SECTION A: GENERAL TAX ADMINISTRATION
Question 1 What happens when a taxpayer`s payment is posted to a wrong tax office?
Answer This can only be possible if the taxpayer does not have a TIN or the bank`s branch teller entered a wrong TIN which is either for another taxpayer or the TIN does not even exist. The system administrator, if informed officially, will reclassify the tax office or such payment. In cases where the taxpayer does not exist in the database, the registration officer will create the taxpayer and the system will generate a valid TIN for the taxpayer. Also, in cases where the TIN was wrongly assigned to a tax office, the TIN can be redirected to the correct office.
Question 2 How does FIRS prevent issuance of multiple receipts for same payment?
Answer The automated receipts and credit notes issuance will eliminate issuance of multiple receipts.
Question 3 If a taxpayer gives a cheque to a bank in his office without going to the bank, how can the taxpayer know whether payment has been made to FIRS account?
Answer The taxpayer should insist on the bank delivering the e-ticket to him which will indicate the date and time payment was captured into FIRS account by the bank.
Question 4 If someone lives in Kaduna and pays his tax there, can he obtain his TCC in Abuja ?
Answer No, one can only obtain his/her TCC from the Tax Authority where the person is registered for tax purposes and has been paying his taxes in compliance with the rule of residence as contained in the tax law.
Question 5 Is medical allowance taxed?
Answer Yes. If it is paid directly to the hospital, Withholding Tax (WHT) should be deducted and if it is given to an employee in the form of allowance, it is taxed under PAYE.
Question 6 Can a taxpayer pay to any collecting bank branch?
Answer Yes. There are no designated bank branches for any tax offices or tax types. All approved Lead/Collecting banks can collect for all offices and tax types.
Question 7 What is the process involved in getting back tax payment erroneously credited in the name of the depositor instead of the taxpayer?
Answer Any tax paid in error can be reversed by the collecting bank within 24 hours if the bank is put on notice within the period. However, if the error was not detected on time, refund can be made by FIRS on request through e-payment platform with the option to use it to set-off future tax.
Question 8 Why does it take more than two weeks to issue TCC even if the taxpayer pays tax in cash?
Answer TCC can only be issued only after all taxes payable by the taxpayer for the past three preceding years have been paid. The statutory standard of issuing TCC within two weeks is still in force. However, the two weeks start to count only after all taxes have been paid and from the day the taxpayer files application for TCC with the Tax office and not from the date of payment of taxes to the Banks.
Question 9 On what basis will an application for TCC be rejected after two weeks and still be under processing?
Answer TCC can be rejected on the following grounds:
a. Where taxes have not been paid
ii Where penalties or interest is still outstanding
iii. Where outstanding returns have not been filed
iv. Where there are outstanding issues arising from tax queries, audit or investigation.
v. Where the case is with the Tax Appeal Tribunal (TAT) for hearing and part of the tax has not been paid as required
TCC once rejected cannot be said to be still under processing, but it is kept on hold until issues outstanding have been resolved or sorted out by the taxpayer with the relevant office.
Question 10 Is installment Payment no longer allowed for self assessment filers?
Answer The tax law still recognizes the granting of installment payment to self assessment filers. However, this can only be granted on application by the taxpayer to the tax office.
Question 11 Why does FIRS still refuse to issue TCC after PAYE has been deducted from the staff salary?
Answer FIRS does not deny issuance of TCC to any taxpayer who has paid his tax liability in full. However, TCC request is rejected where the taxpayer still has outstanding liability to pay.
Question 12 What is Tax avoidance and Tax evasion ?
Answer Tax Avoidance: - This is considered as a way of identifying the loop hole in the tax law and then taking advantage of such loop hole to reduce the tax payable
Tax Evasion: - This is a deliberate and illegal act of the taxpayer not to pay the correct tax
Question 13 What is Accounting year and Accounting period ?
Answer Accounting Year:- This is a twelve (12) months period over which an entity`s financial accounts are made-up.
Accounting Period:- This simply means the period with reference to which financial accounts of an entity are prepared.
Question 14 Is inclusion of Taxpayer Identification Number (TIN) on a Contractor’s quotation necessary?
Answer Yes it is mandatory.
Question 15 What is the meaning of due date?
