Small business tax in Nigeria is compulsory, in as much as your business derives value from here.
To avoid inevitable legal troubles, these are 5 things you must know about paying tax as a small business owner in Nigeria.
1. Income Tax.
All businesses that derive value from Nigeria must pay tax on their income. Income Tax is paid on profit made by small business within year in review. Profit considered for Income Tax is typically on expenses removed from income. But, there are different modifications based on your business type.
Sole proprietorship and single-member LLCs pay taxes on their personal income tax returns while companies pay Company Income Tax from their income, ONLY to FIRS.
2. Self-Employment Tax.
Self-employed Nigerians are required to pay Self-Employment Tax, same applies to LLC owners and partners.
Consultants, freelancers, artisans and other small business owners who do not earn taxable salaries have Self-Employment Tax as an option to pay tax on profits made from their businesses.
3. Value Added Tax (VAT).
Value Added Tax (VAT) in not actually paid by small businesses but rather through them by their customers, depending on product or services they sell.
Value Added Tax is also known as Sales Tax. Find out if your products and services are sales-tax eligible. Small businesses can collect VAT from customers using invoice-based method or accounts-based method.
4. Employment Tax.
When you have employees who earn salaries from your small business, you are required to pay Employment Taxes. Pay your employees’ Personal Income Tax through Pay As You Earn (PAYE) system.
Using PAYE system, you deduct Personal Income Tax from the salaries of your employees and pay it directly to FIRS through a designated bank, on behalf of your employees on a monthly basis.
5. Pay Promptly and Accurately.
Your options for paying small business taxes correctly and as at when due include:
- Hiring an accountant to prepare your books and advise accordingly.
- Using FIRS Tax calculator and paying your taxes online.
- Hiring a tax consultant or CFO who handles the whole taxation process while you focus on your business