The purpose of this article is to enlighten taxpayers on types of tax returns to file with the Nigerian Federal Inland Revenue Service. It highlights the types of federal taxes in Nigeria under various legislations.
Fundamentally, a tax is a financial obligation an individual or corporate body pays to the government to fund public expenditure. The government agency responsible for collecting, accessing, and accounting for tax accumulated by the Federal Government of Nigeria is the Federal Inland Revenue Service (FIRS).1Federal Inland Revenue Service (Establishment) Act 2007, s 8.
Tax Identification Number
A registered company in Nigeria can apply for the issuance of Tax Identification Number (TIN) from the Federal Inland Revenue Service after incorporation. TIN is usually issued simultaneously during the incorporation of companies registered under Part A of the Company and Allied Matters Act and the TIN would appear on the certificate of incorporation.
A Tax Return is a document filed with the relevant tax authority by an individual or company that reports on the tax dealings for a given period. It reports earnings, expenses, and other financial information authorized by law and administrative procedures.
The relevant tax law usually provides the type, nature of information, frequency, and manner a tax return is filed.
Tax returns allow taxpayers to calculate their tax responsibility, schedule tax payments, or request refunds for overpaying in taxes. It is usually filed annually and is a legal obligation fulfilled by taxpayers for various taxes.
A taxpayer has to file returns as required under the relevant tax law. The tax authority facilitates the filing of tax returns process by providing a taxpayer with standardized forms, guidelines, and procedures.
The FIRS released the FIRS Filing tax Returns 2017 framework that lists the contents of different types of tax returns.
Notable legislations for federal taxes in Nigeria
- Companies Income Tax Act, CAP. C21, Laws of the Federation of Nigeria, 2004 (as amended by the CompaniesIncome Tax (Amendment) Act 2007.
- Personal Income Tax Act, CAP. P8, Laws of the Federation of Nigeria, 2004
- Value Added Tax Act, CAP. V1, Laws of the Federation of Nigeria, 2004.
- Capital Gains Tax Act, CAP. C1, Laws of the Federation of Nigeria,2004.
- Petroleum Profits Tax Act, CAP. 13, Laws of the Federation of Nigeria, 2004 (as amended by the Petroleum Profits Tax (Amendment) Act, 2007.
- Tertiary Education Trust Fund (Establishment, Etc.) Act, 2011.
- Finance Act 2021.
- National Information Technology Development Agency Act 2007.
1. Companies Income Tax (CIT)
Companies Income Tax is imposed on the profits of companies in Nigeria. Section 9(1) of the Companies Income Tax Act 1977 provides that the CIT shall be payable annually on the profits of any company accruing in, derived from, brought into, or received in Nigeria.
By virtue of section 55 of Companies Income Tax Act 1977 Every company in Nigeria including companies exempted from incorporation are required to file tax returns with the FIRS.
New companies are required to file CIT returns within eighteen (18) months of incorporation or six (6) months after the accounting year ends. Existing companies are required to file returns within six (6) months after the accounting year ends.
2.Personal Income Tax (PIT)
By virtue of section 1 of the Personal Income Tax Act 1993, Personal Income Tax is imposed on the income of individuals, communities and families, and trustees or estates as determined under the provisions of PITA 1993.
The relevant tax authority for collecting personal income tax from individuals in the Federal Capital Territory is the Federal Inland Revenue Service. The state inland revenue service of a state is responsible for the PIT of that state.
Pursuant to section 2 of the Personal Income Tax Act 1993, FIRS will collect PIT from the following types of individuals:
- Persons employed in the Nigerian Army, the Nigerian Navy, the Nigerian Air Force, the Nigerian Police Force other than in a civilian capacity.
- Officers of the Nigerian Foreign Service.
- Every resident of the Federal Capital Territory, Abuja.
- A person resident outside Nigeria who derives income or profit from Nigeria.
2.1 PIT of self-employed Individuals
Self-employed people resident in the FCT are required to file tax returns with the FIRS. The income is taxed on a preceding year basis i.e. the income is taxed based on the accounts that ended during the previous tax year. A Personal Income Tax return is filed on or before, the 31st March of the assessment year.
2.2 PIT of individuals in Employment
Personal Income Tax for employed individuals resident in the FCT is deducted directly from their income by the employer and paid through the Pay As You Earn (PAYE) system.
The employee’s income is taxed the same year it’s earned i.e. The income earned from employment in the current year is taxed that same year.
