UNDERSTAND YOUR TAXES

Taxes are mandatory fees levied on individuals, business and corporate organizations by the government with the aim of generating revenue for the smooth running of the country and states. In Nigeria taxes come in two categories;

1. Federal taxes
2. State taxes

Federal taxes are determined by the federal government and are paid through the Federal Inland Revenue Services (FIRS) whilst state taxes are determined by each state and are paid through the State Board of Internal Revenue (SBIR).

FEDERAL TAXES

Below are some taxes paid to the federal government and how they are determined?

1. Company income tax; this tax is filled 18 months after incorporation (registration). This tax is subsequently filled within six months of every accounting year. It is usually charged between 20- 30% on taxable incomes depending on the line of business.
2. Withholding tax; this tax is usually paid in advance, this payment can only be made when it is required by the regulations, it is usually charged between 5-15% on taxable incomes.
3. Education tax; this applies to those in the educational field and it is paid once in every assessment year, it is usually charged at 2% on taxable incomes.
4. Value added tax (VAT): this tax is usually filled monthly, you are required to file your VATs before the 21^st day of every month.
5. Stamp duties ;charged on chargeable transactions, stamp duties are charged either at a flat rate or advalerom rate depending largely on the nature of the transaction,individuals also pay stamp duties. states  can also charge an individual or enterprise stamp duties depending on the transaction. so it is safe to say it is not strictly federal tax, it is both federal and state tax.
6. Information technology levy: this levy is charged on the profit of, insurance companies, GSM telecommunication service providers, telecommunication companies, pension managers, banks and other financial institution, cyber companies and internet providers. It is usually charged at 1% of the taxes of the companies listed above, this 1% is  deducted before the taxes on the taxable incomes of these companies are assessed.
7. Capital gains tax : this is charged at 10% on taxable income of companies.
8. Pre-operation levy (POL): This is levied on companies who apply for tax clearance certificate and are yet to commence business.

STATE TAXES

1. Personal income tax: this is paid by individuals on taxable incomes annually and the rate is determined by each state.
2. Business premises taxes: this fee is charged on registration of business premises, the fee to be charged is determined by one major factor, that is whether the property in question is in an urban area or in a rural area, each state defines and determines what areas are marked as urban areas and what areas are marked as rural areas. Urban areas pay a registration fee of 10,000.00 Naira annually and a renewal fee of 5,000 .00 Naira yearly. Rural areas pay 2000.00 Naira for registration of premises and 1000.00 Naira for renewal of registration annually.
3. Other taxes that can be filled at the state board of internal revenue(SBIR) includes, road taxes, market taxes, right of occupancy on lands, certificate on occupancy on land. the fees are determined by each state.

OTHER QUESTIONS

1. Question;

Do private individuals need tax identification numbers?

Answer; yes, since private individuals pay taxes it is important that private person obtain the tax identification numbers (TIN).

2. Question; do NGOs pay taxes

Answer ; NGOs are exempted from paying taxes because they are created for non-profit purposes, but when an NGO ventures into any profit making venture then It will be required to pay taxes

3. Question: Do business names pay taxes?

Answer; yes business names pay taxes the factors listed above determines the taxes payable by each business and individuals.

It is important to note that there are other taxes and parameters used in determining them cannot be exhausted in a single article.

Written by:

• Kindness Nduba Esq.

She is a business and intellectual property lawyer and the founder of @bizreglegal.com

For further inquiries on filling your taxes and more contact kindness by using the whatsApp link on this website.