Answer Due date is the date prescribed by law for filing of tax returns and making of tax payments by taxpayers. All tax types have their different due dates as provided by the relevant tax laws.
Due dates for other tax types are as shown below:
DUE DATES OF FILING TAX RETURNS
TYPES OF TAX RETURNS
a) For old companies, six (6) months after the end of the company`s accounting year.
b) For new companies, eighteen (18) months from the date of incorporation or six (6) months after the end of the company`s first accounting period whichever is earlier.
Company`s Income Tax (CIT) Filing Date
As in the case of CIT
Education Tax (EDT)
As in the case of CIT
National Information and Technology Development Levy (NITDL) (for applicable companies only)
Two (2) months after the commencement of the company`s accounting period
Estimated Petroleum Profit Tax (PPT) Returns
Within five (5) months after the end of the company`s accounting period
Final PPT Returns
Personal Income Tax (PIT)
Annual Returns of Pay As You Earn (PAYE) (By Employers)
10th of every month
PAYE Returns (By Employers)
21st of every month
Withholding Tax (WHT)Returns
21st of every month
Value Added Tax (VAT)Returns
SECTION B: PERSONAL INCOME TAX (PIT)
Question 1 What is P. A. Y. E?
Answer P. A. Y. E. is an acronym for “Pay As You Earn”. It is a method of collecting personal income tax from employee`s salaries and wages through deduction at source by an employer as provided by the relevant sections of Personal Income Tax Act (PITA). (S.81 of Personal Income Tax Act Cap P8 LFN 2004)
Question 2 What is the due date for remitting PAYE?
Answer The due date for remitting PAYE is 10th day of every month following month of deduction
Question 3 Why do PAYE charges vary from Ministries to Ministries for the same level of income/salary?
Answer. PAYE does not differ because the rates used for computation are the same. PAYE rates are as shown in question number 4 below.
Question 4 What are the current tax rates applied on taxable income?
Answer The current rates applicable to the taxable or chargeable income are as follows:
1st N300, 000.00 @ 7%
Next N300,000.00 @ 11%
Next N500,000.00 @ 15%
Next N500,000.00 @ 19%
Next N1,600,000.00 @ 21%
Above N3,200,000.00 @ 24%
Question 5 Is the submission of comprehensive list of staff with PAYE deductions different from submission of annual returns?
Answer No. Comprehensive list of employees with PAYE deductions is continuously submitted on monthly basis each time PAYE is being remitted to FIRS, while annual returns (form H1) is to be submitted by 31st day of January of every year by every employer to enable the Tax Authority ascertain whether the correct deductions and payments of tax have been made for the previous year (period of twelve months) for all its employees.
Question 6 What is benefit-in-kind?
Answer Benefit in kind may be defined as those benefits or perquisites that accrue to a person by reason of office and/or position he/she occupies. Benefits in kind include such benefits as official car, official accommodation, cooks, gardeners, securities etc. It is taxable after certain deductions/reliefs granted.
Question 7 Where should PAYE deductions of staff working in Abuja but residing in Suleja or Mararaba be remitted to?
Answer By residency rule, an employee’s PAYE is payable to the Tax Authority of his/her place of residence. It is therefore the duty of the employer to deduct and remit it to the Tax Authority where the employee is resident that is Niger State Internal Revenue Service or Nasarawa State Internal Revenue Service respectively.
Question 8 What is the minimum tax rate for Personal Income Tax?
Answer The minimum tax rate is 1% of total income. It is applicable if the taxable income is below N300, 000
Question 9 Is it possible to apply for a refund for excess PIT tax deductions/payments ?
Answer Yes; the law provides that excess tax paid by any employee shall be refunded on application by the employee with the option of set-off against future tax liability.
Question 10 When there is under deduction of tax in the employee’s income, who bears the burden of the under deduction?
Answer When there is an under deduction of tax in staff salary, the staff whose tax is under deducted bears the burden.
Question 11 What is Gross Emolument/salary?
Answer Personal Income Tax Act (PITA) as amended defines Gross Emolument as the aggregate of wages, salaries, allowances (including benefits-in-kind), gratuities, superannuation and any other income derived solely by reason of employment.
Question 12 What are non taxable deductions under PIT Act?
