1.1BACKGROUND OF THE STUDY
A tax is a compulsory levy imposed on the income/profits of
an individual, partnership and corporate organizations for the financing of
government expenditure without recourse to a corresponding benefit from tax
Every tax imposed on Nigerian companies or organisations
needs continual interpretation of its specific application and effect on the
various transaction of the organisation. The field of taxation changes every
moment or every day as announced by the new ruling courts and also as are being
made by new government. Tax is paid only
on the profit of the company after all other deductions and allowances such as
capital allowance, investment allowances.
The rate of tax levied and payable for each year of assessment in
respect of the total profit of every company is thirty kobo for every naira as
contained in section 29 of Companies Income Tax Act 2007 as amended. A company which is yet to commence business
after at least 6 months of incorporation shall for each year it obtains a tax
clearance certificate pay a levy of (a) ₦20,000 for the first year and (b)
₦25,000 for every subsequent year before a tax clearance certificate is issued.
Where in any of the basis period for the year of assessment
in which a company commenced business and the next following four years of
assessment as determined under the provision of section 29 of the Act, a
Nigerian company engaged in
manufacturing or agricultural production, mining of solid
minerals or wholly export trade, earns a total gross sales (turnover) of below
one million naira, there shall be levied and paid by the company, tax at the
rate of twenty kobo on every naira of the total profits.
Section 28A of Companies Income Tax Act 2007 states that
where in any year of assessment the ascertainment of total assessable profits
from all sources of a company results in a loss or where a company’s
ascertained total profits results in no tax payable or tax payable which is
less than the minimum tax then shall be levied and paid by the company the
minimum tax as prescribed in subsection (2) of the Act.
(a) If the turnover
of the company is ₦500,000 or below and the company has been in business for at
least few calendar years, be;
percent of gross profits or
5 percent of net assets or
25 percent of paid up capital or
25 percent of turnover of the years, whichever is higher.
If the turnover is higher 500,000 be whatever is payable in
paragraph (a) of this subsection plus such addition tax on the amount by which
the turnover is in excess of ₦500,000 at a rate which shall be 0.125 percent.
The provision shall not apply to a company carrying on
agriculture trade or business or the company with at least 25 percent imported
equity capital and lastly, any company for the first four calendar years of its
commencement of business.
Collection is basic necessity to tax revenue after
assessment has been raised. The tax
payer is expected to pay the assessed tax liabilities to any of the collecting
banks in his or her region with the assessment notices indicating the tax type
being paid. This could be company income
tax, Education tax, Capital gains tax, Personal Income Tax for resident of
Abuja, and non resident individuals, Value Added Tax.
After the payment, the tax payer will be issued an electronically
generated receipt from the bank (e-ticket), then, the collecting bank is
expected to remit the funds same day to lead bank via Inter Switch net
work. The lead bank remits to Central
Bank of Nigeria after two days. The
e-receipt and on line schedule of remittance by lead banks are forwarded to
Federal Inland Revenue Service office and checked before receipts are
issued. The FIRS taxes are being
collected by agents. These agents are
the collecting banks. These are
twenty-four in number (24). The Lead
banks are four (4), Ministry Departments and Agencies, Nigerian Customs
Services, The medium of collection are cash, cheque and electronic transfers.
Accounting for revenue collected is mandatory for FIRS to
all relevant government agencies and stake holders. The accounting procedure is as follows:
Firstly, all revenues collected through the web portal/pay
direct, KP Morgan statement of account, Auto Swift are generated.