The return filed with the tax authority enables employers to remit PAYE deductions to the FIRS. PAYE returns are submitted on or before the 10th day of a month after deductions. An employer is to file a return not later than 31st January of each year.
3. Petroleum Profits Tax (PPT)
PPT is imposed by Section 8 of the Petroleum Profits Tax Act 1958 on the profits of each accounting period of a company engaged in petroleum operations. The tax is charged, assessed, and paid following the provisions of the PPTA 1958.
3.1 PPT estimated tax returns
Pursuant to section 33 of the Petroleum Profits Tax Act 1958, every petroleum company is required to file a return of estimated tax not later than two (2) months of the commencement of each accounting year.
4. Value Added Tax (VAT) Returns
By virtue of section 2 of the Value Added Tax Act 1993, VAT shall be charged on the supply of all goods and services with the exception of some specified goods and services.
4.1 Goods and services exempted from VAT in Nigeria
Goods and services exempted from VAT are listed in the first schedule of the Value Added Tax Act 1993. Examples include medical and pharmaceutical products, basic food items, agricultural products, medical services, etc.
5. Tertiary Education Tax (TET)
TET is established by Section 3 of the Tertiary Education Trust Fund (Establishment, Etc.) Act, 2011. Its purpose is to develop, improve, and consolidate tertiary education in Nigeria. it’s a contribution to the Education tax fund.
Section 28 of The Finance Act, 2021 amended section 2 of the Tertiary Education Trust Fund (Establishment, Etc.) Act, 2011 and provide a new tax rate of 2.5 % on the assessable profit of all registered companies in Nigeria except small companies listed in the Company Income Tax Act.
6. Capital Gains Tax (CGT)
CGT is charged on profits accrued from the disposal of assets.
6.1 What is a Chargeable Asset?
A Chargeable asset is any type of property or asset either in Nigeria or outside Nigeria.2Capital Gains Tax Act 1967, s 3. The tax rate is ten percent (10%).3Capital Gains Tax Act 1967, s 2. CGT is payable by individuals and companies.
6.2 Chargeable assets exempted from Capital Gains Tax in Nigeria
All chargeable asset is subject to Capital Gains Tax when traded for a profit. However, the Capital Gains Tax Act excludes some assets,4Capital Gains Tax Act 1967, s 26. they include gains accrued by some organizations e.g. a charitable or educational institution, cooperative society, and trade union when the gain isn’t obtained from disposable assets acquired from any trade done by the organization.
Gains exempted from CGT further include those arising from the disposal of Nigerian government securities,5Capital Gains Tax Act 1967 (as amended), s 30. and from a decoration awarded for valour or gallant conduct which a person acquires otherwise than for consideration in money or money’s worth.6Capital Gains Tax Act 1967 (as amended), s 30.
Gains from sales of shares are also exempted from CGT7Finance Act 2021, s 2. where:
- the proceeds from such disposal are reinvested within the same year of assessment in the acquisition of shares in the same or other Nigerian companies :
- the disposal proceeds, in aggregate, is less than N100,000,000 in any 12 consecutive months, provided that the person making the disposals shall render appropriate returns to the Service on an annual basis; or
- the shares are transferred between an approved Borrower and Lender in a regulated Securities Lending Transaction as defined in the Companies Income Tax Act.
7. National Information Technology Development Levy (NITDL)
A company in Nigeria having an annual turnover of one hundred million Naira (100,000,000) and above, operating in business areas listed under the third schedule of the National Information Technology Development Agency Act of, 2007 is imposed with a levy on their profit. The Levy is 1% of the profit before tax and is tax-deductible when paid.8National Information Technology Development Agency Act 2007, s 12(2)(a).
7.1 Companies required to pay NITD Levy:
- GSM service providers and telecommunication companies
- Cyber companies and internet providers
- Pension managers and pension-related companies
- Banks and other financial institutions
- Insurance companies
- 1Federal Inland Revenue Service (Establishment) Act 2007, s 8.
- 2Capital Gains Tax Act 1967, s 3.
- 3Capital Gains Tax Act 1967, s 2.
- 4Capital Gains Tax Act 1967, s 26.
- 5Capital Gains Tax Act 1967 (as amended), s 30.
- 6Capital Gains Tax Act 1967 (as amended), s 30.
- 7Finance Act 2021, s 2.
- 8National Information Technology Development Agency Act 2007, s 12(2)(a).