Tax Filing in Nigeria - The Importance, Procedure and Consequences of Non Compliance.

Tax filing is a critical aspect of financial responsibility for individuals and businesses alike. In Nigeria, adhering to the regulations set forth by the Federal Inland Revenue Service (FIRS) is imperative to ensure compliance with the law and avoid potential penalties. This article provides an overview of tax filing procedures in Nigeria, highlighting the importance of timely filing and the consequences of non-compliance.

Understanding Tax Filing

Tax filing refers to the process of submitting tax returns to the relevant tax authority, which in Nigeria is the Federal Inland Revenue Service. This involves providing detailed financial information, including income, deductions, credits, and expenses, in accordance with the country's tax laws.

Purpose of Tax Filing

The primary purpose of tax filing is to determine the amount of tax owed by taxpayers or the refund they may be entitled to receive. By accurately reporting financial information, individuals and businesses contribute to the effective functioning of the tax system and ensure that their tax obligations are met in a timely manner.

Importance of Timely Filing

Filing tax returns on time is crucial for several reasons:

1. Avoiding Penalties and Interest: Late filing incurs penalties and interest charges, which can significantly increase the overall tax liability over time.

2. Legal Compliance: Timely filing is a legal requirement in Nigeria, and failure to comply can result in penalties and legal consequences.

3. Claiming Refunds: Filing on time ensures prompt processing of any refunds owed to taxpayers, minimizing delays in accessing these funds.

4. Access to Benefits: Certain government benefits, credits, or financial assistance programs may require timely tax returns for eligibility. Filing on time ensures that taxpayers can avail themselves of these benefits without delay.

5. Audit and Documentation: Timely filing reduces the likelihood of being selected for a tax audit and provides a documented record of tax compliance, which can be valuable for various purposes such as obtaining loans or visas.

Filing on the Due Date: Step-by-Step Guide:

Filing tax returns on the due date requires careful adherence to the procedures outlined by the FIRS. Below is a general guideline for filing Company Income Tax (CIT) and Value Added Tax (VAT) in Nigeria:

Company Income Tax (CIT) Filing:

1. Log in to TaxPro MAX on the FIRS website.

2. Access the "Taxes Due" section and generate the CIT form.

3. Complete all CIT schedules accurately.

4. Declare the correctness of the information provided and submit the form.

5. Proceed to payment and select a payment gateway for payment processing.

6. Confirm payment and print the payment acknowledgment slip.

Value Added Tax (VAT) Filing:

1. Log in to TaxPro MAX on the FIRS website.

2. Access the "Taxes Due" section and select VAT as the tax type.

3. Process VAT returns and complete the required schedules.

4. Declare the accuracy of the information provided and submit the form.

5. Proceed to payment and select a payment gateway for processing.

6. Confirm payment and print the payment acknowledgment slip.

Penalties for Non-Compliance

Failure to file tax returns on time can result in various penalties as stipulated by Nigerian tax laws. These penalties may include fines, interest charges, and additional tax liabilities. For instance, defaulting on VAT filing can incur a fine of N50,000 in the first month of default and N25,000 for each subsequent month. Similarly, defaulting on Company Income Tax filing can attract penalties of N25,000 in the first month and N5,000 for each subsequent month.

In conclusion, tax filing in Nigeria is a legal obligation that individuals and businesses must fulfill to comply with tax laws and regulations. By understanding the importance of timely filing and following the prescribed procedures, taxpayers can avoid penalties and ensure smooth tax compliance.

It is advisable to consult official guidelines or seek professional assistance from experts like Kjconsult for accurate and timely tax filing.

J. I. Eze Esq

Principal partner

Kjconsult.