Taxation is an important part of your business compliance requirements. As a result, a thorough grasp of the taxes you must pay and a precise tax plan will be critical to your business success.
There are two types of taxes in Nigeria: Federal and State taxes. Company Income Tax, Value Added Tax, and other Federal taxes are examples. Personal Income Tax, Business Premises Tax, and other state taxes exist.
1) Company Income Tax (CIT)
CIT is a tax imposed on a company’s profit from all sources. The tax rate is 30% of the total profit of a company. Some Profits are exempted from CIT provided they are not derived from a company’s trade or business activities, e.g. Cooperative society.
2) Personal Income Tax (PIT)
Individual Income Tax (also known as personal income tax) is a tax that is levied on a person's wages, salaries, dividends, interest, and other sources of income throughout the year. In most cases, the tax is levied by the State where the income is earned.
3) Value Added Tax (VAT)
VAT (Value Added Tax) is a consumption tax levied on all products and services supplied or imported into Nigeria. Individuals, businesses, and government bodies are all required to pay VAT, which is currently set at 7.5 per cent.
4) Withholding Tax (WHT)
This isn't a tax in the real sense. It is a payment of income tax in advance that is deducted at the time of particular transactions. The withheld tax credit note or receipt can be applied to the final tax liabilities of the income recipient.
The primary goal is to get as many tax evaders into the tax system as possible. WHT charges typically range from 5 to 10%, depending on the type of transaction. The FIRS, or State Inland Revenue Service, is also in charge of collecting this tax.
5) Stamp Duty
Stamp Duty is chargeable according to a scale fixed by the Joint Tax Board. This is tax paid to the federal or state governments on documents such as conveyances on sale, bills of exchange, promissory notes, agreements, contracts, etc.
Stamp duty is levied on written or electronic transaction documents. The tax is governed by the Stamp Duties Act (SDA) of 1939 and charged as a flat rate or percentage of the transaction/instrument value, taking the nature of the instrument into cognisance.
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