All individuals, businesses entities, communities, families, executor, trustee and self employed who receive or derive income in form of gain or profit either from trade, business profession or vocation within or outside Nigeria shall be liable to direct assessment.
All tax payers falling within this category should file the returns of their income and claims for reliefs and allowances relating to the preceding year within 90 days from the beginning of every year.
The tax authority will assess the taxable person thereafter.
Pay As You Earn (PAYE)
Personal Income Tax Act imposes the duty to deduct appropriate tax from the total emolument of employees and remit same to the relevant tax authority. Every Employer of Labour is expected to:
- Collect Tax Form A for distribution to the employees.
- Certify the correctness of all salaries and allowances declared in the forms by their employees to ensure that correct reliefs are granted.
- Make returns of completed Tax Forms A to the relevant tax authority.
- Return all Tax deduction Cards (TDC) used in the operation of the PAYE Scheme and the End of the Year Returns should be made to the relevant tax authorities not later than January 31st of the following year.
Hotel Occupancy and Restaurant Consumption Law is a law enacted by the Abia State House of Assembly which imposes Tax on goods and services consumed in Hotels, Facility or Event Centers within the State. It imposes on any person, Corporate or otherwise, who pays for the use or possession of any hotel, facility or event centre; or Purchases consumable goods or service in any restaurant.
The rate of tax imposed by the law is 5% of the total bill issued to the customer excluding Value Added Tax and Service Charge.
Capital Gain Tax
This is a tax chargeable at the rate of 10% on capital gains arising from the disposal of capital assets. Capital gains mainly represent the excess of disposal proceeds realized over the cost of the particular asset. The effects of some of the provisions of the Capital Gains Tax Act 1967 are as listed below:
- Capital loss on disposal of any asset is not deductible from capital gains on disposal of any other asset even if both are of the same type.
- Chargeable gains are assessed on current year basis. In other words, the assessment is based on the year the asset is disposed.
- Roll-over relief is available to any company acquiring a new asset to be used for the purposes of the trade in replacement of an old one. This is of particular interest to companies as there could be benefit accruing to those that would want to claim the relief.
- When the consideration is payable by installments over a period exceeding 18 months, the chargeable gain shall be apportioned to the affected assessment years in proportion to the amount of the installments payable in each of the years.
- The production of evidence of payment of applicable capital gains tax is a condition for effecting change of ownership of property.
- Currently, gains arising from disposal of shares and stocks are exempted from capital gains tax.
Withholding Tax is the deduction of the tax at source from payment made to a taxable person or company in respect of income derivable from services or investments. It is not another form of tax but simply an advance payment of the tax, as the tax deducted at source can be off-set against any subsequent tax liability that may be due in respect of such income. In certain cases, the withholding tax deducted at source is the final tax e.g. Interest and dividend.
The authority of the deduction of Withholding Tax at source is contained in Sections 69, 70, 72 and 73 of the Personal Income Tax Act in respect of individuals and Sections 78, 79, 80 and 81 of CITA Cap. C21 LFN 2004 in respect of Companies.
The Tax provisions referred to above deal with deductions from rent, interest, royalties, dividends, directors’ fees (PITA only) and other payments.It is under these Sections that the application of the general provisions contained in Section 73 PITA and Section 81 CITA widens the scope of Withholding Tax deductions to including building contracts, contract of supplies, consultancy and professional service, which are not specifically mentioned in the Tax Acts.
They are duties paid basically on Instruments, (stamp duties Act, Section 23) and for the purposes of stamp duty, and Instrument is defined to include every written document.
If a transaction is effected orally or arises only from the conduct of the parties involved so that there is no document to stamp, then there can be no duty.
It is therefore advisable that transactions must always be in writing to avoid unnecessary legal tussle, although it is dependent on the level of sensitivity of the transaction.