The Beginning

Chidi U
Chidi U
Aug 22, 2017 · 2 min read

On several occasions, I have tried to discuss Nigerian tax issues with friends who are business owners or salary earners. The most asked question I’ve received is “What is the tax rate for companies/salaries”.

For companies, the answer is almost easy, the Nigerian income tax rate for companies is thirty percent (30%) of total profit. My friends usually go away erroneously thinking, “I’ll just apply thirty percent (30%) to my profit and pay the resultant amount to the government”. This is usually incorrect because total profit is hardly ever the same as accounting profit.

For employees, the answer becomes a bit more nuanced. You see, personal income is taxed in income bands. There is no straight employee tax rate that can be applied to a salary base — except you want a rough estimation, then you can apply an effective tax rate of 19.2%. In fact, it is possible for employees with the same salary package to end up paying wildly different taxes to the government.

The second most asked question is “so where do I pay this tax?”

The answer depends on the type of tax the tax payer intends to remit. At this point, if my friend has lasted this long in the conversation, I explain that there are several taxes a tax payer is expected to remit on a timely basis. Some of the most popular include Companies Income Tax (CIT), Personal Income Tax (PIT) and/or Pay-As-You-Earn (PAYE) tax, Value Added Tax (VAT), Withholding tax (WHT) and Capital Gains Tax (CGT). These are the more popular ones and do not take into consideration, the taxes that companies in the oil and gas industry have to compute and remit. I usually avoid discussing those taxes. Truthfully, I never get far enough in the conversation to discuss the taxes in the oil and gas sector or even to discuss topics like tax incentives.

I must admit that discussing taxes is usually less interesting than discussion debut goals of new signings in the English Premier League. The topic is rendered even less interesting because a lot of the people with whom I discuss do not understand the basics of taxation in Nigeria.

Which is why I have started this blog. I will be taking you through the basics of taxation in Nigeria. It is my hope that the posts will provide a layman understanding of Nigerian taxation and how each of the taxes apply to your business, your salary and your bill at your favorite fast-food restaurant.

My plan is to begin by briefly explaining the popular taxes, then delve into the Lego concepts of each. If you’re still with me at the end of all of this, we might have some fun and begin to discuss tax incentives, differing schools of thought in taxation, etc.

Please note that my posts should not be construed as professional advice. You are advised to speak with your tax consultant about your particular situation.

Welcome!

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Chidi U

Written by

Chidi U

Tax adviser. Road trip lover. Food is a love language. #myopinion

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