What is Tax?

Tax is a compulsory contribution paid to the government by its citizens to support social amenities such as schools, electricity, potable water, roads and hospitals. These taxes are for the benefit of the citizens.

What is Personal Income Tax (Amendment) Act?

Personal Income Tax (Amendment) Act is the amendment of the Personal Income Tax Cap P8, LFN 2004. This is a law that takes care of tax matters as it affects all income earners. These are employees, self-employed, and all other persons that pay personal income tax (PIT) in Nigeria.

What is Personal Income Tax (PIT)?

Personal Income Tax is a type of tax imposed on the income of individuals who are either in employment or are running their own businesses under a business name, a trust, or a partnership.

What are your rights as a taxpayer?

Your rights as a taxpayer include: knowing what the Government does with the money you pay as tax; to demanding to be issued with evidence of payment each time you have paid your tax. The evidence may be a receipt or Tax Clearance Certificate; to know how you will assess your income for tax purposes, when to pay and where to file your returns and make payment; to know when penalty and interest will be applied to you, if you do not pay your tax; to seek redress, appeal or object to assessment raised or decision was taken against you by the tax authority.

What are your obligations as a taxpayer?

Your obligations as a taxpayer include: assessing correctly, filing and making payments as and when due, complying with the relevant provisions of the tax laws; disclose all sources of income for tax purposes.

Is it only public servants that pay tax?

No, it is not true that tax authorities only tax public servants: rather, the tax authorities administer the law on all persons whom the law identifies as personal income tax payers, such as traders, private employees, self-employed individuals, etc.

Who pays personal income tax and how?

All persons who earn incomes, be it on a temporal or permanent basis; whether employees or individuals that carry out business activities are required to pay personal income tax. Tax due and payable by employees by reason of their employment, otherwise known as PAYE, should be deducted by their employers and remitted to the relevant tax authorities. On the other hand, the self-employed are required to assess themselves, file their returns, and make payments on an annual basis to the relevant tax authorities.

What are the general requirements for tax filing and tax payment under PITA?

An individual engaged in full-time employment is taxed under the pay-as-you-earn system. The employer withholds personal income tax from the employee's salary or wages and pays it to the tax authorities within 14 days. An individual whose only source of income is employment income from a single employer must file a tax return unless his/her employment income does not exceed NGN 300,000 per year. Other individuals pay tax by self-assessment or direct assessment. Financial statements and schedules, when applicable, must accompany the self-assessment return. Payments may be made in full or, upon application, in installments. Withholding tax suffered at source can be used to offset income tax due.

What is PAYE?

PAYE means Pay-As-You-Earn. It is a form of personal income tax payable by those on employment.

What are the obligations of the employee?

It is the obligation of an employee to correctly fill and file all relevant tax documents for each year of assessment as may be required by the relevant tax authority. It is obligatory for the employee to correctly disclose all the sources of income for tax purposes.

What are the obligations of employers?

It is the duty of the employer as contained in the law to deduct at the source the correct amount of tax from the salary payable to an employee as computed under the Act each month the employer pays salary to the employee. Also, the tax deducted by the employer must be remitted to the relevant tax authority at least 14 days following the month the deduction was made.

On what sources of income do we tax Nigerian residents?

Nigerian residents are taxed on their worldwide income. Foreign-source income of residents is taxable if remitted to Nigeria.

What about non-resident Nigerians (foreigners)?

Non-residents (foreigners) are taxed on Nigerian-source income, generally via withholding at source.

Are musicians, actors, and sportsmen taxed?

Yes, sportsmen, actors, and musicians are taxed on gains from their overall income except for the portion that is earned abroad/foreign source income and brought into Nigeria through the approved channel.

What is income earned abroad/foreign source income?

Income earned abroad or foreign-source income in convertible currency arising from salaries, dividends, interest, rents, royalties, fees or commissions is exempt if brought into Nigeria through approved channels. The income brought into Nigeria through domiciliary accounts by athletes, playwrights, authors, musicians, artists and temporary guests who are professionals also is exempt.

Which income/earnings are exempted for personal income tax purposes?

Some of the incomes exempted under personal income tax include Interest on any loan granted by a bank on or after January 1st, 1997 to a person engaged in agricultural trade or business and fabrication of any local plant and machinery or as working capital for any cottage industry established under the family Economic Advancement program. (Provided that the moratorium is not less than 18 months and the rate of interest is not more than the base lending rate at the time the loan was granted.)

Income of a local government or government institution; Gratuity payable to a public officer by the government in respect of services rendered under a contract of service to that government. This has to be described as gratuity either in the contract or some other document issued by or on behalf of the government in connection with such a contract.

What is the domiciliary account?

A Domiciliary account is the officially approved channel for remitting income earned abroad as an authorized bank by the Central Bank of Nigeria.

On what type of earnings/income do we pay personal income tax?

We pay personal income tax on all our total income/earnings except on those exempted by law. That is gains on businesses of individuals, enterprises, trusts, partnerships, etc; Salaries, wages, and allowances from employment; all other perquisites.

We received the demand notice, but the thought it was not from the Tax Authority

Always read through the letters sent by the BOSIRS and endeavor to see the undersigned Officer or visit the address stated on the letter.

Why did the Audit Team/Consultant not discuss their findings with us?

The audit team or consultant that carried out the audit is not authorized to discuss their findings of the audit with the Company/Taxpayer.  Their role is to compile and submit documents provided by the Taxpayer to the Tax Authority.

Why were we not called for a reconciliation meeting after we objected to the liability on the demand notice?

There is time frame for objections to be submitted to the BOSIRS by the taxpayers and it is 30 days from the date of receipt of the demand notice.  This is stated in (Section 5B & Section 104(1) of PITA CapP8 LFN.)

Why were we distrained after we had made part payment upon receipt of the Demand Notice from BOSIRS?

All payments to BOSIRS with respect to tax liabilities are received and would be considered as part payment and do not stop the process of recovery, except the full payment is made by the taxpayer before distrain is levied.

Why were we distrained based on the Demand Notice that was sent to the Company and received, but was not brought to the notice of the management?

That is an internal lapse, as it behooves the staff or company representative to bring it to the notice of the officer in charge to do the needful.

Why did the Distrain Team come into our office with a policeman?

It is a provision of the law for the prose of ensuring the security of the Tax officers. Section 104(4) PITA CapP8 LFN

Why was I not served the court process and informed of the date to appear before the court before the warrant was levied?

The law provides that the application to the High Court will be by 'Exparte Motion' which only requires that the Tax Authority must prove that they have fulfilled all statutory requirements and have documents to support their claim and the order to levy distrain may then be granted by the judge.

Why were we sent out and our property sealed?

The law governing distrain provides for the sealing of the property and sale of goods, chattels, and real estate to recover the outstanding tax. Section 104 (1(a-b) Cap P8 LFN.

Why does the distrain team use a cameraman?

To act as an unbiased arbiter where contentious issues arise.

Why must I pay the Cost of Distrain?

Because it is not a provision of the law and the tax defaulter must bear the cost of levying the distress. Section 104 (5) PITA Cap P8, LFN