Lagos State Government has unveiled plans to open new towns in Ito-Omu and its adjoining communities in Ibeju-Lekki Local Council Development Area (LCDA), to fast track development.
The Acting General Manager of New Towns Development Authority (NTDA), Olakunle Aboyeji, speaking at a stakeholders’ meeting with residents of the communities, including representatives of the monarchs, said Governor Babajide Sanwo-Olu had approved the development of new towns within Ito-Omu and its adjoining communities, to raise the status of the area.
He added that the meeting was necessary to inform stakeholders of government’s presence in their communities and seek their cooperation for the success of the project.
Aboyeji told the residents that the government meant well for them.
The Permanent Secretary, Lands Bureau, Mr. Bode Agoro, allayed the residents’ fear of being exploited by the government.
He assured them of government’s cooperation and partnership in the development of the area.
The Surveyor-General, Olutomi Sangowawa, said: “This is going to be the beginning of new things to happen in the communities.”
He said the mistakes of the past while creating new towns would be avoided if the residents worked with the government officials to bring in the needed expertise for the development.
The representative of the Oba of Ito-Omu, Akogun Fatai Kosoko, said the exercise was long overdue “as only Ito-Omu and its adjoining communities that are yet to be developed and connected to the main network of roads coming into Ibeju Lekki and Epe axis.”
Let’s face it: No one likes paying tax and this is exactly why taxes are one of the last things on the to do list of most businesses until they are visited by tax officials. Before the Finance Bill 2019, every business was mandated to have a Tax Identification Number (TIN) before opening a Bank account, but the bill now includes a requirement for Banks to request for Individual Tax Identification Number which would further expand the tax net considerably, therefore understanding the different types of taxes, rates and available deductions should now be an essential for both individuals and businesses.
Two very important types of tax in Nigeria are Value Added Tax (VAT) and Withholding Tax (WHT) and my emphasis today is the meaning and applicability of these taxes to your business.
Withholding tax is basically an advance and indirect source of taxation deducted at source from the invoices of the tax payer. WHT is not really a distinct tax type and therefore has no legislation of its own. It is only a mechanism for the collection of other taxes. Consequently, its application is provided for in the enabling law of other tax types i.e. Section 81 of the Company Income Tax Act or Section 13 of the Value Added Tax Act. The main purpose of WHT is to capture as much tax payers that may have evaded tax into the tax net and the rate is usually 5%-10% depending on the type of transaction.
WHT is used mainly for transactions involving contract of purchase e.g. When a company or individual supplies goods or services to another company an invoice will usually be issued as evidence of a transaction.
The WHT system in Nigeria is regulated by both Federal and State Inland Revenue Services.
Value Added Tax
VAT is a consumption tax payable on the goods and service consumed by any person whether government agencies, business organizations or individuals. The target of VAT is consumption of goods and services and unless an item is specifically exempted by law, the consumer is liable to the tax.
The standard rate of tax has now been raised to 7.5% of invoice value of goods and services although companies with an annual turnover of N25 million (approx. US$69,000) or less would be exempt from VAT registration and filing obligations.
The VAT system in Nigeria is administered by the Federal Inland Revenue Service (FIRS). All existing manufacturers, distributors, importers and suppliers of goods and services are required to register for VAT. The prospective VAT payer will obtain and complete VAT registration (and return it to the nearest FIRS Tax Office. A permanent VAT registration number is then issued to the tax payer.
Goods Exempted from VAT include Medical and Pharmaceutical Products; Basic food items; Books and educational materials; Newspapers and magazines; Baby products; Commercial vehicles and their spare parts, and Agricultural equipment and products and veterinary medicine;
Services Exempted from VAT include Medical Services; Services rendered by Community Banks, Peoples Banks and Mortgage Institutions; and Plays and performances conducted by educational institutions as part of learning.
The tax is collected on behalf of the Government by businesses and organizations which have registered with the Federal Inland Revenue Services (FIRS) for VAT purposes, and who are now required to make monthly returns to the Government.
To illustrate these type of taxes better we will use an example Nairametrics.
Jideowo Ltd is a supplier of printing and stationery and got a contract to supply stationery to MoMoney Ltd for an invoice value of N100,000. Being a Vatable item, JideOwo Ltd adds a 5% VAT to the contract sum bringing the total amount to N105,000.
Upon receiving this invoice, the accounts department of MoMoney deduct 5% WHT from the invoice and schedule a payment of N100,000 in favor of Jideowo Ltd. They then remit the deducted N5,000 to the Federal Inland Revenue Service and obtain a withholding tax credit note which they should give to authorized representatives of Jideowo Ltd.
Jideowo Ltd upon receiving the payment of N100,000 and Tax credit note of N5,000 will remit a sum of N5,000 to the Federal Inland Revenue as value added tax on the transaction. They will then show the FIRS the WHT credit note of N5,000 which can be used to set-off against future company income taxes.
Break-down of payment (who gets what in cash).
Invoice amount – N105, 000
FIRS (VAT) – N5,000
FIRS (WHT) – N5,000
Jideowo Ltd – N95,000
Tax evasion is a crime that involves an individual or business intentionally avoiding payment of tax. Those caught evading taxes are generally subject to criminal charges and substantial penalties. On the other hand Tax avoidance is the legal usage of the tax regime to one’s own advantage to reduce the amount of tax that is payable by means that are within the law. Tax avoidance is perfectly legal.
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