From Uche Usim, Abuja
Many budding entrepreneurs running small and medium-sized enterprises (SMES) are often ignorant of their tax obligations.
Many are unrepentant tax evaders and officials of the Federal Inland Revenue Service (FIRS) are aggressively collecting taxes due to the government because taxes are important to any government as air is to man. This is why tax has been defined as “a pecuniary burden laid upon individuals or property to support government expenditure”.
Failure to be tax-compliant could spell doom for the individual and firm. It attracts scathing penalties.
When should a taxable person register for tax?
A taxable person should register for VAT upon the commencement of business in Nigeria. A taxable person will commence operations on the date it carries out its first transaction in Nigeria at the earliest of when it –
(i) begins to market or first advertises its products or services for sale or
(ii) obtains an operating license from a regulatory authority in Nigeria or
(iii) makes its first sale or purchase or
(iv) performs its first trading contract after incorporation with the CAC or
(v) sends or collects its first invoice or
(vi) delivers or receives its first set of goods or
(vii) first renders services to its customers.
How to determine your tax payable
As an SME, you should duly register your company. If you have, get your TIN (Tax Identification Number). It can be found on your VAT certificate. If you have a business bank account, you will have a TIN.
Do you have a personal TIN? It is readily generated at Large Tax Offices/Integrated Tax Offices of FIRS all over the country, subject to submission of appropriate information.
So, who pays Company Income Tax? Every resident or non-resident business entity incorporated in Nigeria. When do you pay this? At the end of your financial year. Why? To receive your Tax Clearance Certificate.
TaxProMax
It’s a service launched by the FIRS. It enables seamless registration, filing, payment of taxes and automatic credit of withholding tax as well as other credits to the taxpayer’s accounts among other features. TaxPro-Max also provides a single-view to taxpayers for all transactions with the Service.
SMEs are advised to register for a “TaxProMax” Account. It can be done online. It is a very important and relatively easy step. It can also be done at the tax office. Just visit the tax office and request to be registered on the TaxProMax platform. You will be given a form to fill and submit and then you just wait for your login information to be sent to you via email.
How do I file TaxProMax?
Go to https//Taxpromax.firs.gov.ng on your browser • Click on the “Login” button in Blue • Insert email address and password • Click login • It will take you to Taxpro Max home page as seen below; i. From the dashboard click on “Taxes Due” ii. Select the Tax type.
Documents required for tax registration with FIRS (Company)
You need the following:
– Memorandum and Articles of Association
– Certificate of Incorporation
– Form CAC 1.1 (Status report). Formerly, Form CAC 7 containing the particulars of the Company’s Directors and CAC 2 detailing the Company’s statement of share capital and return of allotment of shares.
For companies registered before the introduction of online certificates, FIRS will have a look at the original copy.
Duly completed and stamped VAT registration form 001
Duly completed and stamped CIT registration form – Copies of the VAT Form 001 and CIT form are available at FIRS office
Utility bill
Official application for VAT registration
Official application for CIT registration including the response to FIRS questionnaire
Other forms that may be completed at the FIRS office are application for e-filing, e-TP access and new taxpayer update form.
Documents required when the taxpayer is an individual or a sole-proprietor
A copy of the following;
– Business Name Registration Certificate
– Form 1.1. Formerly, Form CAC 7 containing the particulars of the directors.
Note: For businesses registered before the introduction of online certificate, FIRS will have a look at the original copy.
2. Duly completed VAT registration form 001
3. Utility bill
4. Approved means of identification
5. An official letter of application to register for VAT
Company Income Tax
This is 0% of accessible profit for companies with turnover less than N25 million
20%. of accessible profit for companies with turnover greater N25 million but less than N100 million
30% of accessible profit for companies with turnover greater than N100 million
It’s very important to note the “accessible” part. This tax is payable on the completion of one financial year, when the audited statement of account is presented to FIRS for computation and processing of your tax clearance. The tax is applied after all company costs and expenses are deducted, after the education tax has been deducted, after adjustments for previous year losses and tax exempted income, Then, if you have any profit lef, the tax is applied to it.
Penalty for non-compliance on Company Income Tax
Failure to file CIT returns attracts a penalty of N50,000 for the first month and N 25,000 for each subsequent month of default. Late payment of CIT attracts a 10% penalty and interest at the commercial rate.