Answer The sixth schedule of PITA as amended specifies the following as tax exempt. They are:
a) National Housing Fund contributions
b) National Health Insurance Scheme contributions
c) Life Assurance Premium
d) National Pension Scheme
Question13 Is it within the law for a state tax authority to charge interest, penalty and threaten distrainment for a shortfall between the PAYE remitted by a company and the expectation on the company`s tax deduction cards, going by the fact that actual tax could differ from expectations as a result of salary cuts and staff exits?
Answer It is lawful for a state tax authority to carry out audit of your returns to ascertain compliance. It is also lawful for penalty to be charged on any shortfall. It should be noted however that there must be reconciliation meeting by both parties where all issues must be discussed and agreed. Where a taxpayer is still not pleased with the decision reached, the taxpayer has the powers as conferred by the PITA (as amended) to appeal to the Tax Appeal Tribunal.
Question 14 What is the tax implication of giving new/used vehicles to staff for use in an organization?
Answer This is treated as benefit - in - kind. 5% of the value of the vehicle is calculated and added back to the income of staff and taxed.
Question 15 What is the current Relief claimable under Personal Income Tax Act?
Answer The Personal Income Tax Act (PITA) as amended provides for Consolidated Relief Allowance (CRA) of N200,000.00 subject to a minimum of 1% of gross income whichever is higher plus 20% of gross income and the balance shall be taxable in accordance with the tax rates in schedule six (6) of the Act and as in Question four (4) of this section.
SECTION C: VALUE ADDED TAX (VAT)
Question 1 What are VATable goods?
Answer All goods manufactured/assembled in or imported into Nigeria, except those specifically exempted under the law. Examples of VATable goods include jewelries, shoes, bags, television etc.
Question 2 What are VATable Services?
Answer All services rendered by any person in Nigeria except those specifically exempted under the law. Examples of VATable services are, services rendered by Lawyers, Engineers, Accountants, Contractors and Consultants etc.
Question 3 What are exempted goods under Value Added Tax (VAT) Act?
Answer: Exempted goods are those goods which are not subject to VAT.
· All medical and pharmaceutical products;
· Basic food items;
· Books and Educational materials;
· Baby products;
· Fertilizer (locally produced), agricultural and veterinary medicine, farming machinery and farming transportation equipment;
· Plant and Machinery imported for use in the Export Processing Zone or Free Trade Zone; provided that 100% production of such company is for export
· All commercial Aircraft and Aircraft spare parts imported for use in Nigeria
· Amorphous Pet Chips (H S Code 3907.6000.00)
Question 4 What are exempted services under VAT Act?
Answer Exempted services are services that are not VATable, i.e. not subject to 5% VAT. These include:
- Medical services
- Services rendered by Community Banks,
- People’s Banks and Mortgage Institutions,
- Plays and performance conducted by the educational institutions as part of learning.
- All exported services
Question 5 What is Zero-rated VAT?
Answer Zero-rated VAT means whereas the goods and services are VATable, the applicable rate is zero percent (0%).
Question 6 Which transactions are zero-rated?
Answer The following transactions are zero-rated. There are:-
i. Non-oil exports
ii. Goods and Services purchased by Diplomats
iii. Goods and Services purchased by humanitarian donor-funded projects
Question 7 What is the due date of filing VAT Returns?
Answer The due date for filing VAT is 21st day of every month following month of transaction
Question 8 When a contractor/supplier supplies goods that are exempted from VAT, should VAT be paid?
Answer Goods exempted from VAT are not VATable.
Question 9 Are entertainment services VATable?
Answer Yes. They are VATable services except as contained in the exempted services list.
Question 10 Are catering services VATable?
Answer Yes. Catering services are VATable.
Question 11 Can Ministries, Departments, Agencies (MDAs) exempt foreign investors from paying VAT?
Answer No. Ministries do not have statutory power to exempt a taxpayer from payment of tax or to amend the tax laws.
Question 12 Who is a VATable Person?
Answer A VATable person under Value Added Tax Act (VATA) Cap VI LFN 2004 is “a person (other than a Public Authority acting in that capacity) who independently carries out in any place an economic activity as a producer, wholesaler, trader, supplier of services (including mining, and other related activities) or person exploiting tangible or intangible property for the purpose of obtaining income by way of trade or business”.
In other words, a VATable person is one who trade in VATable goods and services for a consideration.
