Tag: Tax Compliance

TAXATION OF MANAGING DIRECTOR/PROPRIETOR/PARTNER: PAYE OR DIRECT ASSESSMENT?

Investopedia definition of Taxation

INTRODUCTION

For most small and medium-scale businesses, the business owner also doubles as the Business Owner and the Managing Director/Proprietor/Partner as the Business Structure may be.

WHAT IS DIRECT ASSESSMENT?

Direct Assessment tax in Nigeria is a system through which self-employed persons are assessed and charged to pay tax based on their income.

WHAT IS PAYE:

Pay As You Earn is a tax that employer deducts from employees’ salaries and wages. This tax rate moves from 7 to 24 per cent of taxable income. The taxable income band ranges from NGN300,000 to above NGN3.2 million in a year.

THE TAX MAN

Tax authorities more often than not subject Managing Director/Proprietors/Partner to Direct Assessment and the reasons are not far-fetched: to comb and get a declaration of all sources of income, investment etc. after that subjecting the gross income, less the reliefs to tax in line with Section 41(3) and 36 of the Personal Income Tax Act (PITA).

Therefore, if you have multiple sources of income and avoid being double taxed then a Direct Assessment will be the perfect match. Direct Assessment must be filed within 90 Days from the beginning of the year (on or before March 31st).

ONLY SOURCE OF INCOME

However, if the Business is the only source of income, it is advisable to subject oneself to salary and come under the Pay-As-You-Earn PAYE scheme.

FEATURE OF DIRECT ASSESSMENT  

  1. Ideal for multiple sources of income individuals
  2. For High Net Worth Individual

PROs

  1. It prevents double taxation
  2. One payment serves all the Companies

CONs

  1. The declaration/assessment form will be subjected to verification by the tax man before an assessment is raised.
  2. Lump sum payment

FEATURES OF PAYE

  1. Monthly Tax Payment
  2. To be remitted on or before the 10th of the Month for the preceding Month
  3. It is single employment or single salary based
  4. Employer’s responsibility

PROs

  1. Monthly Payment (flexible)
  2. 8% Pensions, NHIS, NHF are Tax Deductibles

CONs

  1. Must be filed monthly on or before the 10th of the Month for the preceding month.
  2. For some States such as Lagos State, the Tax Clearance Card carries both the Tax Payer Details and the Company’s Name.

CONCLUSION

The route to take largely depends on your income (the sources) and your tax planning strategies.

To this end, it is advisable to consult a competent tax practitioner or tax firm for guidance.

For Taxation, Tax Planning and Tax Filing, feel free to contact us:

Tolulope Oguntade
Regville Associates
compliance@regville.com
08065111667

FIRS TAX CLEARANCE CERTIFICATE IN ONE CLICK: FIVE TAKE-HOME POINTS

FIRS One Click TCC January 2nd, 2023

INTRODUCTION

January 2nd 2023, The Federal Inland Revenue Service via its social media platforms gave Business Owners a beautiful Happy New Year Gift: Get Your Tax Clearance Certificate In One Click. Waoo! what a relief, what a joy to business owners. Industry experts showered praises on the Revenue Service, they said it is a giant boost to the Nation’s Ease of Doing Business.

We compiled Five (5) Take Homes from this development

1. NO LIABILITY FROM PRECEDING YEARS: Only Companies with no liabilities including already due VAT will have access to download the Tax Clearance Certificate.

2. PREVIOUS ACCOUNTS/STATEMENT OF AFFAIRS: Preceding Years’ Audited Financial Statement or Statement of Account must have been filed.

3. TAXPROMAX REGISTRATION: If you have not completed your TaxProMax Registration, then you can’t have access to the platform. Issuance of Tax Identification Number (which recently comes with CAC Registration) doesn’t imply the Company is registered on TaxProMax.

4. BUSINESS NAMES: It is worth noting that Business Names can’t apply for or be issued Tax Clearance certificates rather the State issued Tax Clearance Certificate/Document will suffice as the Business Name Tax Clearance.

5. DECEMBER 31ST 2023 EXPIRATION: Unlike the Temporary TCC rolled out some years back which covered only 6 months, this is a full-year tax clearance certificate bearing December 31st 2023 as its expiration date.

CONCLUSION:

This is a beautiful development and we appreciate the management of FIRS for this lofty stride, reducing the bottleneck process of getting TCC from tax offices.

We also want to draw the attention of the Revenue Service to the other missing information on the TCC. A careful look at the downloaded Tax Clearance Certificate as of the 3rd of January, 2023 shows that information for some assessment years is missing. We are sure the Revenue Service has duly noted the anomaly and will rectify same as soon as possible.

For Tax, Tax Clearance Certificates and other Compliance Matters

Tolulope Oguntade
Regville Associates
compliance@regville.com
08065111667