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What you should know about Personal Income Tax (2)

How does the self-employed person pay his tax?

A self-employed person either calculates his tax based on all his sources of income or having been assessed by the relevant tax authority makes payment as may be prescribed the tax authority.

How are traders taxed?

Traders are taxed by calculating their total income from all sources, less all allowable deductions and allowances. Then, the balance is taxed in accordance with the graduated tax table.

Are the personal emoluments of the President, Vice President, State Governors and Deputy Governors still exempted under the amended Act?

No. the provision has been deleted. Therefore, the President, Vice President, State Governors and Deputy Governors now pay personal income tax on their official emoluments.

Who collects personal income tax and from whom?

The State Boards of Internal Revenue and Federal Inland Revenue Service are the two relevant tax authorities that collect personal income tax in Nigeria. The State Boards of Internal Revenue collect taxes from: individuals resident in the State; Body of individuals such as communities, families that run a business; Business names and partnerships; Executors of estates of deceased persons and trustees of trusts.

While Federal Inland Revenue Service also collects Personal Income Taxes from:

Residents of Federal Capital Territory; Persons employed in the Nigerian Army, Nigerian Navy, Nigerian Air Force; Nigerian Police other than in a civilian capacity; Officers of the Nigerian Foreign Service; Non-residents who derive income or profit from Nigeria; Local employees of diplomatic missions; International organizations

When do I pay my personal income tax?

Every taxable person shall file their returns within 90 days from the beginning of every year. This should include the amount of tax payable. Specifically, for those in employment, it is the duty of the employer to deduct and remit same not later than 10 days after the month of deduction. Also the employees are expected to file their returns stating other sources of their income other than the direct deduction in employment for tax purposes.

If I file and make payments on time, is there any reward or benefit?

Yes, there is a benefit. A taxpayer who files and makes payment within the time specified is entitled to 1% bonus of the tax payable.

Do I have to pay personal income tax in each state where I carry out business activities?

No, a taxpayer is required to pay personal income tax to only one relevant tax authority where he/she is deemed to be a resident except in the case of itinerant worker. This is to say that a genuine tax clearance certificate issued by one tax authority (SBIR or FIRS) to a taxpayer is tenable anywhere in the country.

Who is an itinerant worker?

An itinerant worker is an individual, no matter his status who works in more than one state for a minimum of 20 days in at least three months of every assessment year.

Where can an itinerant worker pay his tax?

An itinerant worker pays his tax to the tax authority where in any yaer of assessment he works for a minimum of 20 days in at least three months.

What happened to the principal Act and why amendment?

The principal Act has not been reviewed since 1993. This has rendered some provisions of the Act obsolete with economic realities of today. Some of the reasons for amending the Act are as follow: to reduce the tax burden and make more money available in the hands of low and middle income earners; to remove old and outdated provisions; to make it user friendly; to bring about equity; to make the administration of the Act simpler to the taxpayer and the tax authority; to encourage voluntary compliance on the part of the tax paying public; to widen the tax base; to grow revenue for sustainable development.

Is it true that the tax rate has increased from 3% to 10% as a result of the amendment?

No. The amendment did not increase the tax rate from 3% to 10% as being speculated. Rather it has reduced the tax burdens on low and middle income earners as can be seen from the tax table below:


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