Question 13 Is it compulsory for a VATable person to register for VAT?
Answer Every VATable person has an obligation to register for VAT payment.
Question 14 Who is a VAT Agent?
Answer VAT AGENT: - Are agents of Revenue Collection with regards to Value Added Tax. They facilitate the deduction and remittance of VAT to the Revenue Office e.g. Ministries/Government Agencies/Parastatals and Oil companies
Question 15 Is VAT registration for individuals or corporate bodies?
Answer It is for all so long as they are trading on goods and services as defined by law.
Question 16 What are the penalties for non - registration of VAT?
Answer Failure or refusal to register with the Board within the specified time. The taxpayer shall be liable to a penalty of N10,000 for the first month in which the failure occurs and N5,000 for each subsequent month in which the failure continues. If this persists, the premises where the business is carried on shall be sealed up.
Question 17 What are the penalties for non - deduction of VAT?
Answer Non deduction or failure to collect tax by a taxable person attracts a penalty of 150% of the uncollected tax plus 5% interest above the CBN’s discount rate.
Question 18 What are the penalties for non – remittance of VAT?
Answer Failure to remit tax shall attract a penalty of a sum equal to 5% per annum plus interest at a commercial rate payable within 30 days of notification by the Tax Authority
Question 19 Why is VAT on certain goods and services paid in foreign currency?
Answer Taxes are to be paid in the currency of transaction.
Question 20 Should Ministries issue contractors with receipts for VAT payment in place of FIRS receipt?
Answer No. Receipt acknowledging payment is only issued by FIRS.
Question 21 Most times organizations make part payment to contractors. When should VAT be deducted?
Answer For any payment made, the corresponding VAT should be deducted and remitted.
Question 22 Does FIRS grant refund on VAT to non-citizen who are leaving the country?
Answer Section 23 of FIRS Establishment Act allows for refunds. Goods consumed in the country for which VAT was paid is not refundable.
Question 23 How is VAT on goods sold treated?
Answer VAT element on goods sold is deducted and remitted to the FIRS through any of the approved collecting bank on or before the 21st day of the month following the month of sales.
Question 24 What does “VAT Inclusive” mean?
Answer VAT inclusive means that VAT is already included in the cost of transaction (i.e. goods and services contract). However, the term is being discouraged as it is always advised that VAT be isolated and not included as part of the total invoice value.
Question 25 Some contractors charge 10% for VAT. Is it allowable?
Answer No. The 10% charged on VAT is wrong. The Correct rate is 5%. The contractor should not assume 10% to mean 5% for VAT and 5% for WHT. The two should be treated separately. WHT is deduct from the contract sum and therefore paid by the contractor, while VAT is paid as an addition to the contract sum by the consumer of the goods/services.
Question 26 What is input VAT?
Answer: Input VAT is VAT paid on raw materials or goods and services used for production purposes or goods for resale or goods imported directly for resale.
Question 27 What is output VAT?
Answer Output VAT is VAT charged by taxable persons on goods and services supplied. Where output VAT is more than the Input VAT, the difference is paid to FIRS, but where Input VAT is more than output VAT, the taxable person claims a refund.
Question 28 How can input/output VAT be resolved at the Ministry or Parastatal level?
Answer The issue of input/output VAT cannot be resolved by Government Ministries/Departments/Agencies. However, for further clarification FIRS should be consulted.
Question 29 Are the services of a motor mechanic VATable?
Answer Services provided by mechanics are VATable. Even the motor or vehicle spare parts used for the services are subject to VAT.
Question 30 Do Mortgage Institutions pay VAT?
Answer VAT is exempted only on the primary duties of mortgage institutions. Any other activity (e.g. contract execution) outside their primary banking function attracts VAT.
Question 31 What happens in the case of electricity consumption? Who deducts VAT and how?
Answer VAT is charged on the consumer by PHCN or the electricity company and is collected also by the company who is expected to remit same to FIRS.
Question 32 Is VAT a multiple Taxation?
Answer No. VAT is not a multiple taxation, but a multi-stage tax; it is a consumption tax
Question 33 When should a Taxable person register for VAT?
Answer All companies/organizations that have been in existence before the VAT Act came into operation in 1993 were expected to register for VAT within six months from the date of commencement of the Act. New companies that came into operation after the commencement of the Act are expected to register for VAT within six months of commencement of business.
