BUSINESS LAW & GOVERNANCE
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Module Outline
1 Types of Business Entities in Nigeria
2 Overview of Taxation
3 Corporate Governance and Ethics
4 Effective Board Composition
5 Risk Management
[Module Title]
Overview of Taxation in Nigeria
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Module Objective
This module is designed to communicate to participants a firm
understanding of the role of corporate governance, risk management
and ethics in managing a business.
At the end of this module, participants will know the following:
• The types of businesses allowed to operate in Nigeria
• Taxation and the types of taxes in Nigeria
• The role of governance and ethics in managing a business
• The role of a duly constituted Board of Directors in driving a business to
achieve it goals
• Risks in Business and how to mitigate them.
Course Course
Learning
Description Objectives
Outcome
An introduction to To help participants Participants will learn
taxation in Nigeria understand the about the tax laws in
underlying principles Nigeria and the
behind taxation and various taxes that are
classes of taxation in payable by each the
Nigeria of business
Overview of Taxation
▪ An amount of money levied by a government on its citizens and used to
run the government, the country, a state, a county, or a municipality is
called Tax.
▪ Tax is a powerful tool for achieving economic and social policy objectives
of government and it is a means of transferring resources from the private
to the public sector.
▪ A compulsory exaction from a taxpayer paid in cash or in kind to the
government to provide for the public services of common interest without
regard to the particular benefit received by the taxpayer.
The Taxation System in Nigeria
The Nigeria tax system, like any tax system, is a tripartite structure
TAX
TAX POLICY
ADMINISTRATION
TAX LAWS
Tax administration is
Tax policy forms the
basis for tax laws
the implementation of
the tax laws
Tax Policy in Nigeria
The objectives of Nigeria’s Tax Policy are:
❖ To promote fiscal responsibility and accountability
❖ To facilitate economic growth and development
❖ To provide the government with stable resources for the
provision of public goods and services
❖ To address inequalities in income distribution.
❖ To provide economic stabilization.
❖ To pursue fairness and equity.
❖ To correct market failures.
Taxes in Force in Nigeria
In Nigeria, taxes are charged on the following bases:
1. On individuals’ incomes
2. On companies’ incomes
3. On transactions
On Individuals’ Incomes
• Personal Income Tax
• Development Levy
Taxes in Force in Nigeria
Personal Income Tax (PIT)
• imposed on the Income of a taxable person such as
individuals, communities, families, executors and
trustees.
• administered by State Board of Internal Revenue for
each state of the country.
Taxes in Force in Nigeria
Personal Income Tax (PIT)
• also imposed on the Income of residents of FCT Abuja, Armed
Forces, Nigerian Police, Staff of Ministry of External Affairs and
non-resident individuals, but administered by Federal Inland
Revenue Service.
• PIT is usually assessed through:
o Pay As You Earn (PAYE) system
o Direct Assessment – for sole trader/enterprises and partnerships
Taxes in Force in Nigeria
On Companies’ Incomes
Companies Income Tax Act
Tax is payable on the profit of any company no matter the duration, which is
accruing in, derived from, brought into, or received in Nigeria in respect of:
• Premium
• Dividend, interest, discounts, royalties, charges or annuities
• Any source of annual profit not included above
• Fees, dues, and allowances wherever paid for services rendered
• Any amount of profit or gains arising from the acquisition or disposal of
short-term monetary instruments.
Taxes in Force in Nigeria
On Companies’ Incomes
• Companies Income Tax
• Petroleum Profits Tax
• Education Tax
• Technology Development Levy
Taxes in Force in Nigeria
On Transactions
• Value Added Tax
• Capital Gains Tax
• Stamp Duties
• Excise Duty
• Import Duty
• Export Duty
Taxes in Force in Nigeria
Withholding Tax (WHT)
• This is a type of tax deducted at source and is a way of bringing
people into the tax net and subject them to tax at source.
• The tax deducted is subsequently remitted to the relevant tax
authority by the tax-payer who effected the deduction on its
behalf.
Taxes in Force in Nigeria
Withholding Tax (WHT)
• Persons authorised to deduct tax include government
departments, parastatals(or MDAs), statutory bodies, institutions
and other establishments approved for operation of Pay As You
Earn system.
• It is then the responsibility of the relevant tax authority to issue
the necessary Withholding Tax Credit Note which are to be used
to claim credit against tax payable.
Tax Administration in Nigeria
Tax Administration is carried out in Nigeria
through the following constituted bodies:
▪Federal Inland Revenue Service
▪State Internal Revenue Service
▪Local Government Revenue Committee
Tools of Taxation in Nigeria
Tax Identification Number (TIN)
Tax Clearance Certificate (TCC)
Rendering Returns
• For new companies
• For existing companies
• For companies in the Capital Market
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References
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