Tax

Which taxes does an entrepreneur have to pay? How much?

Some taxes are payable to the Federal Government (and administered by Federal Inland Revenue service), some are payable to the State Governments and some to Local Governments. The taxes commonly applicable for entrepreneurs are

Corporate Income Tax (CIT) – 0% to 30%

Also known as, a business tax, Corporate Income Tax (CIT) is a tax imposed on businesses incorporated in Nigeria and which derive income from within Nigeria. The CIT rate is:

30% for Large Companies (companies with gross turnover greater than N100m)
20% for Medium companies (companies with gross turnover of N25m to N100m.
0% for Small companies (companies with gross turnover of N25m or less)

Tax can be paid in a maximum of six equal monthly instalments if a taxpayer files self-assessment and applies for payment in instalments. CIT needs to be paid through any of the designated banks or via the e-Taxpay. Once payment has been completed, the company will receive an e-ticket (can be printed or sent to a designated email address) which serves as a proof of payment. When bringing this e-ticket to the Integrated Tax Office an e-receipt can be requested. Taxpayer Guide on e-Taxpay can be found here.

Capital Gains Tax (CGT) – 10%

CGT is taxed on the profit that is gained from the sale of a capital assets, for example, buildings held for business, factory space or an office space and shares of companies.

In Nigeria, gains arising from the disposal of assets are taxed at the rate of 10%. Corporate Securities are exempted from Capital Gains Tax.

Value Added Tax (VAT) – 7.5%

VAT is an indirect tax on the consumption of goods and services. A person that is registered for VAT is called vendor. VAT must be included in the selling price of every taxable supply of goods or services made by a vendor. The current standard VAT rate in Nigeria is 7.5%.

VAT is paid during direct sales or open market transactions where the buyer/consumer pays the tax to the seller/vendor together with the cost of the goods or services bought. Afterwards the seller/vendor credits the amount to the First Inland Revenue Service (FIRS).

Employees’ Tax [PAY-AS-YOU-EARN (PAYE)]

Employees' Tax refers to the tax required to be deducted by an employer from an employee's remuneration.

Stamp Duty

Stamp duty is a tax that is levied on legal documents, incorporation of companies, increase in companies authorized share capital, mortgage bonds, debenture and dealing in securities, settlement of estates and conveyance of property. The rate of tax depends on the nature of the document and transaction.

Education Tax – 2%

A tax chargeable on all Nigerian resident companies at 2% of chargeable profits as contribution to the Education Tax Fund.

Nigerian Social Investment Trust Fund (NSITF)

Governed by the NSITF Act, it provided for monthly contributions by members at the rate of 6% of basic salary subject to a maximum of N8.00 per month or a sum total of N96.00 per annum to be paid in equal proportion by the employer and the employee.

Starting or running a business?

Tax