Question 34 Should VAT be paid on commercial rent?
Answer Yes. VAT at 5% should be paid by the tenant on rent paid for use of property for commercial purposes.
Question 35 Is VAT payable on Non-oil product export?
Answer All exports are zero rated i.e. tax rate applicable is 0%. This means that all input VAT incurred in the production process up to the point of export is refundable.
SECTION D: WITHHOLDING TAX (WHT)
Question 1 What is Withholding Tax (WHT)?
Answer Withholding Tax is basically an advance payment of income tax which may be used to offset or reduce tax liabilities. Or an advance tax to be applied as tax credit to settle the income tax liability of the year of assessments to which the income that suffered the deduction relate. Withholding Tax is not a tax but a prepaid tax.
Question 2 What is the due date for remitting WHT returns?
Answer The due date for remitting WHT returns is 21st day of every month following the month in which the deductions were made.
Question 3 What is the Rate of Withholding Tax for Companies and individuals on transactions?
Answer Rates of WHT for corporate companies and individuals on transactions are as follows:-
Contract of Supplies
Contract of Construction
Hire, Charter, Lease
Question 4 What is the content of remittance schedule of Withholding Tax Returns?
Answer i. Name and address of the Agent/Depositor.
ii. TIN of the Agent/Depositor
iii. The name and address of the Taxpayer/Beneficiary
iv. TIN of the Taxpayer/Beneficiary
v. The nature of transaction
vi. The gross value of the business on which WHT is being deducted
vii. The applicable rate of WHT
viii. The amount of WHT deducted.
ix. Period covered
Question 5 What is Withholding Tax Credit Note?
Answer This is the document issued by the Tax Authority showing that a taxpayer has suffered tax deduction at source.
Question 6 What are the contents of Withholding Tax Credit Note?
Answer Withholding Tax Credit Note will generally include the following information:
· Credit note Number.
· The name of the agent/taxpayer who deducted and remitted the Withholding Tax.
· The name of beneficiary from whose income WHT was deducted.
· The nature of transaction.
· The date of the transaction.
· The name of the bank through which remittance was affected.
· The amount deducted
· The period covered
Question 7 Can WHT Credit note be used to offset late returns penalty (LRP)?
Answer No, WHT Credit Note cannot be used to offset LRP. Penalty is not
Tax, WHT Credit Note can only be used to offset income tax due.
Question 8 Why does it take longer time to confirm WHT Credit Notes issued
by the same FIRS?
Answer Confirmation of WHT Credit Notes took longer time because of the manual processes involved. Confirmation will now be done on-line with the coming of the FIRS web-portal
Question 9 Is mobilisation fee liable to WHT?
Answer Yes, Mobilisation fee is liable to WHT. In addition, every Certificate of work done
issued at the different stages of a contract must be subjected to 5% WHT. However, the amount of WHT being deducted at source from the mobilisation fee paid at the inception of the contract should be adjusted (deducted) from the WHT due on the next payment in respect of the certificate of work done issued and the balance should be remitted to the relevant tax authority.
Question 10 Who are the agents of WHT?
Answer The agents of WHT are;
i. Corporate bodies (companies)
ii. Individuals, firms and sole traders.
iii. A statutory body, a public authority and other institutions or organisations.
iv. Government Ministry, Department or Agency and Local Government.
Question 11 Is there any exemption from Withholding Tax ?
Answer Yes, there are certain transactions that are exempted from WHT,
i. Direct purchase across the counter,
ii. Direct purchase of raw materials from supplier as distinct from contract of supplies
iii. Sale in the ordinary course of business.
iv. All imported goods.
v. Inter- bank interest.
vi. Income exempted from income tax
vii. Claims in insurance business
viii. Interest on Bonds
ix. Dividends redistributed by Holding Companies
Question 12 What are the relevant documents required for filing WHT Returns?
Answer Relevant documents for filing WHT includes:
i Evidence of payments to an authorised banks – e-ticket
ii. Schedule of WHT deducted showing:
a. Period covered
b. Name of supplier
d. Nature of supply
e. Gross amount
f. WHT rate
g. WHT amount
h. TIN of agent making remittance
i. TIN of beneficiary (taxpayer).