Collecting taxes are one of the ways government generates revenue for carrying out it assignments. People in the developed world know the importance of taxes and take it upon themselves to pay.
For those thinking of evading taxes, they do so with fear. When caught, you will pay direly for it. In countries like the United Kingdom, tax is one of the most important way by which the government generate revenue and though the rates are high, the results gotten are encouraging.
However, in a country like Nigeria, not everyone pays tax. In fact, it has been stated that over 70% of its citizens are not paying tax. And for the ones paying, many of them play tricks to reduce the amount levied as tax on them. The situation however is changing in states like Lagos where they have the Lagos Inland Revenue Service (LIRS) coming down on defaulters.
Taxes are paid to either the Federal Government through the Federal Inland Revenue Service (FIRS) or State government depending on its type. Let’s take a look at the Nigeria tax acts
Nigeria Tax Acts
The list below contains the list of tax acts in Nigeria.
- Associated Gas Re-Injection Act
- Capital Gains Tax Act
- Companies Income Tax Act
- Deep Offshore and Inland Basin
- Production Sharing Contracts Act
- Tertiary Education Trust Fund Act
- Federal Inland Revenue Service (Establishment) Act
- Income Tax (Authorized Communications) Act
- Industrial Development (Income Tax Relief) Act
- Industrial Inspectorate Act
- National Information Technology
- Development Act
- Nigerian Export Processing Zones Act
- Nigeria LNG (Fiscal Incentive Guarantees and Assurances) Act
- Oil and Gas Export Free Zones Act
- Personal Income Tax Act
- Petroleum Profits Tax Act
- Value Added Tax Act
- Stamp Duties Act
- Taxes and Levies (Approved List for Collection) Act
- Casino Act
Top 5 Taxes In Nigeria
Below are the 5 popular taxes in the country picked from the list of taxes above. A short description of each of the taxes is given below.
1. Value Added Tax(VAT)
The Value Added Tax otherwise known as the Sales Tax was enabled by the Value Added Tax Act, No 102 of 1993. This tax is payable by the consumer at 5% of the net value added based on eligible transactions once consumed.
VAT is usually paid to the State’s Department of revenue.
However, if you’re a business, you should find out which products are sales-tax eligible so that you don’t have to over-pay by paying VAT on the wrong items. As a business, here’s how you can calculate your VAT. You can either use the invoice-based method or the accounts-based method.
For the invoice-based method, sales transactions are taxed, with the customer informed of the VAT on the transaction. This is the most widely employed method. It is expected that all registered businesses possess a VAT registration certificate with the VAT registration number boldly displayed on all invoices.
As a consumer, you can always look out for the VAT registration number to ensure that the VAT being charged is legal.
2. Personal Income Tax Act (PITA)
PITA is payable by all individuals and registered businesses aan partnerships except those registered under Part A of Companies and Allied Matters Act 1990.
3. Employment Tax
If you run or own a business, it is expected that a certain amount of your company’s responsibility fall on your employees and you’re expected to file these when submitting your tax returns to the State Government.
4. Self-employment Tax
This tax is primarily paid by individuals who work for themselves. These include sole proprietors and partners and it is based on the income of the business.
Also, if you’re a LLC owner, you ought to also pay the self-employment tax. However, if you’re the chairman or CEO of a corporation and you work as an employee you don’t have to pay the self-employment tax
5. Capital Gain Tax
This was enabled by the Capital Gains Tax Act, Chapter 42, LFN 1990. The Capital Gains Tax is a 10% tax imposed on Capital Gains arising from a sale, exchange or other disposition of properties known as chargeable assets.
Conclusively, it is important to note that you need to visit any government agency saddled with tax related issue to get a detailed information about each of these acts and which ones apply to you.
In cases were their offices are not available, you can have employ the service of a tax consultant for ignorance of the law is not an excuse. If you’re caught evading tax, the government will milk you dryer than how you would be while paying tax.