Should CSOs in Nigeria Pay Tax?

Annual returns:

Section 55(1) of CITA mandates every company in Nigeria, including CSOs, to file annual tax returns. A tax return comprises:

• The audited accounts,
• The tax and capital allowances computations,
• A true and correct written statement of the amounts of surplus from every source,
• A declaration that the information provided in the returns is true and correct report duly signed by a trustee or any authorized person.

The returns must be filed on or before the due date, within 6 months after the accounting year end for old NGOs and within 18 months from incorporation for new NGOs.

Personal income Tax

This is a statutory obligation imposed on the income of Individuals, Corporate sole or body of individuals, Communities, Families, Trustees, or Executors of any settlement. This tax type is popularly called pay-as-you-earn (PAYE). PIT return is filed, and tax is paid by self-employed individuals on or before the 31st of March every year.

P.A.Y.E

NGOs are required to register with the relevant tax authority for the purposes of deducting personal income tax from employees under the P.A.Y.E scheme. The due date for remittance of PAYE by employers is the 10th day of every succeeding month. PAYE can also be remitted annually by the employee. This should be filed on or before 31st January every year. Failure to register for PAYE with the relevant tax authority within the time specified is an offense that attracts a penalty of N25,000 in addition to payment of arrears of the due tax. Failure to make PAYE deductions or properly account for deducted tax attracts the liability to pay both the amount deducted and a penalty of 10% per annum of the amount plus interest at the prevailing commercial rate, recoverable as a debt from NGOs by tax authorities.

Value Added Tax (VAT)

This is a consumption tax imposed on Nigeria’s supply of all goods and services. It is computed at 7.5% on the value of vatable goods and services. All taxable goods or services CSOs consume are liable to VAT except goods purchased for humanitarian donor-funded projects.

The due date for filing VAT returns is on or before the 21st of every month following the month of the transaction.

You can get a refund on VAT for goods acquired for a donor-funded project provided that you can demonstrate with your financial records that they were indeed for humanitarian uses.

Failure to render VAT returns or where incomplete/ inaccurate returns are rendered, the tax authority shall issue a best-of-judgment assessment on the amount of tax due on the taxable goods and services purchased or supplied.

Also, failure to remit VAT attracts payment of a 5% fine of the unremitted sum per annum plus interest at the commercial rate and the unremitted tax.

Withholding Tax (WHT)

This is an advance payment of income tax that may be used to offset or reduce tax liabilities.

CSOs have a duty to deduct WHT at source from payments they make to contractors/service providers and remit the withheld sum to the FIRS (where the service provider is a corporate body, a resident of the FCT, or a foreign company/individual), or, the relevant SIRS of the state where the service provider is resident.

The due date for remitting WHT returns is the 21st day of every month following the month the deductions were made. Failure to deduct or remit WHT within 30 days from the day it falls due attracts a penalty of 10% of the tax not deducted or remitted. In addition, interest at the prevailing monetary policy rate of the Central Bank of Nigeria will be charged.

Capital Gains Tax (CGT)

is a tax charged on the disposal of chargeable assets.CSOs must pay capital gains tax if assets are disposed of at a profit. It is charged at a flat rate of 10% of chargeable gains. The due date for filing the return and payment of the tax is the same as in Company Income Tax.

Company Income Tax

This is a tax imposed on a company’s profit from all sources. The rate is 30% of the total profit of a company.

CSOs are exempted from paying CIT if they do not engage in trade or business activity.

If otherwise, returns are filed within six (6) months from the end of the accounting year for existing organizations or within eighteen (18) months from the date of incorporation or not later than six (6) months after the end of its accounting period for newly incorporated companies.

Paying taxes is beneficial for the citizens and the country at large. First, it serves as a gauge for measuring the level, growth, and health of the country’s economic activities.

Taxes fund public infrastructure and services, social development and welfare programs, and other government initiatives.

Paying taxes helps to ensure that these essential services are provided to all citizens.

Again, they give taxpayers the moral and legal right to demand a culture of accountability. Paying taxes is an important civic duty that helps ensure society’s functioning.

IT PAYS TO PAY YOUR TAX.

Further Reading

• https://www.firs.gov.ng
• https://www.jtb.gov.ng/
• www.taxpromax.firs.gov.ng