The Federal Executive Council on Wednesday, 11th September 2019, approved that the Value Added Tax (VAT) rate be increased from the current rate of 5% to 7.2%. This proposed increase was announced by the Honorable Minister of Finance, Budget and National Planning…
The President of the Federal Republic of Nigeria recently signed into law the new Nigeria Police Trust Fund (Establishment) Act, 2019 (“the Act”). This Act establishes the Nigeria Police Trust Fund (“the Fund”) in favour of the Nigerian Police Force (“the Police”). The main objective of the Act is to provide a legal framework to govern the Fund to be utilized for training the Police, providing state-of-the-art security equipment and other related facilities to aid in the enhancement of the discharge of the dues of the Police.
Poor corporate governance has been the Achilles’ heel of many corporations worldwide. Nigeria is not immune to this fact, especially as corruption is prevalent in the nation. The attention of the world was drawn to major corporate governance issues in Nigeria in 2007 when material misstatements were discovered in Cadbury Nigeria Plc’s financial statements. Since then, many more corporate scandals have followed and effectively posed as obstacles against attracting foreign investments into Nigeria.
The Financial Reporting Council of Nigeria (FRCN) has issued a Public Notice (the “Notice”) revoking its Rule 4 (“the Rule”) titled “Transactions requiring registration from statutory bodies such as the National Office for Technology Acquisition and Promotion”. The revocation which is to be applied prospectively became effective on 11 July 2019.
The Federal Inland Revenue Service (FIRS) has issued a public notice on the deductibility of withholding tax (WHT) and value added tax (VAT) on compensation and/or commission due to distributors, dealers and/or agents.
Question: Do you want your business to grow into a bigger business which is viable for investors to fund?
Yes, indeed! Then you have to be accountable.
Question: Do you want your business to leave its footprints in the sands of time?
If yes, then set your priorities right from the inception!
Question: Is it difficult to manage your accounting and tax records because you run a small business?
Absolutely NOT! You need to start doing the right things.
It is quite easy to say that with the advent of a number of initiatives to make funds available for small businesses and encourage SMEs to grow, there have been series of programs launched to make this impact measurable to small businesses, including; the Youth Empowerment Scheme of the Bank of Industry, Tony Elumelu Entrepreneurship Program, GroFin Fund, Lagos State Entrepreneurs Trust Fund for startups, Small and Medium scale Enterprises (SMEs) etc. So far, they have all been great initiatives, and their number is increasing by the day. The contribution of these initiatives to the growth of SME business activities and development of the Nigerian economy cannot be over emphasized.
The long-run goals of businesses are profitability and sustainability. Many at times people start up businesses having a deep foresight and understanding of the goals they intend to achieve which is quite paramount in determining the success or otherwise of the business. Once business development goals are set beforehand, actions necessary to actualize them should be mapped out and acted upon.
There is a need for SMEs to have basic knowledge of the fundamentals of accounting and tax related issues, as this will go a long way in shaping the business and ensuring it achieves its founding goals while growing without falling victim of paying huge fines and penalties for not doing things right by complying with the provisions of the regulatory laws and reporting standards.
What books of accounts do SMEs need to keep?
Keeping the right books of account and records from the onset is very essential to the success and expansion of every business aspiring to grow and outlive its owners. The following are key;
• Open a separate bank account for your business that is different from your personal bank account. This would help account for your actual turnover and avoid personal funds from being recognized and taxed as business income by the relevant tax authorities.
• Track your expenses effectively. Make sure you get invoices and receipts for every purchase; this will help to prove claims of allowable deductions on taxable income.
• Maintain proper bookkeeping. This is the process of recording, categorizing transactions and reconciling bank statements which can be done using an accounting software like QuickBooks or manually with Excel spreadsheets. Major books of accounts to be kept are cashbook, sales day book and purchases day book.
• Keep an effective payroll system which should preclude the business owners from dipping their hands into the business account at intervals for personal use. Regardless of how few the number of your staff is, get it right from the beginning because this will save you from the hassle of having to reconcile records when they get muddled up.
Registration with tax authorities
• Income tax registration: Within six months of registration with the Corporate Affairs Commission or commencement of business, every business including an SME is expected to register with the Federal Inland Revenue Service (FIRS) if it is a Limited Liability Company (LTD), or with the respective State Internal Revenue Service (SIRS) of the state where the company intends to operate if it is a Business Name, for income tax purposes.
