16 FIRS TAX FAQs and Answers All Nigeria SMEs Must Know.

Tax is one of the scariest things for any small business owner. But as scary as it is, every business will have to face it someday. Not to be heavily beaten down by it, every business owner must try to meet up with their Tax requirements and do necessary filings to avoid heavy penalties. Before we get to the top basic things SME owners must know about TAX in Nigeria, here is a brief history of Nigerian FIRS.

The Nigerian Federal Inland Revenue Service (FIRS), was created in 1943. It was carved from the erstwhile Inland Revenue Department that covered what was then the Anglo - Phone West Africa (including Ghana, Gambia, Sierra Leone) during the colonial era. The Federal Inland Revenue Service is constitutionally empowered to collect taxes in Nigeria. And since tax provides revenue to fund the government, reduces inflation and generates employment, the government agency takes Tax remittance seriously.

16 TAX ANSWERS YOU MUST KNOW AS AN SME OWNER IN NIGERIA.

Question 1: What is Value Added Tax.
Value Added Tax (VAT) is a tax levied on the consumption of goods and service.

Question 2: On what types of goods and services do you pay VAT?
The VAT Act CAP.VI LFN 2014 requires that you pay VAT on all goods manufactured/assembled in or imported into Nigeria, and all services rendered by any person in Nigeria except those specifically exempted under the law as follows; basic (raw) food items, baby products, medical services and services rendered by community Banks, etc.

Question 3: What is the VAT rate?
5 percent.

Question 4: What is the due date of filing VAT returns?
On or before the 21st day of the month following the month of transaction.

Question 5: What are the relevant documents required for filing VAT returns
1. Evidence of payment such as bank teller, e-ticket, e-acknowledgment, etc. from a FIRS designated revenue collecting bank.
2. Completed VAT returns from 002 (for individuals, enterprises, and companies).
3. Schedule of VAT collected indicating the: Name, Taxpayer Identification Number (TIN) of company or individual on whose transaction the VAT was charged and the related amount.

Question 6: Who should register for VAT?
Both individual and corporate bodies so long as they are trading in goods and services.

Question 7: How do you register for VAT collection?
Once you register with the FIRS by completing the Taxpayer Registration Input Form, submit copies of prescribed documents and obtain Taxpayer Identification Number (TIN), you are automatically registered and authorized to collect VAT.

Question 8: When should a taxable person register for VAT?
All taxable persons are expected to register for VAT immediately they are registered with Corporate Affairs Commission (CAC) or on commencement of business.

Question 9: What is/are the penalties for:
1. Non-registration for VAT?
A penalty of 10,000 for the first month in which the failure occurs and 5,000 for each subsequent month. If this persists, the business premises will be sealed up after a considered reasonable period.
2. Non — remittance of VAT?
A penalty of a sum equal to 5% per annum plus interest at a commercial rate payable within 30 days of notification by the Tax Authority.

Question 10: How do you pay VAT?
VAT is paid through all FIRS designated revenue collecting banks into the VAT Pool Account.

WITHHOLDING TAX ANSWERS YOU MUST KNOW.

Question 11: What is Withholding Tax?
Withholding Tax (WHT) is an advance payment of income tax.

Question 12: What is the Rate of Withholding for Companies and individuals on transactions?
There are varying rates of WHT ranging from 5% to 10% for both companies and individuals depending on the transaction.

Question 13: What is the due date for fling WHT returns?
On or Before the 12th day of the month following the month in which the deductions were made.

Question 14: Who are the collecting agents for WHT?
All organizations or bodies making payments to suppliers of goods and services. They are required to make deductions of withholding Tax and remit to the Tax Authority as payments are being made to suppliers/vendors.

Question 15: What are the relevant documents required for filing WHT returns?
1. Evidence of payments such as bank teller, e-ticket, e-acknowledgment, etc. from an FIRS designated revenue collecting bank.
2. Schedule of WHT deducted indicating the: Name of supplier/vendor, Taxpayer Identification Number (TIN) of company or individual (supplier/vendor) from which the tax was withheld and the related amount.

Question 16: How do you pay WHT?
WHT is paid into the Federation Account through all FIRS designated revenue collecting banks.

With these answers, you should have some basic knowledge of VAT and WITHHOLDING taxes in Nigeria. But just as you need to study before you take an exam, you must have a business financial book/record to know the figures to pay and also present to the Tax officials. A business financial book is simply organized written evidence summarising transactions carried out by a person in his/her business at a given period of time. Your best shot will be to use a simple accounting solution to achieve this.