Managing Taxes for Small Businesses€¦ · Small Businesses and Tax: The Facts Small business are...
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Managing Taxes for Small Businesses 13 October 2017
Transcript of Managing Taxes for Small Businesses€¦ · Small Businesses and Tax: The Facts Small business are...
Managing Taxes for Small Businesses
13 October 2017
6 October 2017
PwC
Agenda
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Managing Taxes for Small and Medium Businesses
How You See Yourself
Taxes and Tax Compliance Requirements
The Evolving Tax Landscape
Getting it Right – Value Drivers
Small Businesses and Tax: The Facts
How the Government Sees You
Going Forward
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Small Businesses and Tax: The Facts
The current tax laws in Nigeria offer large business several advantages over …
Tax compliance places a large burden on small business in aggregate but relative to large companies
Small businesses are more likely to avoid or underpay taxes…
either intentionally
or unintentionally
smaller businesses
Tax is usually the last thing on the minds of small businesses
Small companies however enjoy the benefit of flexibility in corporate structure to enjoy tax benefits.
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Small Businesses and Tax: The Facts
Small business are not immune to the current apathy to government’s useof revenue from taxes.
Tax compliance enforcement on small businesses is more expensive for the tax authority than larger companies.
Small businesses now leverage on technology for sales and marketing but not for financial reporting and taxes.
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Poll
In your opinion, should SMEs be required to comply with tax laws?
AYes, SMEs should comply with tax laws, just like every other business.
BYes, but the tax regulations should be simplified and the tax rate reduced
CNo, SMEs should not be required to comply with tax laws.
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How you see yourself
“Will the government even know that I exist?
“What are the benefits I will get from paying taxes?
“What if I don’t pay taxes, what can happen?
“Maybe I should just pay a small amount or settle some of the tax officials
“I am not even making a lot of profit, I should be benefiting from this government
“Do I really need to pay taxes?
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How the Government See You: The Importance of SMEs to a Developing Economy
Key contributor to job creation Boosts tax
revenue
Largest contributor to
economic growth
Fosters a diversified economy
Flexible structure
Stimulates competition
Change agents
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How the Government See You: How the Tax Authority sees you
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Limited knowledge of tax laws
Means of achieving revenue targets
Culture of non
compliance
No special treatment
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Some Common Taxes
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Some of the common taxes/ levies or contribution are:
Federal Taxes State Taxes Other Taxes
o Companies Income Taxo Tertiary Education Taxo National Information
Technology Development Fund (NITDEF) Levy
o Capital Gains Taxo Withholding Taxo Value Added Taxo Personal Income Tax
Categories of Taxes
o Withholding Tax o Personal Income Taxo Business Development
Levyo Consumption Taxo Property Tax
o Industrial Training Fund contribution
o National Housing Fund contribution
o Employee Compensation Scheme
o Pension Contribution
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Tax compliance obligations – At a glance
DescriptionCIT TET
CGT
Rates30% 2% 10%
Basis of Assessment
Taxable profit Assessable profit Chargeable Gains
Due Date for filing
On or before 6 months from accounting year end
No specific date, usually submitted with income tax returns
No specific date, usually submitted with income tax returns
Due Date for Payment
Two months from the filing due date
60 days from service of an assessment.
Penalties and offences
Late filing= N25,000 (first month; then N5,000 for each subsequent month of failureLate Payment= 10 % of tax due + i15% interest at Monetary Policy rate
Late Payment= 10 % of tax due + interest at Monetary Policy rate
10 % of tax due + interest at Monetary Policy rate
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Tax compliance obligations – At a glance
DescriptionVAT WHT PIT/PAYE
Rates5% ,0%
Dependent on type of transaction (5% or 10%)
Graduated scale of between 7% - 24%
Basis of Assessment
Vatable goods and services Payment to vendors Employment income
Due Date for filingOn or before21st day of month following the month of transaction
WHT deducted from companies is due to the FIRS within 21 days after the duty to deduct WHT arose and 30 days for payments to state tax authorities
10th of the month following the payment of salary.Annual returns must be submitted on or before 31st January.Due Date for
Payment
Penalties and offences
N 5,000 per month for default. 10 % of tax due + interest at Monetary Policy rate
10 % of tax due + interest at Monetary Policy rate
Non filing of annual returns= N500K .10 % of tax due + interest at Monetary Policy rate
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The Evolving Tax Landscape
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1E-filing of Tax returns
2Increased VAT rate
3Threshold for VAT registration
4Sanitised tax incentives
5More detailed tax audits
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Poll
Based on your experience so far, what are most important factors that lead to non-compliance?
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A Size of business profit
B Burdensome compliance requirements
C
CCCD
Complex tax laws
General apathy arising from perceived misuse of tax revenue
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Poll
How many taxes (levies, rates, etc.) does your business pay?
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A None at all
B At least one, but less than five
C
CCCD
DE
At least five, but less than ten
Ten, but less than twenty
More than twenty
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Getting it Right – Value Drivers
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1 2 3 4 5Proper Documentation
Think Tax Strategy
Develop tax processes and control framework
Seek Expert Opinion
Unified front
- Invoices
- Accounting records
- Contracts/ Agreements
- Legal entity- Business
model- Contracts/
Agreements
- Automate tax process
- Clear reporting lines
- Tax accounting
- Data specialist
- Tax consultants
- Lobbying
- Engagement with authorities
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Engage relevant regulatory authorities
Prompt filing of tax returns
Tax review/ health check
Proper invoicing and documentation
Going Forward
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Utilise WHT credit notes
Implementation of VAIDS
Consider tax impact of contracts/agreements
Tax dispute resolution
Going Forward – Cont’d.
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Questions?
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Managing Taxes for Small and Medium Businesses 13 October 2017
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Managing Taxes
Complex corporate and finance structuring for local and international companies.
Small Business Taxation.Regulatory Compliance.Employee taxation, immigration and other regulatory
services.
Email: [email protected]: linkedin.com/in/Moshood-Olajide-849b4a85Phone no: +234 803 407 6209Twitter: @afolabiolajide
About MoshoodInsert text here.
Work ExperienceInsert text here.
Contact DetailsInsert text here.
Tax Partner and General Counsel for West Africa Market Area at PwC
13 October 2017
