The tax environment in different countries including Nigeria is so dynamic, subject to frequent legislative and regulatory amendments. As such, it requires timely compliance both in terms of filing and remittance to the relevant tax authorities.
Compliance such as deduction, filing and remittance for each class or category of tax differs. This tax insight provides exposition on basic tax compliance with the purpose of pointing attention to resultant penalties which are avoidable where there is timely compliance.
WITHHOLDING TAX (WHT)
In accordance with Deduction of Tax at Source (Withholding) Regulations, 2024 which has been implemented starting from 1st January 2025, deduction is to be made at the earlier of when payment is made or amount due settled.
Filing timeline for WHT deducted at source is on or before 21st day of the month following the month of payment (when filing with Federal Inland Revenue Service- FIRS).
When filing with State Internal Revenue Service (SIRS), with respect to Capital Gains Tax (CGT) and Pay-As-You-Earn (PAYE), filing should be on or before the 10th day of the month following the payment. Again, when filing with SIRS, with respect to any other deduction, filing should be on or before the 30th day of the month following the month of payment.
Penalty:
- Failure to Deduct or Remit: Penalty of 10% of the amount and interest at CBN’s lending rate.
- Non-deduction (i.e. WHT portion paid to the recipient): Administrative penalty plus one-off annual interest on amount.
- Non-remittance of deducted amount: Deducted amount but not remitted plus administrative penalty and plus annual interest.
WHT requires deduction at source and filing with relevant tax authorities requires submission or filing in prescribed manner depicting information of the parties from whom WHT is deducted: Name and address, Tax Identification Number, National Identification Number, RC Number or its
equivalent, nature of transaction in respect of which the payment was made, gross amount paid or payable, amount of tax deducted, calendar month to which the payment relates.
In addition, from 1st January 2025 the party making WHT deduction is obliged to issue a WHT receipt with prescribed relevant information so as to enable the beneficiary claim the WHT credit from the relevant tax authority.
COMPANIES INCOME TAX (CIT)
CIT according to Companies Income Tax Act (CITA) 2007 as amended by the relevant Finance Acts (FAs) 2019, 2020 and 2023, imposes income tax on profits accruing in, derived from, brought in to or received in Nigeria. CIT is payable by companies that are registered in Nigeria and non resident companies (NRCs) carrying on business or that have a Significant Economic Presence (SEP) in Nigeria.
CIT is paid by companies and the rate depends on turnover:
0% of taxable profits for small companies (annual gross turnover of N25M or less).
20% of taxable profits of medium companies (annual gross turn over > N25M but < N100M).
30% taxable profit of large companies (annual gross turnover > N100M).
Returns should be filed within 6 months of the company’s financial year end. For a new company, filing is within 18 months of incorporation, or 6 months after financial year end, whichever is earlier.
Penalties:
Late filing attracts N25,000 for the first month, and N5,000 for each subsequent month.
Late payment: 10% of the amount payable and interest at the monetary policy rate.
PERSONAL INCOME TAX (PIT)
PIT applies to individuals (employees Pay-As-You-Earn i.e. PAYE administered on payroll), self-employed persons such as business enterprises who pays PIT. PAYE is remitted on or before the 10th day of the month following the payment of salary (that is, PAYE deducted from October salary should be remitted on or before 10th of November same year).
Employers’ annual filing is due by 31st January each year. Individual annual filing should be completed not later than 31st March in respect of the preceding year.
Penalties:
Late remittance attracts 10% per annum of the amount plus interest at the bank lending rate.
Late Annual filing attracts ₦500,000 for corporate bodies and ₦50,000 for individuals.
VALUE ADDED TAX (VAT)
VAT applies to qualifying goods and services that are neither zero rated nor exempted. The difference between output VAT collected from customer(s) and input VAT paid to vendor(s) is remitted to FIRS.
Filing timeline is 21st day of the month following the month of the transaction. However, appointed VAT agents are required to file and remit the tax by the 14th day of the month following the month of the transaction.
Penalties:
Failure to submit returns attracts a fine of ₦50,000 for the first month and ₦25,000 every subsequent month.
Failure to remit VAT: 10% per annum of the amount plus interest at CBN minimum rediscount rate.
Failure to register for VAT: ₦50,000 for the first month and ₦25,000 for every subsequent month.
In conclusion, the basic taxes discussed have compliance requirements, of which timeliness is key so as to totally avoid resultant penalties that are usually detrimental to both individual and entities going concern projections.
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One Response
Good piece. Quite educative. Please update with the recently gazetted 2024 Tax Reform Bill.