Tax is a compulsory contribution levied by the government. Taxation is important in any economy and its effects remain significant because it helps greatly in the redistribution of income and gives the government funds that it can use to finance public services such as the provision of adequate national security, public infrastructure, power, good road network and a host of other social amenities. So, it’s important for you to pay your taxes. Whilst there are different types of taxes, we will focus on those you should know and pay as a small business. Companies Income Tax: The Companies Income Tax (CIT) is a tax imposed in Nigeria on the profits of registered businesses. It also includes the tax on profits earned by foreign corporations doing business in Nigeria. Limited Liability Companies, including public limited liability companies, pay the CIT. Non-residents are subject to CIT on their Nigeria-sourced income, while resident companies are subject to CIT on their worldwide income. Corporate income tax is calculated using accounting profits that have been taxed. For companies with a turnover of more than N100 million naira, the CIT is currently charged at a rate of 30%. For companies with a turnover of between N25 million and N100 million, it is also charged at a 20 percent rate. The tax is calculated using data from the previous year (i.e. tax is charged on profits for the accounting year ending in the year preceding assessment). According to the Finance Act 2019, companies with a turnover of less than N25 million are exempt from paying company income tax. A non-resident company with a fixed base or a permanent establishment (PE) is taxable on the profits attributable to the fixed base in terms of business profits. As a result, it must register for CIT and file tax returns. Value Added Tax: It is a consumption tax that is levied on a product or services whenever value is added at each stage in the chain of production to the point of sale. It can also be said to be an indirect tax placed on the domestic consumption of goods and services, except for those that are zero-rated (not liable to tax), such as food and essential drugs, or goods or services generally exempted by law. This means that any person or individual, corporate or sole organizations that consumes or buys any taxable any taxable product or service will have to pay VAT. In Nigeria, the average VAT rate charged on the purchase price of certain goods and services is 7.5%. As soon as you register your business, whether as a company or a business name in Nigeria, you are expected to start filing VAT returns. VAT is paid by your customers on whatever money they pay you for your goods or services. Where a business does not earn revenue in a month, or hasn’t started operations, the business is expected to file a NIL return, i.e., you go to the FIRS office nearest to you and fill a VAT returns stating that you made no earnings that month. Stamp Duties: Under the Stamp Duty Act, stamp duty is payable on any agreement executed in Nigeria which includes those relating to any property situated in Nigeria. It is chargeable either at fixed rates or in proportion to the value of a transaction or a property, depending on the class of instrument. Where you prepare documents bordering on deed of assignment of a property, memorandum and articles of association of a company, and legal mortgage, ensure that you have them stamped. It is important to do so because it ensures that these documents are admissible when they are tendered before any law court in Nigeria. There are agencies in the 3 tiers of government who collect and enforce taxes. At the Federal level, there is the Federal Inland Revenue Service (FIRS), at the State Government level, there are the respective State Boards of Internal Revenue (SBIRs) of the thirty- six states of the Federation, one of which is the Lagos Inland Revenue Service (LIRS). Local Governments also administer rates and levies collectible by them through their various councils. Tax is a very crucial component of business that every start-up should be aware of, which is why it’s fine to seek professional advice from a tax expert who can them through the process. We advise you do the same too. Read Also: Registration of Micro, Small and Medium Enterprises (MSMEs) for tax purposes Read Also: Key things to know about the Nigerian Tax System