Filing taxes as a small business owner might seem like a task, but with the right knowledge and approach, it can be manageable and even beneficial for your business. In this guide, we’ll walk you through the essential steps to navigate the process smoothly and ensure compliance with tax regulations.
What is a Tax Identification Number?
The Tax Identification Number (TIN) is a unique number that identifies a specific individual (or business) for the purpose of paying taxes. As tax payment is mandatory for all individuals and businesses, everyone needs to have a unique TIN.
Importance of Tax Payment
Paying taxes contributes to your small business’s growth. Complying with tax regulations avoids defaults and sanctions. Demonstrating commitment through tax payment boosts your reputation, especially with investors. Following these steps that are duly covered here will help you to confidently fulfill your tax obligations.
Obtain Your Tax Identification Number (TIN):
A tax Identification Number (TIN) is important for tax purposes. It uniquely identifies you or your business. If you haven’t received your TIN after registering your business, request it via email at [email protected] or check online using your RC Number / BN Number at http://apps.firs.gov.ng/tinverification.
Understand Key Taxes:
Familiarize yourself with Value Added Tax (VAT) and Withholding Tax (WHT). These are the two main taxes that are very vital for a business to file. The processes of filing taxes as a business owner are covered methodically below:
1. Value Added Tax (VAT)
VAT is a 7.5% tax on the supply of goods and services. It is important to file VAT returns monthly by the 21st day following the transaction. Non-filing leads to penalties (N50,000 for the first month and N25,000 for subsequent months).
2. Withholding Tax (WHT)
WHT on the other hand is deducted from invoices at the source (10% or 5% depending on the type of transaction). It is important to file WHT returns monthly by the 21st day following the transaction. Download VAT and WHT forms from the FIRS website and submit on time to avoid penalties.
3. Apply for Tax Clearance Certificate (TCC)
TCC proves that you’ve paid taxes for the past three years. Obtain it online from the FIRS website or at the tax office where you filed your returns.
4. VAT Exemptions
Certain goods and services are exempt from VAT. These goods and services include medical products, basic food items, educational materials etc.
5. State Inland Revenue Services
Every state in the country has its own inland revenue service for specific taxes. And some of these aforementioned taxes are being filed to them. It is important to note that the Federal Inland Revenue Service (FIRS) oversees taxation in Nigeria but each state’s revenue service handles certain taxes.
Filing taxes as a small business owner requires careful attention to detail, organization, and knowledge of tax regulations. Businesses benefit from government programs, contracts, and financial support by filing taxes and this tax compliance secures your business and enhances credibility. However, it is important to ensure that you provide accurate and up-to-date information to avoid any errors or penalties.