Upon commencement of a business in Nigeria, a taxable person shall register for taxes. Every taxable person will register with the Federal Inland Revenue Service (FIRS) as well as the relevant State Internal Revenue Service (IRS). Registration with FIRS does not waive the need to register with the State IRS. A State IRS may provide a prescribed format for registering new taxpayers. FCT-IRS collects PAYE tax, withholding tax, and other levies of tax residents in the Federal Capital Territory (FCT). This guide will, therefore, focus on how to register for tax with the FCT Internal Revenue Service.
Phase 1: Register for tax with FCT-Internal Revenue Service
- Visit the nearest FCT-IRS office using the list on http://fctirs.gov.ng/locate-us/.
- To create a tax profile of a company, FCT-IRS will require a copy of the CAC certificate as well as a duly completed non-individual tax registration form. In the case of an individual, it will be a duly completed individual tax registration form.
- After registration, FCT-IRS will provide the details for remitting tax.
Phase 2: Monthly tax returns
- PAYE tax is due on the 10th day of the month after payment of salary. For instance, tax on the employee’s salary paid in July will be due on 10 August.
- Withholding tax (WHT) is an advance payment of income tax. The WHT rate is between 5% and 10% depending on the type of transaction and recipient.
Phase 3: Annual tax returns
- Form H1: The company will file an annual employer tax return (Form H1) showing the gross salary and PAYE tax of each employee.
- Individual Form A: The employer will file this return for all employees by 31 March.
- Annual tax clearance certificate: A company will apply for a tax clearance certificate (TCC) on behalf of employees. While there is no deadline, most taxpayers usually process after filing the Form H1. Self-employed individuals can also apply for TCC. Note: The TCC issued by FCT-IRS is different from the corporate TCC from FIRS.
- A copy of the registration forms, PAYE tax schedule, TCC form, Form H1, Form A for FCT-IRS is accessible on http://fctirs.gov.ng/downloads/.
- There are other statutory deductions that an employer will deduct from employment income. However, this is subject to certain conditions. Two popular types are contributions to a pension fund and industrial training fund, although it is not mandatory for businesses with two (2) employees. To read more on the statutory deductions, check here.
- Guide on PAYE tax in Nigeria for an overview of the PAYE tax system.