The Personal Income Tax Act states that a Business Name owner who earns an income from employment or running a business in Nigeria is subject to tax. It is expected that a Business Name owner pays tax for each year that is being assessed on the aggregate amount from every source of income for the year.

The aggregate includes profit from the business, salaries, wages, fees, allowances and other profits from employment. These profits could be compensations, bonuses, premiums or benefits given or granted by an employer to an employee, profits and premiums arising from rights granted to another person for the use or occupation of property, dividend, interest, and annuity.

Tax structure

The minimum tax rate is now 1% of gross emolument if the income is below N 300,000.00 against the 0.5% initially charged.

Also read:Tax Obligations for Individuals in Nigeria

What is a Tax Identification Number (TIN)

A Tax Identification Number (TIN) is a unique identification number that identifies a business for the purposes of paying taxes. A Business Name owner must register with and obtain a TIN from the Inland Revenue Service. It is compulsory for a business owner to register and obtain a TIN from the Federal Inland Revenue Service (FIRS). This will enable such business to pay taxes such as Personal Income Tax, Withholding Tax and also for VAT purposes.

Everyone that is taxable is required to prepare and submit the annual self-assessment tax returns within 90 days. This is from the start of every year and also includes the amount of tax payable.

For the year under evaluation, you should file a return of income in a form containing the following listed below. The tax should be filed with the relevant authority.

• The amount of income from every source of the year preceding the year of assessment,
• Such particulars as may be required for the purpose of the Act with respect to any such income, allowances, reliefs, deductions etc.
• A declaration by him or on his behalf that the return contains a true and correct statement of the income disclosed on the form, in accordance with the provisions of the Act.

PAYE

Employers are required to deduct the prescribed tax from their worker’s salaries and pay directly to the FIRS. The payment can be made monthly through the banks assigned on behalf of the employees. The Pay As You Earn (PAYE) system is how persons on paid employment pay their personal income tax.

The relevant tax authority

The State Boards of Internal Revenue collect the Personal Income Taxes of:

• Business names
• Individuals in their various states of residence
• Executors of estates of deceased persons and trustees of trusts.
• Body of individuals like communities, families that run a business

The Federal Inland Revenue Service is responsible for collecting Personal Income Taxes of:

• Persons employed in the Nigerian Army, the Nigerian Navy, the Nigerian Air Force and the Nigerian Police other than in a civilian capacity;
• Non-residents who derive income or profit from Nigeria;
• Officers of the Nigerian Foreign Service.