• VAT registration: All businesses should be registered with the FIRS for VAT purposes irrespective of its company type.
• Tax Identification Number (TIN): A TIN which is a unique number for a taxpayer’s identity will be given after registration. This number will be used for opening a business bank account and doing other business transactions. The employees are also expected to have their unique Taxpayer ID/TIN depending on the state in which the employees reside as this is necessary for staff tax clearance certificates processing.
• Pay As You Earn (PAYE) registration: If you are not running a one-man business, you need to register your staff with the SIRS for PAYE purposes.
All these registrations are simply done by visiting a tax office close to where your business is domicile, filling the necessary forms provided and attaching all necessary documents required.
• Value Added Tax (VAT) returns: Every business once registered is expected to start filing VAT returns on or before the 21st day of the month for the VATable transactions of the previous month. The FIRS VAT Form 002 should be filled correctly and the e-ticket evidencing payment of the VAT payable attached. A NIL VAT returns is filed when, but not only if, no sales was recorded in the previous month and a bank statement should be attached to prove that.
• Annual PAYE returns: This returns is expected to be filed on or before the 31st of January of every year in respect of the PAYE tax deducted and remitted in the previous financial year. The returns include the employer’s declaration of the gross income of employees and PAYE taxes paid for the immediate preceding year on a schedule referred to as Form H1 including the receipts for the PAYE remittances and a projected payroll of the current year but in some states apart from Lagos there has to be attached another schedule showing the income, deductions and tax paid relevant for the three preceding years referred to as form H2.
• Company Income Tax (CIT) returns: Limited liability Companies have a duty to file CIT returns on or before six months after the company’s accounting year end on an annual basis with the current year being referred to as the Year of Assessment in which the returns are due for submission and taxes are due for payment.
• Withholding Tax (WHT): This returns should be filed on or before the 21st day of the month following the month in which the deductions were made or when the transactions occurred depending on the nature of transaction and the provisions of the law as regards such.
Taxes to be paid
• Personal Income Tax (PIT)/Company Income Tax (CIT): Companies are to pay 30% of their chargeable income to the FIRS while enterprises/business names are to pay PIT using the tax graduation table.
• Value Added Tax (VAT): VAT is a consumption tax levied at every level of production and ultimately borne by the final consumer. Businesses add VAT at the rate of 5% to the sales price of the goods or services they offer in Nigeria. They also pay VAT, just like consumers, on goods and services that they consume.
• Pay as You Earn (PAYE): Businesses are expected to deduct PAYE tax correctly from the salaries paid to their employees/staff. They are to remit same to the relevant SIRS on or before the 10th day of the month following the month of deduction.
• Withholding Tax (WHT): This is an advance payment of income tax. Every business is required to make deductions from every taxable person with whom the company has business dealings (Vendors/suppliers, Investors) etc. using the rates as listed in provisions of the tax laws and remit same to the relevant tax authority when payments are being made or when it becomes due depending on the provisions of the law as regards such. e.g. WHT on Rent, Dividend and Interest are paid when it becomes due but WHT on Contract/supply is due when payments are being made in line with the provisions of the law.
Conclusively, we understand that in the pursuit for companies to survive and seal business deals, there may be no adequate time to coordinate the accounting and tax related issues so, engaging the services of a tax and accounting expert will save you the stress and time of having to manage all your tax matters while allowing you to focus on your core business activities avoiding penalties and sanctions at the same time.
Wishing you a Most Compliant and Productive start-up!
In 2013, Actis Africa (Nigeria) Limited (“the Appellant”) made profits and retained some of its earnings (after tax had been paid on the profits made). In contrast, no profits were made in the subsequent year, that is, 2014, as a result, no income tax was paid by the Appellant. In spite of this, the Board of Directors of the Appellant recommended that interim dividends of N49,095,020 (Forty-Nine Million, Ninety-Five Thousand and Twenty Naira) be declared to the shareholders of the company payable from the retained earnings of the company for the previous financial year.
The Tax Appeal Tribunal (TAT) of the South-East Zone on June 21, 2019, in its decision in Nigerian Breweries Plc v Abia State Board of Internal Revenue (TAT/SEZ/002/17) held that gratuities are exempted from income tax under the Personal Income Tax Act (PITA), 2011.
