25.2 C
Lagos
Wednesday, October 21, 2020

Key Taxes That You Have to Pay in Nigeria

- Advertisement - data-full-width-responsive="false">

Taxation is process whereby persons and entities are required to pay the government of the day some pre-determined amount of money in order to enable the authorities provide crucial products and services to the society. In light of this fact, many governments usually go out of their way to ensure that many people and business organizations alike are able to fall within the category of taxable persons.

- Advertisement -

However, there are several countries such as Nigeria where the people do not necessarily enjoy paying their taxes. This is on account of real or perceived limitations on the part of the authorities when it comes to effective utilization of the taxes collected.

In fact, the only reason why people in Nigeria and other such countries pay their taxes is because it is a legal requirement and failure to do so will result to dire legal ramifications.

In order to ensure that you do not end up on the wrong side of the law, it is important to have an understanding regarding some of the most common taxes that Nigerian authorities require all business entities and other such establishments to part with.

Company Income Tax

This form of taxation applies to all business organizations that operate in Nigeria. The Company Income Tax is calculated using a rate of 30 percent of all taxable income. Taxable income in this context refers to the company’s profits and not revenue. The income is therefore arrived at by subtracting all the expenses and tax exempt items from the total revenue.

Companies are required to remit the company tax income to the country’s Federal Inland Revenue Service. Companies operating within the oil and gas industry pay a special type of tax referred to as the Petroleum Profit Tax.

Value Added Tax (VAT)

Value Added Tax is also another common tax in Nigeria that is paid by virtually all individuals and companies operating in the country. This tax is levied on goods and services manufactured and sold in the country. The difference between VAT and the other form of taxes is that VAT is mot soften than not passed onto the final consumer.

In Nigeria, VAT is calculated at a special rate of 5 percent of the value of the good. It is however important to note that the there are certain categories of goods in Nigeria that are VAT exempt and this implies that the value added tax is not levied onto such goods.

It is therefore important to employ the services of a locally based tax expert who will advise you accordingly regarding some of the products or services that fall within the category of VAT exempt goods.

Withholding tax

This form has a special mechanism through which tax payers are required to pay. The withholding tax is not really paid by the individual owing the tax but it is withheld by another entity and paid by the third party on behalf of the person to whom the liability applies to.

Advertisement
data-full-width-responsive="true">

For instance, if company A owes 10,000 dollars to company B, then company a can actually go ahead and pay this amount less a specified amount of withheld tax of say 10 percent of the value. Company A will then remit this amount to the authorities on behalf of company B as payment for withheld tax.

Pay As You Earn (P.A.Y.E)

PAYE is a form of taxation that is applicable to people employed and working in Nigeria. This form of taxation is deducted at source by the employer and the employer remits the payment on behalf of his or her employees. Pay as You Earn applies to all employers operating in Nigeria who have at least four employees in their workforce.

Education tax

Education tax is ostensibly a type of taxation meant to support the education initiatives in Nigeria. It is levied by the authorities to individual companies and the money collected goes into a trust fund that is mainly used to support various education institutions in the country. This form of taxes has also been applied in setting up new educational establishments across Nigeria.

Capital Gains Tax (CGT)

Capital Gains Tax is a form of tax that Nigerian Internal Revenue Service will require you to pay whenever you dispose of an asset.

It is however important to note that capital gains is only charged when one has actually disposed of the asset in question at a profit. This therefore implies that you must have realized a capital gain in order for this form of taxation to apply.

Personal Income Tax

Personal Income Tax is an umbrella tax that applies to all business, individuals, companies, partnerships and other such entity that derives its income owing to its operations in Nigeria. This form of income is calculated basing on the actual income that the entity in question has realized.

For instance, the first 300,000 Naira that one makes will attract a tax at the rate of 7 percent, the next 300,000 Naira will be taxed at 11 percent, and the next 500,000 Naira at 15 percent and this rate keeps on increasing with the amount of income that one has been able to make.

Minimum tax

Minimum tax is levied to those companies that have failed to realize a profit from their operations or in some cases, where the profit realized by the company fails to meet its minimum threshold in terms of tax liability. This tax is also calculated using a special rate based on the level of income that the company had made.

Local government levy

As its name suggests, the local government levy is levied by local government authorities. This levy is meant to enable the local government authorities to raise income by charging various taxes such as licensing fees, special events taxes and other such taxes that are outside the mandate of the national government.

It is important to have an understanding of all the key taxes in Nigeria so as to avoid any potential conflicts with law enforcers. Furthermore, you should be aware of any amnesty programs meant to encourage people to pay their taxes.

Advertisement
data-full-width-responsive="true">
Kingsley Felixhttps://kraftysprouts.media
Based in Port Harcourt, Nigeria. I am the founder of Krafty Sprouts Media, LLC (US), i make sure thing run smoothly and well organized in our organization. Follow me on my social media platforms.
- Advertisement -

Trending Now

The Best Tech Products to Buy in 2020

We have outlined the best tech products you can buy for your loved ones as well as yourself. Basically, technology is a part of our...
- Advertisement -

10 Best Places to Download Bollywood Movies

Do you spend hours watching Bollywood movies as I do? Have you been in search of the perfect sites to download the...

Startimes Subscription Prices, Packages and Channels List in 2020

StarTimes Nigeria is one of the popular cable TV providers in Nigeria. This service is a subsidiary of a Chinese based company...

Itel S16: Specification, Feature and Price

Itel on the 5th of October 2020, released the iTel S16 series as part of their rebranding efforts. The Itel S16 device...

GB WhatsApp, WhatsApp Plus and OG WhatsApp Tips and Tricks

Checkout the new GB WhatsApp Tutorial. Hello, welcome to WhatsApp Plus, OG WhatsApp and GB WhatsApp tips and tricks. For the sake of this article,...

7 Best Offline Racing Games for Android Users in 2020

Are you a real gamer? If you are one, then you will know how exciting it can be to experience the adrenaline rush that...

GOtv Error Codes: How to Clear and Resolve GOtv Errors

If you are a GOTV user, you have probably encountered one or two GOTV errors, and these errors are preventing you from...

StarTimes Customer Service Contact and Simple Error Fixes

StarTimes has fast become one of Nigeria's most used cable or digital Pay Tv. Despite its vast customer reach, the company has...

9+ Infinix Phones With Best Camera in 2020

People purchase smartphones for different reasons, and it is no brainer that the camera specifications is one of the features they look out for...

22 Smartphones With the Highest Screen to Body Ratio in 2020

Screen to body ratio on a smartphone screen recently turned into an important thing to consider when comparing smartphones. It became more...

DStv Channels List, Packages and Prices in 2020

Thousands of people in Nigeria have put their trust in DStv to provide them with the very best of television shows and programs. DStv (Digital...
- Advertisement -

Related Posts

Why VoIP Phones Are Useful for Your Business?

Voice over internet protocol also known as VoIP is fast changing the way businesses communicate and is also gaining popularity quite rapidly. With VoIP,...

Will Your Uber Clone App Work in the Market? Ask the Experts!

Getting late for a meeting - book an Uber Wanna visit the old city - book an Uber Whatever might be the reason, from visiting a...

How Magento Business Intelligence Can Help to Boost Your Business Performance

Applying the distinct strategies, tactics, and methodologies, every business anticipates getting the most out of their investment and to attain so requisites outreaching customer...

10 Tips to Solopreneurs to Develop a Business

Getting a brand started can be hard. It’s like starting an old car; you will feel the engine struggling to get started, its pistons...

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.