For self-assessment filers, the “due date of payment” is determined as follows: For companies with accounting year ending on 31st December, the due date of payment is 30th June of the succeeding year; For companies with accounting year ending on 30th September, the due date of payment is 31st March of the succeeding year; For companies with accounting year ending any time between 1st January and 30th June, the due date of payment is 1st January of the succeeding year; and For all other cases the due date of payment is six (6) months after the accounting year end.
Under the self-assessment system, a corporate taxpayer is expected to attach a draft/cheque for the tax payable to the returns filed. However, under the provisions of the Act, it has up to two months from the due date of payment within which to settle the assessment. This latter arrangement applies to lump sum payments only. Self-assessment filers who file their assessments promptly and attach drafts/cheques may be granted, on application, the concession to pay the remaining tax due in not more than five monthly instalments commencing from the month immediately following the due date of payment. Such payments may not extend beyond 30th November of the year the assessment and the tax payable relate.
Undisputed Government Assessment: Government-assessed tax will continue to be payable within two months from the date of the assessment. However, the two-month period expires after the 14th December, tax must be paid not later than that date.
Example 1: ABC Limited was assessed on 1st July 1992 for 1992 current assessment for N500,000.00
Comment: The assessment is expected to be paid between 1st July, 1992 and 31st August, 1992 and not by 14th December, 1992.
Example 2: ABC Limited was assessed on 1st December, 1992 for 1992 current assessment for N1m
Comment: The company has two months within which to pay the assessment but since the two-month period expires after 14th December, 1992, the last date for the payment of the tax should be 14th December, 1992.
Disputed Assessment: An amount payable in connection with a determined formal objection or appeal must be settled within one month from the date on the notice of amended assessment, but where the one month period expires after the 14th December; such tax must be paid not later than that date.
Terms of Payment: Lump sum Payment; All assessments and the provisional tax are payable in one lump sum.
A taxpayer may arrange with the Service the payment of the current self-assessment by instalments. The maximum number of six monthly instalment payments may be enjoyed by a self-assessment filer provided the taxpayer remits at least one instalment with the self-assessment tax return. However, where the period of the instalment payments expires after the 30th November of the year of assessment, the balance of the payments must be paid not later than that date otherwise interest at commercial rate is payable on the balance.
Government assessments are payable in one lump sum only except where interest at commercial rate is payable for deferment of payment.
Qualification for Instalment Concession: Granting instalment payment concessions is not automatic. It is at the discretion of the Service. It must be applied for and approved in writing. To qualify for the grant, a company must prove to the satisfaction of the Service that the payment of the tax due in one lump sum will impose financial hardship on its operations. In other words, the company should convince the Service that it is unable to pay the whole tax due in one lump sum. The application must also be lodged with the relevant office of the Service the due date payment. Additionally, anapplication for instalment payments not backed up with at least the first instalment as evidence of cooperation may not be considered.
Example 3: ABC Limited was assessed N100,000 on 1st July 1989 for 1989 year of assessment. 50% was paid at the end of that year and the balance remained unpaid till 30th June, 1992.
Comment: Penalty starts to count from the date the notice of assessment was issued.
1/7/89 - 31/12/89 -6 months
1989 100,000 at 10% for 6 months 5,000
1990 50,000 at 10% for 1 year 5,000
1991 50,000 at 10% for 1 year 5,000
1992 50,000 at l0% for 6 months 2,500
Total penalty due on 30th June, 1992 17,500
Self Assessment, Provisional Tax and Penalty: A self-assessment filer is exempted from the payment of provisional tax. However, a company that is so exempted but fails to file the self-assessment on the due date of filing or having filed, fails to pay on the due date of payment, will be required to pay the provisional tax together with the statutory penalty.
Interest: The interest is to compensate the government for the use, by the taxpayers, of the funds that legally belong to it. It is also to prevent the creation of an unfair financial advantage for those who do not pay their taxes as and when due. Interest will therefore accrue fewer than two conditions: Where penalty is payable (i.e. where the payment of government assessment, self -assessment or provisional tax is late); and Where the taxpayer has the formal approval of the Service to defer the payment of the tax. In the first case, the interest is charged together with the penalty for late payment. In the second case, only the interest is chargeable for the period of the deferment.
Reckoning of Interest: Interest is due from the date of reckoning. The date of reckoning is determined as follows: Self Assessment; The reckoning of interest starts from a day after the due date of payment.
Government Assessment: The reckoning of interest would start a day after the date the assessment was issued.