The matter was instituted in 2017 by the Nigerian Breweries Plc (“the Appellant”), where the Appellant contested the decision of the Abia State Board of Internal Revenue (“the Respondent”) on taxing of gratuities paid to its retirees. The main ground of objection raised by the Appellant was that the Respondent erred in law when it assessed the Appellant’s employees to tax on gratuities paid to them by the Appellant.
President Muhammadu Buhari has declined assent to the controversial National Housing Fund Bill which was passed by the National Assembly some weeks ago. The Bill attracted a lot of public criticism when it was transmitted to the President for his assent, with many stakeholders in the private sectors calling on the President not to grant assent to it.
The President in his letter to both Chambers of the National Assembly stated that “the various levies imposed by the Bill on Nigerians will not only be “disruptive and punitive” to industries and other sectors of the Nigerian economy but will have a negative impact on Nigerian workers”.
The news of the passage of the National Housing Fund (Establishment) Bill (“the proposed Act”), recently broke. The Bill is intended to largely replace the existing National Housing Fund Act Cap N45, Laws of the Federation of Nigeria 2004. The objective of the new law is to provide for additional sources of funding for effective financing of housing development in Nigeria. A quick review of the proposed law indicates that there are not many areas of differences with the existing laws, other than the attempt to jerk up the financial obligations of contributors.
On Friday 25 January 2019, the President of the Federal Republic of Nigeria signed the Executive Order 007 2019 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme (“The Scheme”).
The Scheme aims for a public-private partnership (PPP) by providing an opportunity to the private sector to commence the construction and refurbishment of eligible road infrastructure projects as a way of narrowing the road infrastructure gap in the country. As an incentive for these private companies, the Scheme assures a full and timely recovery of the project costs through a tax credit mechanism.
The Financial Reporting Council of Nigeria (“FRCN”) issued the Nigerian Code of Corporate Governance 2018 (“the Code”) on 15 January 2019. The Code is made pursuant to the powers of the FRCN under Sections 11c and 51c of the Financial Reporting Council of Nigeria Act 2011. The objective of the Code is to institutionalise corporate governance best practices in Nigerian companies. The Code is also to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment.
Pedabo admits some Senior Managers as Partners of the firm.
As part of Pedabo’s growth and succession plan, three senior managers were admitted as partners of the firm, raising the firm’s total number of partners from three to six.
This appointment was announced in a new year message sent by our managing partner, Ajibade Fashina to the entire staff on 1st January 2019. He wrote, “we are proud to announce that some of our managers are being admitted as partners of the firm; Kehinde Folorunsho, Bunmi Kuteyi, and Peter Asemah”.
The three new partners were former senior managers and longtime staff of the firm. This development is not only in line with the firm’s staff growth and development policies but also necessary in order to meet the leadership needs of the firm and to match the growth pace.
The newly admitted partners, Kehinde Folorunso and Bunmi Kuteyi were admitted as partners into the tax arm of the firm while Peter Asemah was admitted as a partner in audit services.
He is an Associate member of the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria. He is a pioneer member of the firm. His work experience covers areas of taxation, accounting, administration and consulting.
He has been involved in many aspects of tax and accounting projects including statutory audit functions, investigation, financial due diligence, financial advisory services, corporation tax issues, acceptance certification processing, tax advisory services etc. His accounting proficiency covers all sectors of the economy, including Banks, Securities, Oil Service, Manufacturing, Power (Energy) and Information technology.
A graduate of Accounting & Finance from Lagos State University. She is an Associate member of the Institute of Chartered Accountants of Nigeria (ICAN). She commenced her career with Look Consultants International, Lagos where she gained extensive experience with responsibilities for clients in Service Industries, Construction, Manufacturing Hospitality, and Financial Services sectors. Bunmi also had a stint with O. A. Adefeso & Co (Chartered Accountants) as Audit Senior before moving to Pedabo in February 2007.
Bunmi easily demonstrates her extensive experience in the provision of varied advisory services to a diverse clientele in the areas of financial advisory, corporation tax issues, acceptance certification processing, and general tax compliance advisory services, cutting across the various sectors of the economy.
