How Not To Get Caught Up With Tax Officials

If you’re a business owner or you’re planning to become one anytime soon, the following will guide you so as not to get into trouble with Tax officials in Nigeria.

Your Business & Tax

1. If you have registered a limited liability company with the Corporate Affairs Commission and you have opened a bank account in your company name, don’t, I repeat, DON’T use the account for personal transactions, if you do, you are running the risk of having tax issues with the FIRS.

2. When FIRS discovers such bank account (with BVN, it’s very easy for them), they will ask you to account for the money. They will ask you to present different kinds of accounts such as Audited Financials, Management Account, Cashbook, etc. You will be expected to show evidence of your VAT and WHT payments as well.

3. If you claim your company is not doing any business yet, they will not believe you because there are transactions in the company’s bank account. So they will assume all the inflows into your bank account are transaction proceeds and they shall compute VAT at 5% on the sum total.

4. So I advise you, if you have a company registered and you have not started doing any business with it, do not open a bank account in that company’s name and if you have opened an account, do not transact with it. Transact personal businesses with your personal bank accounts. That way, you only have PAYE to worry about with your state internal revenue service.

5. If you have registered a limited liability company and you have not started business, ensure you file Zero Returns with the FIRS. Talking about filing, there are certain times when you have to send some reports inform of letters to the tax office. These are instances where maybe you had 20 employees and you did a massive layoff to say remaining 5, you need to inform the tax office. Or if you’re going to be having a pause in your business; it also has to be reported. Your business has been long incorporated for say 3, 4 years ago but you are just starting out, you need to file that also, or maybe your business will not make income for a very long time due to certain project you are running or your changed your business address, do file a report making them aware before hand.

6. If you want a Business name for whatever reason, instead of registering a company, why not start with a Business Name? You can have your corporate bank account but you will not have to file returns to the FIRS. You will only remit VAT, and WHT on Invoices from limited companies, any other tax (basically PAYE and WHT on Invoices from non-limited enterprises) will just be with your state IRS.

7. Finally, do not transact personal business with your corporate bank accounts. Someone wants to send you N2m to buy a car, do not receive it through your corporate account, receive it into your personal account. 

You want to start that small business? Register a business name and not a limited liability company for now. 

Save yourself from tax issues in the future!