TAXES AND LEVIES YOU NEED TO KNOW ABOUT

Taxes in Nigeria are levied along the three tiers of government i.e. the Federal Government, the State Governments and the Local Governments.

Tax is usually calculated within a tax year and Tax Clearance Certificates issued after payment.

 1. TAXES PAYABLE
The Federal Government is responsible for the collection of companies income tax; petroleum profits tax; withholding tax on companies; withholding tax on residents of the Federal Capital Territory (FCT) Abuja; withholding tax on non-resident individuals; value added tax; education tax; capital gains tax on residents of the FCT; capital gains tax on corporate bodies and non- resident individuals; stamp duties on corporate bodies and residents of the FCT and personal income tax in respect of certain government officials.

 The State Governments are responsible for the collection of personal income tax (Pay-as-You-Earn) for individuals resident in their various states; withholding tax for individuals; capital gains tax for individuals; stamp duties on certain instruments; business premises registration fee; development levy etc. 

Local Governments are responsible for other miscellaneous taxes such as tenement rates, shops and kiosks rates etc.

 A summary of some of the above-stated taxes is as follows:

 - COMPANY INCOME TAX: All companies in Nigeria are required to pay income tax on all profits accruing in, derived from, brought into or received in Nigeria at a rate of 30%. All companies incorporated in Nigeria are liable to pay tax on their profits.

 - EDUCATION TAX: This is charged on the profit of every company incorporated in Nigeria at the rate of 2%. It is assessed by and payable to the Federal Inland Revenue Service.

 - STAMP DUTY: Stamp duty is charged on written agreements and other relevant documents to which a company is party. This tax is in two forms. The tax may be fixed or based on the value of the transaction.

 - VALUE ADDED TAX: Value added tax is charged and payable on the supply of all taxable goods and services. It is chargeable at a flat rate of 5%.

 - WITHHOLDING TAX: Where payment is due to a company in respect of goods or services it has provided, or payment is due to it in respect of dividend, loan interest, rent or royalty, the person making the payment is required by law to deduct a percentage of the payment as withholding tax and remit same to the relevant tax authority. It is payable at a rate between 5% and 10%.

- PAY AS YOU EARN (PAYE): For the payment of personal income tax, all employers are required to deduct from the employees’ emoluments, personal income tax payable by the employees. The deduction made is then remitted to the relevant tax authority. The tax is payable at a rate between 5% and 25%.

 - CAPITAL GAINS TAX: This tax is payable on gains accruing from the disposal of assets. It is paid at the rate of 10%.

 - CUSTOMS DUTIES AND TAX: This tax is charged on goods imported into the country. The rates are as shown in the Customs Duty Rate of the year or years in which the goods concerned are imported into Nigeria. The rates are amended from time to time.

 - PETROLEUM PROFITS TAX: Companies engaged in petroleum operations are subject to the payment of petroleum profits tax at the rate of 85% of their taxable income
Tax registration is required with the relevant government authorities for payment of taxes.

 MULTI-LEVEL TAXES
There is often a problem of multiple taxes for businesses, at the federal, state and local government levels. Investors are therefore advised to engage the services of professional tax advisors in dealing with this problem.