When you start a business in Nigeria, you will begin to pay taxes and levies to different government bodies. Not many new business owners are aware of this. As a result, they are caught unaware and are often unprepared for this reality. It is vital to have an understanding of the business taxes and levies payable by you in Nigeria. The aim of this article is to show you the list of taxes and levies you should be aware of before you start a business in Nigeria.
The government agency that deals with assessing, collecting and accounting for taxes paid to the government is the Federal Inland Revenue Service (FIRS). It was formed in 1943 and has its headquarters in Abuja.
Importance Of Tax In Nigeria
- Government officials who were elected and employed to serve the citizens of the country all get paid from taxes.
- The government makes use of tax funds to make, fix and maintain the road people travel on. In other words it is used to build infrastructure.
- It is easier for a tax payer to bid for government contracts and grants because they will be in their good books. Also, investors and financial institution will find you more credit worthy.
Steps In Paying Taxes
You can register and pay taxes online. All you have to do is:
- Go to www.firs.gov.ng
- Click on e-services, then click on e-filing.
- Download the e-filing access application form and
- Scan the correctly filled document and then send to your preferred tax office.
Types Of Taxes And Levies In Federal, State And Local Government Level
Citizens pay taxes to the three levels of government, depending on the type of levy or tax you are to pay. For the federal level, the FIRS collects the tax. For the state level, the State Inland Revenue Service collects the taxes and levies. Then at the local level, the state local government collects the levies.
(1) Taxes and Levies To Federal Government
a. Company Income Tax
The Company Income Tax (CIT) is a tax that is charged from the profits of companies in Nigeria that are registered. Both LLC and PLC companies pay this kind of tax.
The FIRS presently charges 30% for the CIT. This is for companies that have a hundred million Naira yearly turnover. They charge companies with a yearly turnover from 25 million to 100 million 20% while they exempt companies whose yearly turnover is less than 25 million.
b. Value Added Tax
Value Added Tax is the tax the FIRS collects from government agencies, businesses and individuals for the goods and services they consume. For businesses, the VAT is charged on goods that are imported into the country. Business people must register and make monthly VAT returns to the FIRS.
The VAT rate presently is 7.5%. it was previously 5%. The FIRS does not tax all goods though. Items like non-oil export, spare part import, machinery and equipment for solid mineral extraction, commercial vehicles, basic foodstuff, pharmaceutical supplies, education materials, etc. have a 0% VAT rate.
c. Capital Gains Tax
When individuals sell some assets like stocks, bonds, shares, real estate and precious metals they pay tax on the profit they make. The FIRS charges a flat rate of 10%.
(2) Taxes and Levies To State Government
a. Business Premises Levy
The government imposes a levy on individuals who have property that they use for making or generating money. This includes rental houses, office buildings, factories, etc. In most places in the country, business premises levy is charged at ₦10,000 for initial registration and is renewed yearly at ₦5,000. This is for urban areas. It is ₦2,000 for registration and ₦1,000 for renewal in rural areas.
b. Personal Income Tax
Personal Income Tax is a tax paid by small business owners from the income and profit they made for the year. The tax is paid in the following year to the state tax authority, with the deadline being the 31st of January. The amount of Personal Income Tax that is charged each business is dependent on the amount of their annual income. It ranges from 7% – 24%.
c. Signboard And Advertisement Levy
Before you can advertise or use a signage for your business in Nigeria, you must have a permit from the appropriate authority in the state. So any structure for billboards, any wall sign, any roof sign, any free-standing portable sign, any furniture or stature type sign, any kiosk supporting outdoor signage and temporary signs are levied.
A permit is given after a fee for the advertisement or signage has been paid. It is then renewed annually.
d. Betting, Lottery And Gaming Taxes
The National Lottery Regulatory Commission gives license and permits to lottery and sports betting business. The application and processing fees for lottery and sports betting is 2 million Naira. To find out how to register either one of them, you can check out this website.
(3) Taxes and Levies To Local Government
a. Shop And Kiosk Levy
This is similar to the business premises levy. This is paid to the local government council and how much they charge these shops and kiosks is dependent on the area.
b. Motor Park Levy
The National Union of Road Transport Workers (NURTW) charge levies on commercial vehicles, motorcycles and tricycles (Keke Napep). The amount charged these commercial transport business people varies. For instance, in Lagos, buses and cars are charged ₦3,000, motorcycles are charged ₦600 and tricycles ₦1,800.
c. Liquor License Fee
Before you can own an establishment that serves liquor or a beer parlor, you must have a liquor license. The local government office issues this license in rural areas. To know the procedure of applying and receiving a liquor license, check out this site.
This is the list of taxes and levies you should be aware of before you start a business in Nigeria.
My name is Emmanuel Ejiga. Content lead of OG Capital
I am a writer. Technical writer, song writer, and sometimes fictional writer.