Types of Taxation, Tax Rates, Period for Payment, Payment and Filing, Penalties for

Non-payment.

Nigerian revenue law encompasses the legal frameworks and regulations governing the
collection of taxes—a very common form of revenue generation within the country. As a critical
component of the nation's fiscal policy, taxation plays a vital role in funding government
operations, infrastructure development, and public services.

The Nigerian tax system is characterised by various types of taxes imposed on individuals,
corporations, and goods and services, each with its own set of rules and compliance
requirements. The system also includes the interplay between federal and state tax jurisdictions,
leading to a broad taxation landscape. As such, Value Added Tax (VAT), Capital Gains Tax,
Company Incomes Tax, Withholding Tax, Stamp Duties, and so on are among the major types of
taxation that contribute significantly to the nation’s revenue. In addition to outlining the types of
taxes, the law stipulates tax rates, payment periods, filing procedures, and penalties for
non-compliance.

1.​ Capital Gains Tax

The Capita Gain Tax is chargeable on capital gains accruing to any person (company or
individual) making a disposal of assets.

Tax Rate: 10%

Payment, Filing and Period of Payment: Every person that has disposed of a chargeable asset
is required to compute and pay CGT as well as file the required returns not later than 30 June or
31 December of the year of disposal.

2.​ Companies Incomes Tax

CITA imposes income tax on profits accruing in, derived from, brought into or received in
Nigeria. It is payable by companies that are registered in Nigeria and non- resident entities
carrying on business or that have a Significant Economic Presence (SEP) in Nigeria.
Tax Rate: Exempted—profits of small companies (companies with annual gross turnovers of
N25m or less).
20% - Medium-sized companies (companies with gross annual turnovers greater than N25m but
less than N100 million).
30% - Large companies (Companies with annual gross turnovers higher than N100m).

Payment and Filing: Filing requirements include a self-assessment return in the prescribed form
and the following supporting documents.

• Audited accounts
• Tax and capital allowance computation
• A statement in writing containing the amount of profit for the year from each and every source.

Period of Payment: Every company shall make payments of tax due on or before the due date
of filing in one lump sum or in instalments

Penalties for Non-payment: Late filing of returns – Failure to file tax returns attracts a penalty
of ₦25,000 for the first month in which the failure occurs and ₦5,000 for each subsequent month
in which the failure continues. Upon conviction, the responsible officer of the company may be
liable to a fine of ₦100,000 or 2 years imprisonment or both.

Late payment or non-payment of tax - Penalty is 10% of the amount of tax payable and interest at
the monetary policy rate (MPR) currently plus a spread to be announced by the Finance Minister.

3.​ Withholding Tax

Withholding TAX (WHT) is an advance payment of income tax deductible at source on specified
transactions. It can be applied as a tax credit against income tax liability in most instances.
Tax Rate:

Transactions Companies Individual

Dividends, interests and rent 10% 10%

Royalties 10% 5%

Hire of equipment, motor vehicles, plants and machinery 10% 10%

Commission, consultancy, technical and management fees, legal 10% 5%

Construction of road bridges, buildings, and power plant / Other 2.5% / 5% 5%

All types of contracts and agency arrangements, other than sales 5% 5%

Directors’ fees N/A 10%

Payment and Filing: Withholding tax returns should include a schedule showing vendor Tax
Identification Number, name and address, type of contract, rate applied, amounts, and evidence
of payment.

Period of Payment: In the case of WHT deducted from companies, remittance is due to the
FIRS within 21 days after the duty to deduct WHT arose. However, in the case of WHT deducted
from individuals and unincorporated entities, remittance is due to the relevant State tax authority
within 30 days after the duty to deduct WHT arose.

Penalties for Non-payment:

Failure to remit WHT due to the FIRS– a penalty of 10% per annum and interest at CBN’s
lending rate.

Failure to remit WHT due to SIRS– 10% of tax due, in addition to the principal tax and interest at
the CBN monetary policy rate (14%).
 4.​ Stamp Duties

Stamp duties are a tax on physical and electronic instruments/documents evidencing transactions
between persons.

Tax Rate: Stamp duty is chargeable either at fixed rates or ad valorem (i.e., in proportion to the
value of the consideration) depending on the class of instrument.
For instance, an “Electronic Money Transfer” levy is applicable on electronic receipts or
electronic transfer for money deposited in a financial institution, on any type of account. The
applicable levy is ₦50 on any transfer of ₦10,000 or more. The levy is to be accounted for by
the person to whom the transfer or deposit is made.

Payment and Filing: Stamping required for relevant documents.

Period of Payment: Payment should be made at the time of executing the relevant instrument or
document.

Penalties for Non-payment:

Late stamping: ₦20;

Where the unpaid duty exceeds ₦20: a further penalty in the form of interest on the stamp duty
payable at the rate of 10% per annum subject to a maximum of the unpaid duty. The FIRS may
choose to apply penalties under the FIRS Establishment Act which can be as high as 10%
penalty plus interest at CBN MPR and imprisonment of up to 3 years. Also, in civil proceedings
unstamped documents are not admissible as evidence.

5.​ Value Added Tax

VAT is chargeable on the supply of all goods and services in Nigeria other than those listed in the
First Schedule of the Act. The relevant law is the VAT Act LFN 2004 as amended.

Tax Rate: Standard rate of 7.5% of the value of goods and services.
Payment and Filing: The following should be submitted to the tax authority:
• Completed VAT returns form

• VAT schedule showing Tax Identification number (TIN), name and address, date of transaction,
invoice number, contract sum, rate applied, tax paid and month of return

Period of Payment: Payment is due on the 21st day of the month following the month of
transaction. However, companies appointed by the FIRS to withhold or collect VAT are required
to remit the tax by the 14th day of the month following the month of the transaction.

Penalties for Non-payment:

Failure to register for VAT: ₦50,000 for the first month and ₦25,000 for every subsequent
month.

Failure to remit VAT: 10% per annum of the amount of tax not remitted plus interest at CBN
minimum rediscount rate.

Failure to issue tax invoice: Fine of 50% of the cost of the goods or services for which tax
invoice was not issued.

Failure to keep proper records: Fine of ₦2,000 for every month in which failure continues.

Failure to collect VAT: penalty of 150% of the amount not collected plus 5% interest above the
CBN Monetary Policy Rate.

Failure to submit returns: Fine of ₦50,000 for the first month and ₦25,000 in which the failure
continues.

In conclusion, understanding these various taxes, along with their associated obligations, is very
essential for businesses and individuals operating within Nigeria. Adherence to tax laws not only
ensures compliance but also contributes to the economic growth and stability of the country. In
this regard, the penalties outlined for late filing, late payments, and non-compliance highlight the
importance of diligent record-keeping, timely payments, and proper adherence to the tax laws.