Understanding Various Tax Types
Obligations and Rights of Taxpayers
Obligations:
I. The obligation to register as a taxpayer with the relevant tax authority.
II. The obligation to be honest.
III. The obligation to be cooperative.
IV. The obligation to provide accurate information and documents on time.
V. The obligation to keep records.
VI. The obligation to pay taxes as at when due.
VII. The obligation to make payments into the government Consolidated Revenue Account.
VIII. The obligation to obtain e-receipts from the banks for all payments made.
Rights:
i. The right to be informed, assisted and heard.
ii. The right of appeal.
iii. The right to pay no more than the correct amount of tax.
iv. The right to certainty.
v. The right to privacy.
vi. The right to confidentiality and secrecy.
vii. The right to quality service at all times.
OFFENCES AND PENALTIES UNDER THE PERSONAL INCOME TAX
Personal Income Tax is that type of tax that individuals, enterprises (registered entities by business names), families, communities, executorships and trustees of the estate pay. In other words, it is the tax paid by persons not Limited by the status of existence.
By jurisdiction under the Nigerian Tax System, Personal Income Tax is paid to the State Government and administered by the State Internal Revenue Service.
The Prime Book of Law that guides the administration of the Personal Income Tax is the Personal Income Tax Act (PITA) which has
gone through periodic Amendments in Nigeria. The Current Act is the Person Income Tax Act 2011 as amended.
This Book of Law for administering the assessments and collections of the Personal Income Tax spells out the offences that are likely to be committed by taxpayers and the penalties that are to be applied on the possible offenders.
The excerpts of the offences and penalties under PITA are mentioned below in a tabular form.
S/NO | OFFENCE | PENALTY | RELEVANT SECTIONS OF PITA |
1 | Failure by bankers to render returns, books, documents and information
| N500,000 for Corporate N50,000 for Individual
| 47(3) |
2 | Failure by bankers to render information about new customers within seven | N500,000 for Corporate N50,000 for Individual
| 49(4) |
3 | Failure to keep books of accounts | N500,000 for Corporate N50,000 for Individual
| 52(1)(a) |
4 | Failure to deduct or remit tax by taxpayers or deduction agents | 10% of the tax not deducted/remitted plus interest at CBN Monteray
|
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5 | Failure to file annual PAYE returns by the employer | N500,000 for Corporate N50,000 for Individual
|
81(3) |
6 | Giving false information of tax liability when to obtain TCC and | liable on conviction to a fine of N50,000 plus twice the tax payable | 85(7a & b)
|
7 | Failure to demand and verify Tax Clearance Certificate (TCC) | N5,000,000 or three years in jail or both | 85(9)
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8 | Failure to comply with provisions where there is no specific penalty | N5,000 in 1st instance and N100 for everyday
| 94(1)
|
9 | Making incorrect returns | N20,000 | 95(1)
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10 | Making false statements and returns | N500,000 for Corporate N50,000 for Individuals and imprisonment for six months
| 96(1)(b)
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11 | False statements by a person concerning tax payable or repayable
| N10,000 or imprisonment, not more than six months | 96(1)(b)
|
12 | Offences by authorized and unauthorized persons | N10,000 or three years imprisonment for both | 97
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ASSESSMENT OF PERSONAL INCOME TAX
1. Direct assessment: Taxable person engaging in business activities is expected to file a return annually on or before 31st March of each year to the State tax authority in which they reside to be used as the basis of assessment. Otherwise, the Best of Judgment Assessment (BOJA) will be applied.
The tax authority will raise an assessment after necessary adjustment and due consideration of Consolidated Relief Allowance CRA by communicating appropriately to the taxpayer by submitting a demand notice, to which the taxpayer statutorily has 30 days to respond.
2. Pay As You Earn PAYE: Taxable person working under employment is liable to pay PAYE tax to the state tax authority in which they reside.
The law mandates the employer to deduct and remit to the tax authority on or before the 10th day of the month following the month in which the salaries are paid.
The assessment is done by considering all statutory reliefs such as Pension contributions, National Housing Fund NHF, National Health Insurance Scheme NHIS and Consolidated Relief Allowance CRA before subjecting the chargeable income to the tax table in other to ascertain tax liability due for payment.
Consolidated Relief Allowance CRA is computed by ascertaining 20% of gross income plus two hundred Thousand 200,000 or 1% of assessable income, whichever one is higher.
Gross income is now defined by the finance Act 2021 as total income minus statutory contributions.
TAX TABLE
First N300,000.00 of chargeable income @7%
Next N300,000.00 of chargeable income @11%
Next N500,000.00 of chargeable income @15%
Next N500,0000.00 of chargeable income @19%
Next N1,600,000.00 of chargeable income @21%
Above N3,200,000.00 of chargeable income @24%
Example
Mr Audu is an employee of the Niger State Ministry of Finance with a monthly consolidated salary of N230,000. He is making a monthly pension contribution of N18,400 to Lead way pension administrators and he want to know how much he is to pay as tax to enable him to plan for his net income after tax.
