3 May 2024

Becoming Tax Compliant when registered as a Business Name

Nigerian Tax Academy

Being registered as a business name with CAC means that you have registered your business as an Individual business or what is popularly called 'One man business'. If this is your type of business, here are the major activities required for you to be tax compliant in Nigeria.

Registration and Filings:

1. As a business name, your personal income taxes are paid in the state where you live, not where your business is located. There will be other levies that you will pay to the state where your business is, but not personal income tax.
2. Register for Value Added Tax (VAT) if applicable: If your annual turnover exceeds N25 million, you're required to register for VAT. This involves obtaining a VAT certificate from the Federal Inland Revenue Service (FIRS).
3. File Annual Tax Returns: Even if your income falls below the taxable threshold for Personal Income Tax (PIT), you're still obligated to file annual tax returns with the FIRS. This helps the government maintain a record of your business activities.

Record Keeping:

1. Maintain accurate financial records: This includes: - Receipts for all business expenses (rent, utilities, supplies, etc.)- Invoices for all sales made- Bank statements- Asset records (equipment, furniture, etc.)- Payroll records (if you have employees)
2. Organize your records systematically: Having a proper filing system makes it easier to find information when needed for tax filing or audits.
   

Tax Payments:

1. Pay VAT if registered: If you're registered for VAT, you'll need to collect VAT on your sales and remit it to the FIRS monthly.
2. Pay Withholding Tax (WHT) if applicable: In certain situations, your business might be required to withhold tax from payments made to your contractors or suppliers or interest on investments if your business gives collects investments and pays a return. The withheld tax must then be remitted to the relevant tax authority, which will be tax authority of that supplier..

Additional Considerations:

1. Stay informed about tax updates: Tax regulations and filing requirements can change. Monitor the FIRS and State IRS websites or continue to follow our platform for more updates.
2. Seek professional guidance: A qualified tax advisor can help you navigate complex tax situations, ensure compliance, and potentially identify tax optimization strategies.

Remember:

1. Not all business names will be subject to income tax (PIT) due to the minimum threshold. However, tax compliance goes beyond just income tax.
2. Fulfilling these activities will ensure your small business stays compliant with Nigerian tax regulations and avoids potential penalties for non-compliance.

Here are some resources that might be helpful:

1. Go to our Resources page to get more info from more institutions.