What determines the success of a business to you? It is easy to say it is dependent on profits, but there are so many important factors that influence a business’s success.
One of those important factors that you need to understand is tax compliance.
Corporate tax compliance refers to the process of ensuring that your business follows tax laws and regulations.
This includes reporting your company’s income, paying your taxes on time and maintaining your records to ensure that you do not have any issues with tax authorities.
Your business must be registered with tax authorities in Nigeria. This includes obtaining a tax identification number (TIN) from the Federal Inland Revenue Service (FIRS) and registering with state tax authorities.
Why Corporate Tax Compliance is important:
• Avoid Penalties: Non-compliance can lead to penalties, fines, and even suspension of your business.
• Build a Positive Reputation: Regulatory bodies and investors view businesses that follow tax laws more favourably.
• Tax compliance helps with financial planning and ensures your business operations run smoothly.
Businesses in Nigeria are obligated to pay several types of taxes.
Your tax obligations include:
• Value Added Tax (VAT): VAT is charged on the sale of goods and services at a rate of 7.5%. This tax is given to the government.
• Company Income Tax (CIT): This tax is paid on the company’s profits. Companies must pay 30% on profits exceeding N25 million annually.
• Personal Income Tax (PAYE): You are required to deduct personal income tax from employee’s salaries for relevant authorities.
• Education Tax: This is a 2% levy on company profits.
Tax Deadlines:
• VAT Filing: Monthly VAT returns must be filed by the 21st day of the following month.
• CIT Filing: CIT returns are due six months after the end of the company’s financial year.
• PAYE Filing: Monthly PAYE returns are due by the 10th of the following month.
• Education Tax Filing: This is filed with the annual CIT filing.
Mistakes to Avoid in Corporate Tax Compliance:
• Registering with the wrong authorities: Ensure that you have registered with the relevant state tax authorities.
• Not filing tax returns on time: Failing to pay taxes on time can lead to penalties including fines and interest charges.
• Inaccurate record-keeping: Poor record-keeping can make it harder to file taxes and potentially lead to discrepancies.
• Ignoring incentives: Be aware of tax incentives to reduce your tax burden.
If you need help with your taxes, consider consulting a professional experienced in tax obligations.
Lawhaven Solicitors is one of the top law firms in Nigeria and covers the corporate aspects of businesses including tax-related enquiries. So, if you have a tax-related enquiry, contact us.
Your first consultation is free!