1. Why are MSMEs required to pay Tax?
MSMEs, like other taxpayers are considered as legal and economic persons and as such have to fulfil their civic duties which includes paying relevant taxes to the Government accordingly.
2. What are the key Taxes applicable to MSMEs in Nigeria?
a. Personal income tax (for individuals, business names and unincorporated bodies)
b. Companies income tax (for limited liability companies)
c. Value added tax
d. Withholding tax
e. Capital gains tax
3. Is there a special Tax rate for MSMEs?
A reduced tax rate of 20% applies to MSMEs set up as a limited liability company with less than 1 million turnover. To qualify, an MSME must be engaged in agricultural, manufacturing, wholly-exported trade and should be within the first five (5) years of operations. However, this is not seen by MSMEs as adequate. Hence, the agitation for a more beneficial, effective and dedicated tax regime.
4. How can I determine appropriate Taxes and Levies that may be charged against my business?
An MSME can access and review the Taxes and Levies (Approved List for Collection) Act for a list of taxes and levies applicable to all categories of taxpayers. The provisions of this Act are considered to be too heavy for the profile of MSME operations.
5. What is a Tax number?
It is a unique identifier used by the tax authorities to identify, record and track individual taxpayers within the tax net. It is commonly referred to as a “tax identification number” by the Federal Inland Revenue Service and “Payer ID” by the Lagos Internal Revenue Service. Other states within Nigeria employ different nomenclatures for the tax number issued to taxpayers.
6. Are MSMEs eligible for special Tax incentives/exemptions?
MSMEs are entitled to various tax incentives available to Nigerian businesses and companies in general, provided the relevant requirements are met.
7. How is Tax administration structured in Nigeria?
Tax Administration in Nigeria is three-tiered.
ü Federal Inland Revenue Service (FIRS) for corporate bodies and residents of the Federal Capital Territory
ü State Board of Internal Revenue Service (SBIRS) for individuals and unincorporated bodies (partnerships and sole proprietors)
ü Local Government Revenue Committee are also empowered to collect applicable levies from individuals, businesses and companies as may be applicable
8. What is the process for registering for Tax purposes?
Visit any tax office close to your location along with your business registration or incorporation documents to submit an application to obtain a tax identification number.
9. How can MSMEs obtain annual Tax clearance certificates?
By submitting an application upon completion of relevant forms at the tax office where the business entity files its tax returns. All outstanding tax obligations must have been fulfilled in order to prevent possible delays or denial of the application.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s approximately 225,000 professionals are committed to becoming the standard of excellence.
This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.
© 2017 Akintola Williams Deloitte