Covenant Capital- Tax Seminar ¡ ¡ Tax and Tax Management Techniques Being Paper presented by Oyin Immanuel and Godwin Emmanuel Oyedokun at Tax Seminar organized by the Covenant Capital, Covenant Christian Centre, held on September 6, 2014 at 400, Herbert Macaulay Road, Jibowu, Yaba Protocol This presentation would serve as a follow up on the already well prepared and delivered presentations by the Tax Guru from Tax & Advisory Service Department of Akintola Williams Deloitte who is also collaborating with the Covenant Capital on this Tax Seminar. This presentation would touch on the following sub topics among others on Tax and Tax Management Techniques as we thought it wise to share with you Sons and Daughters of God: 1. Tax and tax management. (everything about tax) 2. Keeping up to date tax records. 3. A tax informative video 4. Registration of Business for Tax Purposes 5. Personal Taxation 6. Full time house wife and other jobless persons 7. Self-Assessment 8. Religious Organisations & Payment of taxes 9. High Net Worth Individual 10. Documents needed to file tax returns 11. Electronic Tax Clearance Certificate 12. Hotel Occupancy and Restaurant Consumption Tax Law Page ¡ 1 ¡of ¡ 15 ¡ ¡ ¡
Covenant Capital- Tax Seminar ¡ ¡ 1.0. Tax and Tax Management What is Tax? • It is a mandatory payment to the government. • It is not directly related to a service and it does not have direct return of value. • It is levied by the government to fund public spending. • In summary, it is a compulsory contribution levied by the government on a tax payer (individual or legal entity) or added to the cost of some goods, services, and transactions to support the government and failure to pay is punishable by law. Types of Taxes o Companies Income Tax o Value Added Tax o Personal Income Tax and Other contributions. o Petroleum Profits Tax o Withholding Tax o Capital Gains Tax o Customs and Excise Duties o Stamp Duty Administration of Taxes. The main bodies responsible for tax administration in Nigeria are: 1. The Federal Inland Revenue Service (FIRS) 2. The State Board of Internal Revenue Service (SBIRS) 2.0. Keeping up to date records Financial record keeping : Page ¡ 2 ¡of ¡ 15 ¡ ¡ ¡
Covenant Capital- Tax Seminar ¡ ¡ For any transaction that has a financial element keep: • copies of invoices and receipts you provide for goods sold or services rendered • invoices for goods or services you purchase or bills you pay such as rent, rates, insurance, license fees etc • payments to employees and to other organisations on behalf of employees e.g. PAYE tax • financial statements including profit and loss statement and balance sheet • tax returns information Business record keeping In addition to your financial records requirements and you are required to keep records relating to your business and employees. When setting up your record keeping system, keep: • contracts, insurance agreements and other legal documents • your lease if you're renting • licenses and permits • employee records including time sheets, copies of pay slips etc • safety records e.g. risk assessment for occupational health and safety • any other records which are 'business activity' specific and required by law for the operation of your business Page ¡ 3 ¡of ¡ 15 ¡ ¡ ¡
Covenant Capital- Tax Seminar ¡ ¡ 2.1. Registration of Companies for Tax Purposes 1. If your is Limited Liability Company 2. Within the 6 month of your Company’s registration with CAC 3. Go to the nearest FIRS Office close to your Company’s Register address 4. Apply TIN 5. Apply for Value Added Tax (VAT) Registration 6. Ensure you file VAT return every Month (be sure you do this with 10 day preceding the month in question) 7. Though the due date for filing VAT is 21st day of every month following month of transaction 8. Failure ¡or ¡refusal ¡to ¡register ¡with ¡the ¡Board ¡within ¡the ¡specified ¡time. ¡The ¡taxpayer ¡shall ¡ be ¡liable ¡to ¡a ¡penalty ¡of ¡N10,000 ¡for ¡the ¡first ¡month ¡in ¡which ¡the ¡failure ¡occurs ¡and ¡ N5,000 ¡for ¡each ¡subsequent ¡month ¡in ¡which ¡the ¡failure ¡continues. ¡ ¡If ¡this ¡persists, ¡the ¡ premises ¡where ¡the ¡business ¡is ¡carried ¡on ¡shall ¡be ¡sealed ¡up. ¡ 9. Non ¡deduction ¡or ¡failure ¡to ¡collect ¡tax ¡by ¡a ¡taxable ¡person ¡attracts ¡a ¡penalty ¡of ¡150% ¡of ¡ the ¡uncollected ¡tax ¡plus ¡5% ¡interest ¡above ¡the ¡CBN’s ¡discount ¡rate. ¡ 10. Failure ¡to ¡remit ¡tax ¡shall ¡attract ¡a ¡penalty ¡of ¡a ¡sum ¡equal ¡to ¡5% ¡per ¡annum ¡plus ¡interest ¡ at ¡a ¡commercial ¡rate ¡payable ¡within ¡30 ¡days ¡of ¡notification ¡by ¡the ¡Tax ¡Authority 11. Note that you will be asked to pay fine if you default (#5000 is key) 12. Your Company must file annual return after the fiscal year of the company 13. Take for example, you are expected to file on or before June ending in case of December Accounting year end 14. Payment of #25,000.00 for the first month of default and #5,000.00 for every subsequent months 15. There are also available fine for failure to file WHT and VAT ¡ 3.0. Personal Income Tax 3.1. Personal Income Tax It is a tax levied on all incomes of an individual in employment or business. All employers of labour are expected to deduct taxes from their employees and remit same to the tax authority on a monthly basis, while persons in business are expected to file their annual returns and pay accordingly. Page ¡ 4 ¡of ¡ 15 ¡ ¡ ¡
Covenant Capital- Tax Seminar ¡ ¡ Any person who earns income in the form of salary, wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums as or expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain. 3.2. Temporary or casual worker and payment taxes The Personal Income Tax (Amendment) Act, 2011 combined with the provisions of S.3 (1)(b) and S.3(1)(b)(i) particularly defining the taxpaying employee as either a temporary or permanent employee. 3.3. Consolidated Relief Allowance (CRA) According to the new Personal Income Tax (Amendment) Act 2011, CRA is the Consolidated Relief Allowance, which combines all previous reliefs (Housing, Meal, Utility, Transport, Leave allowances, etc) consolidated into a single relief of N200, 000 subject to a minimum of 1% of gross income (whichever is higher) plus 20% of the gross income. 3.4. Tax-exempt from my emolument In addition to the Consolidated Reliefs and Allowances (CRA) the following items in the Sixth Schedule table are still tax exempt; a. National Housing Fund Contribution b. National Health Insurance Scheme c. Life Assurance Premium d. National Pension Scheme 3.5. Rate to be used in computing my taxes After the relief allowance and exemptions have been granted, the balance of income shall be taxed as specified in the following Sixth Schedule Table. Page ¡ 5 ¡of ¡ 15 ¡ ¡ ¡
Covenant Capital- Tax Seminar ¡ ¡ 1. First N300,000 @7% 2. Next N300,000 @ 11% 3. Next N500,000 @ 15% 4. Next N500,000 @19% 5. Next N1,600,000 @ 21% Above N3, 200,000 @ 24%. 3.6. Type of taxes State Board (LIRS) collect 1. Personal Income Tax from all residents of Lagos State 2. Witholding Taxes on all business/economic activities involving a second party who is not a corporate entity 3. Business Premises levy from all businesses and companies operating within the state (N10, 000 registration and N5, 000 renewal annually) 4. Development Levy from all individuals (N100 per head/yearly) 5. Sales Tax 6. Consumption Tax. 3.7. Uniform Taxes across all states Taxes payable in Lagos State is not different from that of other States as all States Internal Revenue operate under the same Constitutional Provisions and Tax Laws. Current Law in use for Personal Income Tax is the Personal Income Tax Act CAP P8 LFN 2004 & (Amendment) at 2011. You can officially obtain information on all taxes paid on your behalf through the Executive Chairman of each state board (LIRS). 3.8. Payment of taxes by Full time house wife and other jobless persons Page ¡ 6 ¡of ¡ 15 ¡ ¡ ¡
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