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Why Pay Tax?
Nobody likes paying tax. But in Nigeria, it is becoming impossible to avoid if you want to grow.
The "Carrot": You need a Tax Clearance Certificate (TCC) to get government contracts, visa applications, or even appoint directors.
The "Stick": The FIRS (Federal Inland Revenue Service) now links your bank account to your TIN. They can freeze your account if they suspect massive tax evasion.
The "Carrot": You need a Tax Clearance Certificate (TCC) to get government contracts, visa applications, or even appoint directors.
The "Stick": The FIRS (Federal Inland Revenue Service) now links your bank account to your TIN. They can freeze your account if they suspect massive tax evasion.
The Mighty TIN (Tax Identification Number)
Your TIN is your identity in the tax world.
Who needs it?
How to get it: It is free! Visit any FIRS office or apply online at jtb.gov.ng.
Who needs it?
- Individuals: Automatically generated when you register for BVN (in most cases), but you may need to validate it at the JTB (Joint Tax Board) website.
- Businesses: Mandatory for opening a corporate bank account.
How to get it: It is free! Visit any FIRS office or apply online at jtb.gov.ng.
PAYE (For Employees)
If you earn a salary, your employer automatically deducts tax. This is called Pay As You Earn (PAYE).
The Math: It is a progressive tax.
Important: Ensure your employer actually remits this money to the State Internal Revenue Service (e.g., LIRS in Lagos), otherwise, you won't get your Tax Clearance.
The Math: It is a progressive tax.
- First ₦300k: 7%
- Next ₦300k: 11%
- ...and it goes up to 24% for high earners.
Important: Ensure your employer actually remits this money to the State Internal Revenue Service (e.g., LIRS in Lagos), otherwise, you won't get your Tax Clearance.
VAT (Value Added Tax)
Rate: 7.5%
VAT is a consumption tax. If you buy a phone, you pay VAT. If you eat at a fancy restaurant, you pay VAT.
For Business Owners: You must charge 7.5% VAT on your goods/services and remit it to the FIRS by the 21st of every month.
Exemption: Basic food items (yam, rice, beans), medical supplies, and books are VAT-free.
VAT is a consumption tax. If you buy a phone, you pay VAT. If you eat at a fancy restaurant, you pay VAT.
For Business Owners: You must charge 7.5% VAT on your goods/services and remit it to the FIRS by the 21st of every month.
Exemption: Basic food items (yam, rice, beans), medical supplies, and books are VAT-free.
Company Income Tax (Small Business Exemption)
Good news for small businesses! Under the Finance Act:
- Small Company (Turnover under ₦25m): 0% CIT. You pay NOTHING. (But you must still file returns on time!).
- Medium Company (Turnover ₦25m - ₦100m): 20% CIT.
- Large Company (Turnover over ₦100m): 30% CIT.
Tax Clearance Certificate (TCC)
This is the "Golden Ticket." It proves you have paid your taxes for the last 3 years.
Why you need it:
Tip: Apply for it at the start of every year (January/February) to avoid the rush.
Why you need it:
- To apply for government tenders/contracts.
- To process some visas (embassies look at it).
- To run for political office.
Tip: Apply for it at the start of every year (January/February) to avoid the rush.
Musa Ibrahim
Staff Writer
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Writes practical, context-aware guides for African audiences.
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