Tax is an amount of money that you have to pay to the government so that it can pay for public services. Services such as roads and schools. Your tax keeps the government running. Taxation is the fundamentals of the development of all nations. It is the major source of income for most countries after all. Taxation sees to the provision of public infrastructures and facilities.
In any state in Nigeria, as a business owner, selling taxable goods and services, you are obligated to pay tax. As a citizen as well, you are required to pay tax.
Tax collections saw its very beginnings in the 1800s following the inception of colonization. Before that, several forms of tax were collected by traditional rulers and used as they deemed fit. Following the tracks of tax ordinances in Nigeria, the present form of Nigeria taxation can be traced through the following laws and ordinances:
- Proclamation Law 1914
- Native ordinance 1917
- Non-natives protectorates Tax Ordinance 1931 and
- Raisman commission 1958
Birth from the Federal Board of Inland Revenue, the Federal Inland Revenue Service was formed in 1978 as the operational arm of the FBIR. Now in charge of assessing, collecting and accounting for tax and other revenues accruing to the Federal Government. Needless to say, defaulters face penalties such as jail time or huge fines.
Taxation is a huge dilemma for SME’s without the capability of hiring finance personnel in their team. This is why KloverHarris Limited exists. To lend its’ expertise and knowledge in financial and administrative consultancy.
In accordance with the law, here are the different types of taxes available in Nigeria.
Companies Income Tax (CIT):
Under the Companies Income Tax Act, you have to pay Companies Income tax if you are a resident or non-resident company incorporated in Nigeria.
Petroleum Profit Tax (PPT):
The Petroleum Profit Tax is subject to any resident company or person in charge of a non-resident company who are exploring for petroleum or producing it in Nigeria.
Value Added Tax (VAT):
Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as Value Added Tax (VAT) in Nigeria.
Personal Income Tax (PIT):
The Personal Income Tax (PIT) is the most common tax type in the country. A Personal Income Tax is a tax imposed on individuals or entities (taxpayers). This varies with respective income or profits (taxable income). Generally, Personal Income Tax is computed as the product of a tax rate times taxable income.
Withholding Tax (WHT):
The Withholding Tax deductions are regarded as advance payments (or payments on account) of the relevant tax liability that will arise from the tax returns of the period concerned.
Educational Tax (EDT):
Stamp Duties (STD): Items or persons subject to Stamp Duties tax are written documents relating things between individuals or companies or group of soles. And Stamp Duties may include instruments such as financial transaction, article of association between companies, statements, deals, bonds, etc.
Capital Gains Tax (CGT):
All the companies registered in Nigeria which earn any capital gains are liable to Capital Gains Tax. Capital Gains Tax is calculated and submitted with Companies Income Tax to FIRS through Designated Bank.