What is personal income tax?
It is a tax levied on all incomes of an individual in employment or business. All employers of labour are expected to deduct Taxes from their employees and remit same to the tax authority on a monthly basis, while persons in business are expected to file their annual returns and pay accordingly.
Who should pay personal income tax?
A. Individual in paid employment – Any person who earns income in the form of salary, wage, fee, allowance, or any other gain or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums as or expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain;
B. Self-employed Individual- Any person who earns Income in the form of gain or profit from any trade , business, profession, or vocation , for whatever period of time such trade, business, profession, or vocation may have been carried on or exercised;
Is a temporary or casual worker meant to pay taxes?
Yes. The Personal Income Tax (Amendment) Act 2011, combined with the provisions of S.3(1)(b) and S.3(1)(b)(i) particularly defining the taxpaying employee as either a temporary or permanent employee.
What is CRA?
According to the amended personal Income Tax (Amendment) Act 2011, CRA is the Consolidated Relief Allowance, which combines all previous reliefs (Housing, Utility, Transport, Leave, Allowances, etc.) consolidated into a single relief of N200,00 subjects to a minimum of 1% of gross income (whichever is higher) plus 20% of the gross income.
What items are tax –exempt from my emolument?
In addition to the Consolidated Reliefs and Allowances, the following items in the sixth schedule table are still tax exempt:
- National Housing Fund Contribution
- National Health Insurance Scheme
- Life Assurance Premium
- National Pension Scheme
How do I know what rate to use in computing my taxes?
After the relief allowance and exemptions have been granted, the balance of income shall be taxed as specified in the following Sixth Schedule Table.
- First N300,000@ 7%
- Next N300,000@11%
- Next N500,000 @15%
- Next N500,000 @19%
- Next N1,600,000@21%
Which type of taxes does AKIRS collect?
After the relief allowance and exemptions have been granted, the balance of income shall be taxed as specified in the following Sixth Schedule Table.
- Personal Income Tax from all residents of Akwa Ibom State.
- Withholding Taxes on all business/economic activities involving a second party who is not a corporate entity.
- Business Premises Levy from all businesses and companies operating within the
state (N10,000 Registration and N5,000 renewals annually)
- Economic Development levy (EDL) from all individuals (N100 per head/yearly. The rates for corporate organizations vary)
- Consumption Tax (which replaces sales tax).
Why is the amount of taxes payable in Akwa Ibom State so high?
Taxes payable in Akwa Ibom State are not different from that of other states, as all States Internal Revenue operate under the same constitutional provisions and Tax Laws. Current law in use for Personal Income Tax is the Personal Income Tax Act CAP P8 LFN 2004 & (Amendment) Act 2011.
How do I confirm if taxes deducted from my monthly emoluments are remitted to the state Government?
You can officially obtain information on all taxes paid on your behalf through the Executive Chairman of AKIRS.
Is it mandatory for full time house wives and other jobless persons to pay tax to Akwa Ibom State Government?
The position of the law is that all income earners must pay Personal Income Tax except full time housewives, jobless persons and those exempted by the law as stipulated in the third Schedule of PITA 104 CAP P8 LFN 2004 & (Amendment) at 2011.
What is the difference between PAYE (PAY AS YOU EARN) and DIRECT ASSESSMENT?
PAYE and Direct Assessment are two ways of assessing individuals for tax. PAYE is for individuals under paid employment and Direct Assessment is for self-employed individuals.
Can I use withholding taxes deducted from one of my income sources to offset my Personal Income Tax Liability?
Yes, withholding tax is recognized as part of taxes paid and can be net off from liability assessed for the year.
What is Self-Assessment?
It is the ‘do it yourself’, easier and convenient approach recently introduced by the AKIRS which enables a new taxpayer to assess him/herself, make payment through any of the designated banks and obtain his/her e-TCC without visiting any tax office or officer.
Can anyone who pays Self-Assessment continue to do so yearly?
No. For continuity and adequate record keeping, tax payers who have tax records at any AKIRS office should approach the same office for proper assessment on yearly basis. This is important for proper coordination and determination of adequate tax liability as income of taxpayers varies year to year.
Is there a penalty for failing to file my returns?
Yes. The penalty for failure to file returns according to the Personal Income Tax (Amendment) Act 2011 is N500,000 for corporate organizations and 50,000 for individuals.
