This page gives you pertinent information regarding the various state tax systems in Nigeria. However, every country’s progress and citizens’ satisfaction are largely dependent on how much money the government can raise. This will impact variables like the availability of infrastructure facilities and fundamental amenities. The main means of producing revenue for the government’s smooth operation is taxation. The Nigerian tax system is something that everyone, whether they work for the government or for a private company, should be familiar with. You must pay taxes to the Nigerian federal government if you work in Nigeria and generate any money. Here, we’ll examine the several kinds of taxes that Nigerian states must collect.
TYPES OF STATE GOVERNMENT TAXES IN NIGERIA
The state government of Nigeria collects the following taxes and levies.
PERSONAL INCOME TAX IN RESPECT OF INDIVIDUAL RESIDENT IN THE STATE
Personal income tax is another name for individual income tax. The earnings, salaries, and other sources of income that an individual receives are subject to this kind of income tax. Typically, the state imposes this tax. Most people do not pay taxes on all of their income because of exemptions, deductions, and credits.
According to Section 1 of the Personal Income Tax Act, Cap P8 Laws of the Federation, 2004, all individual, community, and family income as well as income derived from or owed to a trustee or an estate is subject to taxation. With some exclusions, tax is due on each individual’s total income for each year of assessment.
STAMP DUTIES ON INSTRUMENT EXECUTED BY INDIVIDUALS
Stamp duties are essentially levies on documents that are paid to the Federal or State Government. Stamping fees for documents pertaining to negotiations between a company and an individual, group, or organization of individuals. On the other hand, the state government is authorized to collect stamp duty with regard to documents signed by two or more people.
CAPITAL GAIN TAX
Whenever you sell (or “dispose of”) an item (an “asset”) whose value has increased, you are subject to paying capital gains tax on the profit. Not the quantity of money you get, but the gain you create, is what is taxed. The Capital Gains Tax Act, Cap. C1 LFN 2004, governs it (as amended). 10% of chargeable gains is the flat rate for capital gains tax.
Primarily, withholding tax is an advance payment of income tax that can be used to lessen or balance other tax obligations. It is an extra payment that will be used as a tax credit to pay the income tax debt from the assessment years for which the income that was subject to the deduction is relevant.
BUSINESS PREMISES TAX
Business Premises Levies: This levy is a type of tax that is paid to the State government on real estate that is used to generate money, such as office buildings, factories, and so forth. Costs for registering commercial properties in urban and rural areas, include annual renewal fees and registration fees set by each state.
POOL BETTING, LOTTERIES GAMING AND CASINO TAXES
Taxes on gaming and casinos, pool betting, and lotteries are imposed on businesses and organizations operating outside of the jurisdiction. According to section 73 (2) (a) (b) & (5) of PITA, operators of casinos, gaming establishments, pools betting, sports betting, and lotteries are required to deduct taxes at the rate of 5% from wins.
Companies in Nigeria with a yearly revenue of at least 100 million Nigerian naira ($262,800) are required to pay the National Information Technology Development (NITD) levy. One percent (1%) of the liable companies’ profit before tax (PBT) is how it is determined.
Every taxable person must pay a Development Levy (Individuals Only) of no more than N100 annually.
LAND USE CHARGE
The Land Use Law supports the Land Use Charge. All land-based rates and property charges, including tenement rates, ground rent, neighborhood improvement charges, etc., were brought into harmony by this act. For convenience of administration and collection, the State and Local Governments typically collect land use fees under a single levy.
There are several names for road tax throughout the world. For a motorized vehicle to be used on a public road, a tax must be paid for it or included with it.
OTHER STATE GOVERNMENT TAXES IN NIGERIA
- Naming of street registration fees in the State Capital
- Market Taxes and Levies (where State finance is involved)
- Land use charge (where applicable)
- Entertainment Tax (where applicable)
- Environmental (Ecological) fee or Levy
- Mining, milling and quarrying fee
- Hotel, Restaurant or Event Centre Consumption Tax (where applicable)
- Animal Trade Tax (where applicable)
- Produce Sales Tax (where applicable)
- Slaughter or Abattoir fees (where applicable)
- Infrastructure Maintenance Charge or Levy (where applicable)
- Fire Service Charge
- Property Tax (where applicable)
- Economic Development Levy (where applicable)
- Social Services Contribution Levy (where applicable)
- Signage and Mobile Advertisement, jointly collected by State and Local Government
- Right of Occupancy fees on lands owned by the State Government in urban areas of the State
TAXES IN NIGERIA: WHAT YOU SHOULD KNOW
Why are taxes collected in Nigeria? Paying taxes is both a civic obligation and a legal requirement. This means that failing to pay taxes is a legal offense that carries a jail sentence administered by the Federal Inland Revenue Service. To ensure that Nigerian citizens pay their taxes, the appropriate tax body must be consulted. Large penalties or jail time are among the consequences for refusing to pay taxes.
The federal government collects taxes from a variety of sources, including corporate tax, personal income tax, payroll tax, tariffs, and many more. The government requires these monies in order to fulfill its many obligations for the growth of the country.
Tax rates merely indicate that each taxpayer (individual or business) pays a different amount of tax depending on their income. You pay more the more money you make.
Nigerian businesses are required to pay 30% of their total or gross profit. Companies that are not residents of Nigeria must pay 30% of their profits. Nigerian citizens must contribute 25% of their gross income. Individuals who are not residents of Nigeria are only obligated to pay 25% of their profits made there.