A graduate of Agriculture from Ambrose Alli University, Edo State. He is Fellow member of the Association of Chartered & Certified Accountants (ACCA) and the Institute of Chartered Accountants of Nigeria (ICAN). He commenced his work career with Multiverse Resources Plc. where he worked as an Accounts Officer till 2009. He joined Pedabo in 2010 and has been involved in many aspects of audit and accounting including statutory and private audits, investigation, financial due diligence, financial advisory services, corporation tax issues, etc.
Peter’s audit and consulting experience cover key sectors of the economy, including Financial Services, Oil and Gas, Information Technology, Power, Real Estate, Manufacturing, and Professional Service Industry.
On behalf of the existing partners and the entire staff of Pedabo, we say congratulations to the newly admitted partners.
Lagos State Internal Revenue Service (LIRS) on Thursday, 3rd January 2019 issued a public notice appointing employers and payers of capital sums as collecting agents of payees for the purpose of deducting and remitting Capital Gains Tax (CGT) due on the respective capital sums paid including but not limited to compensation for loss of employment. This public notice purports to give full implementation to the earlier public notice issued in 2017 where LIRS clarified its position on the taxability of compensation for loss of employments.
139 delegates and 32 companions met on 21-24 October for 3 days of networking, knowledge sharing and uncovering business opportunities.
The conference welcomed some high-profile professional speakers from the accountancy profession.
The President of the Federal Republic of Nigeria on Monday 8th October 2018, signed an Executive Order 008, titled “Voluntary Offshore Assets Regularisation Scheme (“VOARS” or “Scheme”).
According to the Order, the office of the Attorney General of the Federation and Minister of Justice has a mandate to set up a Scheme for all categories of taxpayers who have defaulted in the declaration of their offshore assets, payment of taxes due and collectible subject to the fulfilment of the terms and conditions stipulated by it. The Scheme aims to provide an opportunity for taxpayers to regularize their offshore assets, pay taxes or levies due, commit to avoid tax evasion and ensure full tax compliance going forward. The scheme commences from the date of the Order and shall be in operation for 12 months.
The Federal High Court has set aside the Tax Appeal Tribunal (TAT) ruling of 2012 exonerating Gazprom Oil & Gas Nigeria Limited (Gazprom) from paying VAT on services supplied to it by non-resident entities. Gazprom had appealed to the TAT against VAT assessments served on it by the Federal Inland Revenue Service (FIRS), resulting from payments by Gazprom to some non-resident consultants.
FIRS’s brief of argument was for the FHC to determine
“Whether in the light of the provisions of the Value Added Tax Act, the Honourable Tax Appeal Tribunal was right in holding that the Respondent ought not to have been held liable to pay VAT on the services it purchased/consumed from non-resident companies”
Gazprom on its part requested that the Court determines:
“Whether upon a proper construction of the VAT Act, the Tribunal rightly upheld the Respondent’s appeal to the effect that the Respondent is not liable to self-assess and remit VAT to the Appellant in respect of services received from outside Nigeria and provided by non-resident companies that were not carrying on business in Nigeria”
Pedabo is organizing a training/workshop on the Emerging Financial Reporting Standards: IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers). The training course is scheduled to take place on 16th & 17th of October, 2018 at the Civic Centre, Ozumba Mbadiwe Road, Victoria Island, Lagos.
For registration, fill the form below:
The Federal Government of Nigeria through the Federal Inland Revenue Service (FIRS) has issued a revised income Tax (Transfer Pricing) Regulations, 2018 effective March 12, 2018, thereby revoking the old Regulations.
Objective Of The New Regulations
The Regulations were issued to ensure alignment with the developments in international tax practice as it relates to Transfer Pricing (TP) particularly the Base Erosion and Profit Shifting (BEPS) project embarked upon by the Organisation for Economic Cooperation and Development (OECD) on the request of the finance ministers of the G20 countries.
The OECD developed thirteen (13) Action Points to mitigate BEPS. Action Point 8 to 10 (Aligning transfer pricing outcomes with value creation) and Action Point 13 (Transfer Pricing Documentation and Country by Country Reporting) focused on intangibles, contractual allocation of risks between Multinational Entities (MNEs), level of returns to funding provided by a capital-rich MNE group members and the requirements for filing “Master and Local files” among other issues.