Solution
Mr Audu Pay-As-You-Earn (PAYE) computation
Monthly Salary Annual Salary
N230,000 * 12 N2,760,000
Less Statutory contribution (Pension8% of A/S) N220,800
Annual Gross Income N2,539,200
Less CRA = 20% of N2,539,200 + N200,000 N707,840
Chargeable Income N1,831,360
Application of Tax Table on
Chargeable Income
First N300,000 of CI @7% N21,000
Next N300,000 of CI@ 11% N33,000
Next N500,000 of CI@ 15% N75,000
Next N500,000 of CI@ 19% N95,000
Balance of N231,360 of CI @21% N48,585.60
Annual Tax Payable N272,585.60
Monthly PAYE Payable N22,715.47
TAX BENEFITS
1. Paying taxes makes you a good citizen of your Country.
2. It is a source of revenue for the Government.
3. Paying taxes enables the Government to serve its citizens better.
4. It is means of checking inflation.
5. It is a means of redistribution of wealth between the rich and the poor.
6. It is a means of controlling the consumption of unhealthy goods and services.
STAMP DUTIES (RECOVERY AND COLLECTION) REGULATIONS.
Stamp duty is one of the indirect taxes in Nigeria; it is a tax on commercial and legal documents that record and affect certain transactions. The SDA primarily governs Stamp Duties.
The main body of the Act deals with administration, transactions, and definition of instruments and penalties. The stamp duty rates are generally contained in the Schedule to the Act.
Section 4(2) of the Stamp Duties Act which provides that ‘’ The State Government shall collect duties in respect of instruments executed between persons or individuals at such rate to be imposed or charged as may be agreed with the Federal Government’’
ELECTRONIC INSTRUMENTS, ELECTRONIC PAYMENT SYSTEMS AND TRANSACTIONS
The Finance Act 2019 (“the FA 2019”), particularly section 52, expanded the scope of the SDA to capture electronic transactions. A new section 89A of the SDA (amended by section 48 of the Finance Act, 2020 (‘the FA 2020”). These regulations shall apply to electronic instruments and transactions of and between individuals carried on through or on their behalf by banks, operators of clearance services and electronic payment systems and or any other payment of electronic instruments and transactions operating within the territory of Niger State.
These regulations shall apply to the following types of instruments and transactions;
DUTIABLE INSTRUMENTS AND APPLICABLE RATES IN THE SDA
S/N | Agreement | Type | Stamp Duty Rate |
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1 | Admission as a barrister or | Flat | N50 |
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2 | Affidavit, Affirmation, and Statutory Declaration | Flat | 45K |
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3 | Agreement under hand | Flat | 15K |
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4 | Agreement under seal | Flat | N3 |
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5 | Appointment of trustee | Flat | 50K |
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6 | Appraisement or valuation of | Ad valorem | 1.50% |
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7 | Assignment by way of security | Ad valorem | 0.38% |
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8 | Assignment upon a sale or | Ad valorem | 1.50% |
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9 | Bill of sale | Ad valorem | 1.50% |
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10 | Bond | Ad | 0.38% |
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11 | Charter party | Flat | 9K |
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12 | Contract (Except other | Flat | 15K |
| stamp duty in the SDA) |
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13 | Contract Note | Ad valorem | 0.08% |
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14 | Conveyance or transfer by way of security | Ad valorem | 0.375% |
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15 | Conveyance or transfer on sale of any property | Ad valorem | 1.50% |
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16 | Debenture | Ad valorem | 0.375% |
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17 | Declaration of any use of | Flat | N3 |
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18 | Deed of any kind not described in the Schedule to | Flat | N3 |
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19 | Documents, agreements from ministries, | N/A | Duty not applicable |
| agencies of Government |
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| adviser |
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20 | Lease | Ad valorem | 0.78% if lease period is |
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| not |
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| 3% |
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| between |
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| 6% |
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| over |
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21 | Loan capital | Ad valorem | 0.125% |
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22 | Marketable securities | Ad valorem | 2.25% |
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23 | Mortgage | Ad valorem | 0.38% |
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24 | Increase in share capital | Ad valorem | 0.75% |
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25 | Insurance | Ad valorem | 0.08% |
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26 | Power of attorney | Flat | 3k |
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PENALTY FOR LATE STAMPING
Failure to pay stamp duties to the appropriate authority within the time stipulated in the SDA is an offence that could attract penalty and interest.
| Penalty | Interest |
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Where stamp duty is not more than NGN20 | NGN20 |
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Where stamp duty is more than NGN20 | NGN20 | 10% interest per annum from the day of first |
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| execution up to the unpaid duty. After 10 years, |
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| once cumulative interest is 100% of the unpaid |
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| duty, not further interest is charged. |
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