Tax Administration in Nigeria

Quick answer: Tax Administration in Nigeria is a public legal-education guide. The correct legal step may depend on the facts, documents, location, timing, and current law, so readers should seek tailored legal advice before acting.

This article is provided for general legal education only and is not a substitute for advice on a specific matter.

TAX ADMINISTRATION IN NIGERIA

In Nigeria, taxation is regulated by law. Implicitly, the passing of the applicable statute is required to make such a tax a legal obligation (Act, By-law, decree among others). The administrative body is established by the tax code, which also defines its tax jurisdiction. According to tax regulations, some types of income, profits, gains, and transaction values of taxable people are subject to tax at a predetermined rate. The current economic climate, the complexity of financial transactions, welfare demands, and social needs are taken into consideration while making changes to these regulations.

The body in charge of collecting and administering federal taxes is called the Federal Inland Revenue Service (FIRS). Taxes that are owed to state governments are handled by the several state boards of internal revenue, whereas taxes owed to local governments are handled by local government revenue committees. However, the Joint Tax Board offers advice, harmonises double taxes, and suggests change.

Nigeria's tax system is adapted to the country's political system (Federal, State and Local Government). Nigeria has a decentralised tax system in which each level of government is in charge of handling taxes within its own area of responsibility. Nigeria collects taxes from all levels of government and uses the proceeds to pay for its expenditures. For taxes owed to each level of government, a body has been established.

TAXES IN NIGERIA

Companies Income Tax, Education Tax, Stamp Duties, Custom Duties, Excise Duties, Withholding Tax, and Value Added Tax are the principal taxes administered by the Federal Inland Revenue Service; Personal Income Tax and Withholding Tax are principally administered by the State Board of Internal Revenue; and Levies are principally administered by Local Government.

PRINCIPLES FOR TAX ADMINISTRATION

Tax statutes, the cornerstone of tax administration, set taxes. These tax statutes typically list the tax rate, payment deadline, method of assessment, offences, and penalties for the cited taxes.

Tax administration entails the registration, assessment, returns, collection, compliance monitoring, compliance enforcement, sanction, taxpayer education and awareness, as well as any other action that might increase the efficacy and efficiency of taxation.

• Registration of Taxpayer: Taxpayer registration is done by submitting relevant information as required by relevant tax authority. Taxpayer registration usually precede tax assessment, collection, compliance monitoring and enforcement. Federal Inland Revenue Service (FIRS) and State Board of Internal Revenue register taxpayer for taxes within their jurisdiction.
• Assessment of Taxpayers: Tax authorities assess taxpayers to taxes administered by them and they can also reassess tax return rendered by taxpayers. The basis of assessing tax (tax rate, basis period, and tax deduction) are stipulated in tax statute.
• Returns: Tax authorities usually require taxpayer to file information as required by relevant tax statute and as further required with them. This is usually on a periodic basis (annually, monthly) or as the need arises.
• Tax Collection: Tax collection is the next step after assessment either the taxpayer self-assess himself or is assessed/reassessed by tax authority. Mode of tax remittance is usually determined by relevant tax authority.
• Compliance Monitoring: Tax authorities usually monitor tax compliance of taxpayers by assessing their adherence to the provisions of relevant tax statute. This is usually done by tax authorities at their respective offices by checking taxpayer’s file and/or visit taxpayer to obtain further relevant information to complement information at their disposal to assess taxpayer’s compliance with the provision of relevant tax statute.
• Compliance Enforcement: Tax authorities compliance can be enforced on taxpayer.

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