Is Hotel Occupancy and Restaurant Consumption Tax Law (HORCL) the same as Value Added Tax (VAT)?
NO. VAT is collected by the federal Government through the FIRS while Hotel and Consumption Tax is collected by the State Internal Revenue Board.
Who is an expatriate?
An Expatriate is a non-Nigerian with foreign travelling document who only works and receives income or does business in Nigeria. However, a Nigerian may be treated by his employer as an ‘expatriate ‘by paying remuneration and condition of service similar to non-Nigerian.
How many days can I stay before my income become taxable?
A foreign individual or an expatriate must spend an aggregate of 183 days in Nigeria (inclusive of annual leave and temporary period of absence) in order for his income to be taxable.
What is the meaning of informal sector?
A person who operates under any unorganized business sector e.g. Artisans, Market Men and Women belong to the informal sector.
How much do they pay?
They are taxed at a lower rate due to the nature of their business. This is a means of encouragement on the part of the State Government.
Must I register with a tax office before making any payment?
No. You may decide to pay via any of the designated banks without registration at any tax office, but advised to register at the nearest tax station for proper record keeping.
Is tenement rate the same as land use charge i.e. Property tax?
No. But all tenement levy/charge is to be paid under land use charge. This is to avoid double taxation.
Can I pay my taxes to any bank?
No. You have to identify designated banks approved by the State Government which collect revenue on its behalf.
How many tax stations does AKIRS have?
32 tax stations. Atleast 1 in each Local Government Area.
What do I do if my employer is not remitting my taxes deducted?
You report immediately, when you discover such act, to the Executive Chairman AKIRS through a petition or an official letter.
Do I need to show proof of tax payment in all transactions with Akwa Ibom State?
Yes, except for related services.
Do I have to pay tax as a pensioner?
No, except pensioner with other sources of income. However, as a pensioner only, you need to obtain a pensioner’s tax clearance through the personal income tax unit at AKIRS headquarters.
I don’t have any income must I pay tax?
The position of the law is that all adults who are 18 and above (i.e. income earners) and not full time students must pay personal income tax. However, an individual may depend on the legal institutions to prove his /her case.
Do I pay tax on my gratuity?
No, the Nigerian tax law has exempted taxes on pension and gratuity
What is Withholding Tax?
Withholding Tax is the specified amount deducted at source from payment accruing or made to individuals or corperate entities in respect of income receivable for service(s) rendered or from investment and remittance of same to the relevant Tax authority in line with the provisions of personal income Tax(PITA) and Companies Income Tax Acts(CITA).
Is withholding Tax another form of Tax?
Yes. It is another form of tax but simply an advance payment of tax, as the tax deducted at source can be set-off against any subsequent tax liability payable on such income by the recipient (tax payer).
Do I have a duty to deduct and remit withholding taxes?
Yes. You are a collecting agent of government. Whenever you or your firm pays an individual or corporate entity any of the under listed items, appropriate withholding tax must be deducted and remitted to the relevant tax authority (State Internal Revenue Service or Federal Inland Revenue Service).
What are the services/payment on which withholding taxes must be deducted?
Withholding Taxes must be deducted from payments due to corporate bodies and individuals on Rent, Commission, Management/Professional Fees, Consultancy Fees, Technical Service, Dividend, Directors’ Fees, Agency Arrangements/Agreements, Tenancy Agreement Dividend, Supplies.
What is the currency of deduction and remittance of withholding Taxes?
The currency in which tax is to be deducted and paid over to the relevant Tax Authorities is the currency of transaction. Where the transaction is in foreign currency, tax is to be deducted in the foreign currency and remitted to the Relevant Tax Authority which could be paid in local currency at the instance of the Revenue Authority.
When is the remittance date for withholding taxes deducted?
Taxes withheld from payments due to corporate bodies and individuals must be remitted to the relevant authorities on the earlier of 30 days for individuals and 21 days for corporate entities from the date the amount was deducted and from the time the duty to deduct arose.
Is there any penalty for failure to deduct and/ or remit withholding taxes?
Yes. A person or body corporate who fails to deduct or having deducted fails to remit such deductions within 30 days shall be liable to a penalty of an amount of 10% of the tax not deducted or not remitted in addition to the amount of tax not deducted or remitted plus interest at the prevailing monetary rate of the Central Bank of Nigeria.
I am told withholding taxes on some payments are final tax. What does this implies?
