If your business is structured as an enterprise it is important to know that there are some taxes you shouldn't pay. For example, a business name owner only pays Value Added Tax (VAT) on a monthly basis to the Federal Inland Revenue service (FIRS). One good thing about VAT is that it is your customers/clients that pay it based on the value you added. It is calculated at the rate of 5% of the value added.
However private companies pay both VAT and Company Income Tax (CIT). It is calculated at the rate of 30% in Nigeria annually. The 30% is not charged on revenue but on the profit made for an accounting year that is twelve (12) calendar months.
Advantages Available to MSMEs In the Nigerian Tax System
They are as follows:
1) Every company that has proper records and accounts can choose to be on self assessment scheme they also receive 1% tax bonus as benefit.
2) Through tax avoidance SMEs can legally reduce the amount to pay as tax. Tax avoidance can be achieved through tax planning before the beginning of a business year. This helps the business have more money for growth.
Note: Tax evasion is a crime while tax avoidance is not a crime.
3) Getting assessment based on the actual business operation not assessment based on government estimation which is always higher than the actual assessment from operation.
4) Filing of VAT on or before 21st every month save SMEs charges of interests, fines and imprisonment. These charges impede the growth of business.
5) Payment of your tax/taxes give you opportunity to apply for different Federal government low interest rates loans or even grants. For example, the recent AGSMEIS loan by federal government, one of the requirements is VAT receipts from FIRS.
Besides Federal government scheme targeted to help MSMEs. There are certain jobs you cannot put quotation for if you can't provide evidence of tax payment made to relevant tax authority.
In conclusion, SMEs are very important to the Nigerian economy. Government will do everything to ensure their survival and growth. Government needs MSMEs and MSMEs need government for a viable economy.