TAXATION OF SOLE PROPRIETORSHIP
A sole proprietorship is owned by one person, and the owner doesn’t have a separate legal existence from the business.
TAXATION OF SOLE PROPRIETORSHIP
What Is a Sole Proprietorship?
A sole proprietorship is owned by one person, and the owner doesn’t have a separate legal existence from the business. As a sole proprietor, you’re entitled to all income; however, you’re also personally liable for any debts and losses incurred.
Sole proprietorship taxes depend on your net profit (income minus expenses), whether you have employees and if you’re subject to local and state taxes.
FILING A TAX RETURN
You'll be taxed on all profits of the business -- that's total income minus expenses -- regardless of how much money you actually withdraw from the business. In other words, even if you leave money in the company's bank account at the end of the year (for instance, to cover future expenses or expand the business), you must pay taxes on that money.
TAXES FOR SOLE PROPRIETORS IN NIGERIA
Sole proprietors in Nigeria don't pay any corporate income tax, since they are not legal entities. Instead, they only pay the PIT - Personal Income Tax. The individual's income in any form (salary from employment or earnings as a sole trader) is covered in the Personal Income Tax.
The Personal Income Tax Act (PITA), and its amendment in 2011, divided personal income taxpayers into two groups: the employees and the self-employed. The area of interest for a sole trader is the latter.
Sole traders are responsible for filing their tax returns themselves and paying taxes when they are due, according to the articles of the Personal Income Tax Act (PITA).
All sole proprietors in Nigeria are liable to pay tax for every year of assessment on the total amount for every income source. The income includes profits made from the business, salaries, wages, fees,allowances, or any other profit gained from employment, including benefits and compensation. The tax rate varies according to the amount of income earned, and they range from 7% to 24%.
There are, however, deductibles and allowances you can use to lower the tax you owe each year. Some of the deductibles are contributions to a pension scheme, loan interests, business rent, and other costs and other costs and maintenance of any business equipment.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
TEL: 08065553671, 08024230080