The implication is that the income cannot be subjected to further taxes in the hands of the recipients apart from the withholding taxes earlier deducted.
What are the payments in respect of which withholding taxes are final?
Withholding tax on dividend, interest, rent and royalties when suffered by individuals or corporate entities not resident in Nigeria represent final tax.
Also, with effect from January 1996, withholding tax on interest and dividend represent final tax on these incomes in the hands individuals resident in Nigeria.
What is the different between Withholding Tax and Value Added Tax (VAT)?
Withholding tax is paid to the relevant authority depending on whether the taxpayer is a corporate body or an individual. VAT on the other hand, can only be paid to the Federal Inland Revenue service under the Nigerian Tax Laws.
VAT is a form of indirect tax (consumption) while withholding tax is a direct tax (income)
Withholding tax is deducted from income while VAT is added to the invoiced value of goods and services.
The individual who suffered withholding tax has the right to set it off against future tax liability, VAT cannot be set-off.
How do I claim withholding taxes deducted from my invoice?
- You must ensure that the individual or corporate entity (collecting agent) to whom you render services remit the withholding taxes deducted from your income to government coffers and obtain certificate of payment issued by AKIRS in your name.
- The certificate of payment should be included in your tax return for the relevant year
- Once your income from all sources have been assessed and tax due ascertained the amount of withholding tax paid at source will be set-off against the tax due to arrive at net tax payable.
- It is important to emphasize that the presentation of a letter from the collection agent showing that a taxpayer has suffered deduction is not enough for AKIRS to grant withholding tax credit
- Similarly, government treasury receipts issued by other government departments showing that they have deducted tax from a taxpayer are not enough to grant tax credit.
Why do I have to stamp my documents?
To confer government and legal recognition.
Who pays stamp duties?
The beneficiaries of the transaction.
Why do I need to verify my stamp duty documents?
To ensure it is duly and properly stamped by the Stamp Duties Offices.
What are the differences between flat rate and ad valorem?
It is ad valorem when Stamp Duty is paid on the basis of value of instrument while it is flat if it is based on fixed charges.
Why is evidence of tax payment a prerequisite before stamping?
Tax payment is a civic responsibility of all adults.
What are the various types of stampable instruments?
Deed of Assignments, Deed of Mortgages, Power of Attorney, Deed of Assent, Vesting Deeds, Memorandum of Understanding, Memorandum of loss, Contract Agreements, Tenancy Agreements, Lease Agreements etc .
Who are exempted from paying stamp duties?
Governments at all levels. Federal, State, Local Governments, International Agencies.
Which instruments are exempted from payment of stamp Duties?
Instruments executed by government Agencies.
Which laws governs stamp duty?
Stamp Duties Act (SDA) Cap S8 2004 LFN
What are the instruments you can stamp in state and federal?
All instruments between individuals, Partnership, Enterprise are stamped at state level while instruments executed between corporate bodies are stamped at federal level.
Which government official has the authority to approve waiver for stamp duty?
Minister of Finance at Federal level.
Is there any penalty for late stamping?
Yes. Ten percent of the amount assessed and not paid within the prescribed time.
Can I transfer my stamp duty payment for one instrument owned by me to another instrument?
How can stamp duty payable be determined?
It is based on applicable rates.
Can Stamp duty paid in Akwa Ibom for land transaction be executed outside the State?
Where are stamp duties offices in Akwa Ibom?
AKIRS Officers Block 9, Idongesit Nkanga Secretariat, uyo.
What are the payment codes?
What is Capital Gains Tax?
It is the amount of tax paid on the disposal of charges assets e.g. Lands
WHO PAYS CAPITAL GAINS TAX?
The person who sold a property or Transferor, Lessor.
Who is exempted from paying capital gains tax?
Government Agencies at all levels, International Agencies, and ecclesiastical, Charitable or Educational Institutions of a public character.
Why do I have to pay capital gains tax?
It is a requirement of the law.
Which laws governs capital gains tax?
Capital Gains Tax LFN 2004
Do the proceeds from the disposal of assets on account of a deceased person attract Capital Gain Tax?
Yes. It will be paid by the personal representatives or person on whom the assets are devolved.
What are the various assets that are liable to capital gains tax?
Land, buildings and any permanent or semi-permanent structure, fixed plant or machinery, propelled motor vehicles, ships and aircraft.
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