal Revenue (SBIR) like the Lagos State Internal Revenue Service are saddled with the responsibility of administering Personal Income Tax. There are other types of taxes that are created and administered by the various state government, depending on the powers that they have to administer such taxes. The SBIRs are responsible to the State government in terms of accounting and remitting these collected taxes to the coffers of the State government.

The Local government also collects taxes through the committee set up within their powers. They collect taxes, rates and fines posted under its jurisdiction and are responsible to the Local government chairman for all taxes collected.

Do you even know the different tax types that are in Nigeria? Just in case you don’t I would mention all of these here:

FIRS

Companies Income Tax (CIT)
Petroleum Profit Tax (PPT)
Value Added Tax (VAT)
Personal Income Tax (PIT)
Withholding Tax (WHT)
Educational Tax (EDT)
Stamp Duties (STD)
Capital Gains Tax (CGT)
National Information Technology Development Fund (NITDF) Levy

SBIRS

Personal Income Tax
Capital Gains Tax (Individuals only)
Stamp duties
Business Premises levy
Hotel occupancy and Restaurant Consumption Tax
Capital Gains Tax (Individuals only)

Let’s talk about the Tax Collection in Nigeria

Tax Collection is also classified under the three tax administering bodies:

Taxes Collected by FIRS

S/NTAXESRATES
1COMPANY INCOME TAX30% OF PROFIT BEFORE TAX
2WITHHOLDING TAX ON COMPANIES10%
3PETROLEUM PROFIT TAX
4VALUE ADDED TAX7.5%
5EDUCATION TAX2% OF ASSESSABLE PROFIT
6CAPITAL GAINS TAX ON THE RESIDENCE OF THE FEDERAL CAPITAL TERRITORY, CORPORATE BODIES AND NON-RESIDENT INDIVIDUALS10%
7STAMP DUTIES ON BODIES CORPORATE AND RESIDENTS OF THE FEDERAL CAPITAL TERRITORYFLAT RATE
8PERSONAL INCOME TAXRATES GRADUATED AS STATED IN PITA (AMENDMENT) ACT 2011 ON: MEMBERS OF THE ARMED FORCES OF THE FEDERATION, MEMBERS OF THE NIGERIAN POLICE FORCE; RESIDENTS OF THE FEDERAL CAPITAL TERRITORY, STAFF OF THE MINISTRY OF FOREIGN AFFAIRS AND NON-RESIDENT INDIVIDUALS

Taxes Collected by the State Internal Revenue Service (Using Lagos as an example)

TAXES/LEVIESRATESLEGAL INSTRUMENTREMARKS
WITHHOLDING TAX:Personal Income Tax Act 2004 L.F.N.Applicable to Individuals, Sole Proprietorship and Partnership
INTEREST10%
RENT10%
ROYALTY5%
DIRECTORS FEES10%
DIVIDEND10%
TECHNICAL SERVICES10%
CONTRACT5%
BUILDING CONSTRUCTION5%
CONSULTANCY/PROFESSIONAL FEES5%
COMMISSION5%
PERSONAL INCOME TAX: PAYE DIRECT/ASSESSMENTGraduating rates as given in the 6th Schedule of the Personal Income Tax (Amendment) Act 2011Personal Income Tax Act 2004 L.F.N.

Personal Income Tax (Amendment) Act 2011

Lagos State Revenue Administration Law
Personal Income Tax is collected from income earning adults i.e. Resident within the State
CAPITAL GAINS TAX10%Capital Gains Tax Act CAP. 42 L.F.N 1990 Act CAP. C1 L.F.N. 2004Individuals only
STAMP DUTIESFlat RateStamp Duties Act Cap.42 L.F.N. 1990Individuals and Corporate Entities
BUSINESS PREMISES REGISTRATION FEE IN RESPECT OF:
URBAN AREASRegistration = ₦10,000 Annual Renewal = ₦5,000Registration = ₦10,000 Annual Renewal = ₦5,000Corporate Entities
RURAL AREASRegistration = ₦2,000 Annual Renewal = ₦1,000Act 21 of 1998Corporate Entities
TAX ON GOODS & SERVICES CONSUMED IN HOTELS , RESTAURANTS AND EVENTS CENTRES5% of total bill issued to the consumer, excluding value added tax.Hotel Occupancy and Restaurant Consumption Law 2009.This tax is not applicable where the Sales Tax is collected

Taxes and Levies Collected by Local Government

  • Shops and Kiosks rates
  • Tenement rates
  • On and Off Liquor License fees
  • Slaughter slab fees
  • Marriage, birth and death registration fees
  • Naming of street registration fees, excluding any street in the State Capital
  • Right of Occupancy fees on lands in the rural areas, excluding those collectible by the Federal and State   Governments.
  • Markets taxes and levies excluding any market where State finance is involved
  • Motor park levies
  • Domestic animal license fees
  • Bicycle, truck canoe wheelbarrow and cart fees, other than a mechanically propelled truck
  • Cattle tax payable by cattle farmers only
  • Merriment and road closure
  • Radio and television license fees (other than radio and television transmitter)
  • Vehicle radio license
  • Wrong parking charges
  • Public convenience, sewage and refuse disposal fees.
  • Customary burial grounds permit fees
  • Religious places establishment permit fees.
  • Signboard and Advertisement permit fees.

Now that you have all you need to know regarding tax administration in Nigeria.