Chukwuemeka Ayogu is the founder and principal partner of Countsystem,…
Gone are the days when small and medium-sized scale business owners will say forget Value Added Tax (VAT). It is for big companies. If you continue to operate your business with that mindset, both the amount for VAT and penalties will keep piling up. VAT is a tax that is added to the price of goods or services. It is charged at a rate of 7.5 percent.
The current battle by some State governments to collect VAT in their various states instead of the Federal Government is a great concern for every business owner. Every business owner is by law a tax agent to the Government. It means that officially your business is meant to file VAT to the Federal Inland Revenue Service (FIRS) on or before the 21st of every month.
Who pays VAT?
VAT is paid by users of the paid goods and services. Every business that makes sales of products or services either at a stretch or cumulatively the sum of twenty-five million nairas (N25,000,000) or more in a year is liable to pay VAT.
Considering this new development, the governments will employ all kinds of law enforcement, including touts, to collect more VAT. This will put more pressure on business owners and their cashflows. This law enforcement when they visit you as VAT defaulter, you will have to settle them, and still pay the VAT you owe including the penalty.
What a loss!
Put your house (business) in order by doing the following;
1. Separate your personal finance from business finance by simply placing yourself as a business owner on salary. If your business cannot pay salary then wages.
2. Stop using your company account to assist people who have relations overseas just because there is a promise of extra cash. You cannot prove is not for business afterward. Then you will be forced to pay VAT out of it.
3. Start keeping proper records of all your business transactions.
4. If in the last three (3) or six (6) months you have not made sales or purchases worth six a million (N6,000,000), do not charge VAT anymore to your customers this year. The reason is that you may not be making up to twenty-five million Naira(N25,000,000).
5. Even though you do not charge VAT you are supposed to be filing VAT to either FIRSor State Board of Internal Revenue depending on the state of residence. Presently, Rivers and Lagos states are the leading states in VAT collection.
Hello entrepreneur, you cannot afford as a business owner in this present economy in Nigeria not to file VAT. The need and demand for money by the government at all levels have never been like this. This will push the government to take measures you may consider “not business-friendly”.