As the business year draws to a close, corporate bodies and self-employed individuals have certain tax obligations that they must fulfill in order to be in the good books of the relevant tax authority: They must file their tax returns for the appropriate period of the year.
A tax return covers all the documentation filed with a tax authority which reports income, expenses and other relevant financial information concerning a particular taxpayer over a period of time, usually for a one year period. While filing their tax returns, tax payers usually calculate their tax liability, draw a schedule of tax payments, or request refunds for any overpayment of taxes within the period under review.
Julia Kagan, in an article published in April, 2021 in Investopedia.com, describes a tax return as “a form, or forms filed with a tax authority that reports income, expenses and other pertinent tax information.” She goes further to state that “in most countries, tax returns must be filed annually for an individual or business with reportable income, including wages, interest, dividends, capital gains, or other profits.”
In Nigeria, filing of tax returns is a legal requirement and an obligation that every taxpayer must take seriously. On the other hand, the tax authority has the duty to facilitate the process of filing tax returns by providing the taxpayer with “standardized forms, guidelines and procedures.”
Section 81 of the Personal Income Tax Act, PITA, 2004, as amended, mandates that “every employer shall be required to file a return with the relevant tax authority of all emoluments paid to its employees, not later than 31st January of every year in respect of all employees in its employment in the previous year.” Section 81 goes further to state that “any employer who contravenes the provision of this section shall be liable, on conviction to a penalty of N500,000.00 in the case of a corporate body, and N50,000.00 in the case of an individual.”
According to the Federal Inland Revenue Service, FIRS, the following are some of the types of taxes filed with the FIRS:
Companies Income Tax Returns. “Every company is required to file returns with the FIRS even if exempted by the law from paying tax. For new companies, such returns should be filed within eighteen months of incorporation or six months after accounting year end, whichever comes first. For old and existing companies, the returns should be filed within six months after the accounting year ends.”
CONTENTS OF A COMPANY INCOME TAX RETURN
With the phased transition to the adoption of International Financial Reporting Standards as from January 2013, the contents of the returns to be filed include:
Duly completed self-assessment form;
Audited financial statement comprising:
A statement of financial position [Balance Sheet]
A statement of comprehensive income [Profit and Loss Account]
Statement of changes in equity
Statement of cash flows
Notes on significant Accounting Policies and other explanatory information
Comparative figures of preceding year on the Generally Accepted Accounting Principles [GAAP] basis to be included in the returns.
Capital Allowances Computation
Tax Identification Number, TIN.
Schedule of Fixed Assets and
Evidence of Payment of Taxes due.
The Audited financial statements are expected to be signed by two directors. The Accounts should be audited and signed also by external auditors who must be members of a recognized professional body.”
Withholding Tax Returns: Withholding Taxes deducted from payments due to all limited liability companies, including from individuals and unincorporated entities operating in the Federal Capital Territory, FCT, Abuja, as well as from nonresident individuals and companies, are payable to the Federal Inland Revenue Service, FIRS.
However, for withholding taxes deducted from payments due to individuals and unincorporated entities outside the FCT, the returns should be filed with the tax authority of the relevant state where the individual who suffers the withholding tax resides.
For companies other than Petroleum companies, withholding tax returns should be filed within 21 days from the date the amount was deducted or the time the duty to deduct arose.
At the state level, companies and other employers of labour within the state’s tax jurisdiction are required to file the Pay As You Earn, PAYE, income tax returns on all emoluments paid to their employees in respect of all employees in their employment in the preceding year, in accordance with the provisions of the Personal Income Tax Act, PITA, Cap P8 [LEN] 2004, as amended. PAYE returns are usually submitted monthly on or before the 10th day of the month, following the month to which the tax deduction relates, using the appropriate schedule.
Also, Section 41 of the Personal Income Tax Act, 2004, as amended, has made it compulsory for self-employed individuals to file their tax returns on or before the 31st March every year. This is in accordance with section 41 which provides that: “A taxable person can file with the relevant tax authority the returns as stipulated in this section within 90 days from the commencement of every year of assessment.”
With respect to tax returns from a taxable person, section 41 says that “for each year of assessment, a taxable person shall, without notice or demand [by the tax authority], file a return of income in the prescribed form, and containing the prescribed information, with the tax authority in the state in which the taxable person is deemed to be a resident, together with a true and correct statement in writing containing the amount of income from every source of the year preceding the year of assessment computed in accordance with the provisions of this Act.”
As stated earlier, there are penalties for default. In addition to the 10 per cent interest per annum imposed on a defaulting tax payer on the due tax, Section 81 of the Personal Income Tax Act states clearly that “Any employer who contravenes the provisions of this Act shall be liable on conviction to a penalty of N500, 000.00 in the case of a body corporate, and N50, 000.00 in the case of an individual.”