Business Tax Regulations: What You Need To Know Before You Open a Company or Corporate Bank Account for Your Business in Nigeria

Tax Regulations for Business and Corporate Bank Accounts in Nigeria

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Are you a business owner or an entrepreneur starting a business in Nigeria? There are some tax regulations and business accounting tips you should know before starting that profitable business venture. In this article, I will be discussing some important business accounting and tax regulatory measures in Nigeria for business owners.

Business and Accounting Tips for Businesses in Nigeria on Tax Regulations

Please note the following Tax Regulations if you’re a business owner or you’re planning to become one:

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 use the account for personal transactions, if you do, you run the risk of having tax issues with the FIRS.

2. When FIRS discovers such a 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/documents such as Audited Financials, Management accounts, Cashbook receipts, invoices, other support documents, 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 7.5% 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’s internal revenue service.

5. If you have registered a limited liability company and you have not started a business, ensure you file Zero Returns with the FIRS.

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. After registering your business with the CAC as either a business name or limited liability, you are required by law to always file what is known as annual returns on a yearly basis. Failure to do so may render your company “inactive” on the CAC portal. So many people have been denied visas by foreign embassies because they assumed the company you used to apply for your visa application isn’t operational.

8. If the total turnover/revenue/sales generated by your business isn’t up to N25 million, you aren’t expected to pay for VAT. You will start paying when your revenue threshold exceeds N25 million.

9. The CAC now creates TIN for every company that was registered as a limited liability company. That does not stop the company from registering with the FIRS at their nearest office.

10. Finally, do not transact personal business with your corporate bank accounts.
An uncle wants to send you N5m to buy a car. Do not receive it through your corporate account, receive it in your personal account.

Do you want to start that small business? Register a business name and not a limited liability company.

Save yourself from avoidable tax and regulatory issues in the future! Educate your People.

Best Bank in Nigeria To Open a Corporate Business Account

To open a business account in Nigeria, I was charged N10,000 non-refundable fee which they tagged “Money for Name Search” after that, the account was successfully opened having submitted the required documents.

But the real gist was that the bank was charging me N10 each time I receive a transaction that is N1,000 and above till I finally got an alternative and then stop using the account.

So many small business owners don’t know that giving a customer a business account for payment makes you more professional and genuine in business.

You can escape the N10,000 name search fee and that N10 deduction by creating a free business account with Kuda Bank where they will have 21 fee transfers and at the same time, no deduction of their money whenever they receive money.

You can also check out how to register your business yourself instead of paying 18k-20k as this will even give them access to make any changes or corrections at any time and then how to professionally place their business on Google.

Recently, the same Kuda Bank has introduced a free debit card for business account holders to enable them to make a swift and easy payment. So, kindly log in and apply for a card if you need it.

See let me tell you, as a small business owner, part of your main duty is to try as much as possible to maximize profit and minimize cost.

More success to all Entrepreneurs!

In Nigeria, Business tax is charged on profits for the accounting year ending in the year preceding assessment. The corporate income tax (CIT) rate is 30% for large companies (i.e. companies with gross turnover greater than NGN 100 million), assessed on a preceding year basis. Small businesses with profits below N25million yearly are not taxed in Nigeria.
These are controlled by government agencies regulating businesses in Nigeria, they include the Securities and Exchange Commission (SEC), which regulates the Nigerian capital market, Economic and Financial Crimes Commission, which investigates economic crimes and prosecutes offenders in Nigeria, Nigeria Customs Service, SON, Federal Inland Revenue Service (FIRS), etc.
Nigerian residents are taxed on their worldwide income, while non-residents are taxed only on their Nigerian-source income. Small and Medium Businesses earning below N25million yearly, are not taxed. The personal Income Tax is calculated at graduated rates ranging between 7% and 24% of an individual’s taxable income, with an effective tax rate falling below 20% for every category of individual liable to tax in Nigeria.
Nigeria operates a decentralized tax system where each level of government is independently responsible for the administration of taxes within its jurisdiction. Nigeria generates revenue to fund government expenditure through a pool of taxes from each tier of government.
Business owners pay Income Tax in Nigeria.
Most businesses must file and pay federal taxes on any income earned or received during the year. Partnerships, however, file an annual information return but don’t pay income taxes. Instead, each partner reports their share of the partnership’s profits or loss on their individual tax return.
SMEs are expected to pay income tax, employment tax, sales tax, and self-employment tax in Nigeria. Some SMEs pay taxes to local govt, state govt, and federal government agencies, whereas some other SMEs avoid paying structured taxes such as corporate and personal taxes.
According to Federal Inland Revenue Service (FIRS); the body in charge of tax regulations in Nigeria, there are nine (9) types of taxes in Nigeria.
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