The self-assessment tax regime is a system of tax administration whereby a taxpayer is granted the right by law to compute his liability pay the tax due and produce evidence of tax paid at the time of filling returns.
RETURNS: This refers to an act of submission by individuals or companies of a record of financial statement and other required related documents to the tax offices for a specific financial year.
The law requires every company (including a company granted exemption from incorporation) to, at least once in every year without notice or demand, make and deliver to the tax authority a return in the form of:
1) The audited accounts, tax and capital allowances computations and a true and correct statement in writing containing the amount of profits from each and every source;
2) A declaration which shall be signed by a director or secretary of the company that the returns contain a true and correct statement of the amount of its profits computed in respect of all sources and that the particulars in such returns are true and complete.
• For newly incorporated companies, the submission shall be within eighteen months from the date of its incorporation or not later than six months after the end of its first accounting period, whichever is earlier.
• For existing companies – companies that have been in business for more than 18 months – the submission shall be not more than six months after the close of the company’s accounting year.
The taxpayer bears the burden of accurately calculating his liabilities, pays the tax due and files self-assessed returns on or before the due date.
The tax returns are accepted by the tax officers as filed, subject to simple arithmetic checks to ensure that tax forms are duly completed. The tax authority may subject the returns to further administrative checks to determine whether or not a taxable person self-assessed less than what ought to be.
Where the taxpayer fails to meet his obligations, sanctions are immediately applied. Non-filers are subjected to administrative assessment that are based on information obtained from the tax payer and other sources with appropriate penalties and interest effective after the due date; it relies heavily on post-filing controls such as risk-based audits, collection enforcement measures etc.
COMPOSITION OF RETURNS
A. COMPANY INCOME TAX
1) Duly signed audited account or statements of affairs
2) Tax computation
3) Capital allowances computation
4) Schedule of assets
5) Duly completed self-assessment forms (Company Income Tax and Education Tax)
6) Evidence of payment of the taxes due (or as applicable)
B. PETROLEUM PROFIT TAX
o Computation of estimated adjusted profit or loss;
o Estimated assessable profit of that period;
o A schedule showing:
• The residue at the end of that period in respect of its assets,
• All qualifying petroleum expenditures incurred in that period,
• The value of any of its assets disposed in that period, and
• The allowances due it under that schedule for that period.
o A computation of its estimated chargeable profits of that period.
o A statement of other sums, deductable under section 22 of Petroleum Profit Tax Act (PPTA), the liabilities for which were incurred during that period.
o A statement of all amounts repaid, refunded, waived or released to it, as referred to in subsection of its estimated tax for that period.
C. PERSONAL INCOME TAX
o Completed income tax forms (Form A ) in the prescribed form:
• Statement of the amount of income from every source,
• Particulars of income, allowance, relief etc,
• Declaration/attestation of the correctness of returns by taxable persons,
• Forms to be signed by a director of the company, and the secretary of the company.
o Evidences of payment of tax.
D. PAY AS YOU EARN (PAYE)
o Completed Form A (income tax form for returns of income and claims for allowances and relief)
o Form H1 (annual income declaration)
o A schedule of tax deduction from the employer containing the following information;
• Name of the employer
• Tax Identification Number (TIN) of the employer
• Name of employees
• TIN of employee
• Basic salary
• Tax charges
• Overall total charged and remitted
o Evidence of payment of tax.
E. VALUE ADDED TAX
o Fully completed Form 002
• Value of all taxable goods and services purchased or supplied during the preceding month.
• Evidence of input tax deducted (as much as possible).
• Evidence of payment of tax.
FILLING: This is an act of compliance with the tax law which requires that returns must be submitted within a stipulated period (statutory due date) regarding an individual or a company.
DUE DATES OF FILLING RETURNS: This refers to statutory date by which a company or individual taxpayer, depending on the tax type, must file its tax returns or risk a relevant sanction which may include being charged penalty and interest on a varying degree as the relevant tax law prescribes.
Section 41 of CITA thus provides that:
1) “Every company including a company granted exemption from incorporation shall, whether or not a company is liable to pay tax under this Act for a year of assessment, with or without notice from the Service, file a self-assessment return with the Service in the prescribed form at least once a year.”
2) “Subject to this Act or any organization made thereunder the time of filing returns shall be:-
a) In the case of a company that has been in a business for more than 18 months, not more after the end of the accounting year and;
b) In the case of newly incorporated company within 18 months from the date of its incorporation or not less than 6 months after the end of its accounting period, whichever is easier, in addition, the form of returns shall be signed by a managing director of the company and the secretary respectively.”
3) “Any company which fails to comply with the provision of sub-section 2 shall be liable to pay as penalty for late filing as follows:-
a) N25,000 in the first month in which the failure occurs, and
b) N5,000 for each subsequent month in which the failure continues.”
Part III, Section 12 of Value Added Tax law as amended provides that:
4) “A taxable person shall render to the board, on or before the 21st day of the month following that in which the purchase or supply was made, a return of all taxable goods and services purchased or supplied by him during the preceding month in such manner as the board may, from time to time, determine.”
5) “A person who imports taxable goods into Nigeria shall render to the board returns on all the taxable goods imported by him into Nigeria.”
Part IV, Section (1) of the Personal Income Tax as amended provides that:
6) “For each year of assessment, a taxable person shall, without notice or demand therefore, file a return of income in the prescribed form and containing the prescribed information with the tax authority of the state in which the taxable person is deemed to be a resident, together with a true and correct statement in writing containing:-
a) The amount of income from every source of the year proceeding the year of assessment computed in accordance with the provision of this Act and rules or regulation made there under, and
b) Such particulars as by the return may be required for the purpose of this Act and rules or regulations made there under with respect to any such income, allowance, relief, deduction or otherwise as may be material for the purpose.”
7) “The form of return shall contain a declaration which shall be by or on behalf of the taxable person that the return contains a true and correct statement of the income computed in accordance with the provisions of this Act and rule or regulation made there under or that particulars given in the return are true and complete.”
8) “A taxable person shall file with the relevant tax authority the returns as stipulated in
CONSEQUENCE OF FAILURE TO FILE RETURNS ON DUE DATE
• If there is a failure to file a self-assessment return on due the date, Section 55(1) (2) and (3) of CITA 2004 as updated in 2007 provide the penalty of N25,000.00 in the first month in which the failure occurs, and N5,000 for each month in which the failure continues.
• Where an offence that relates to failure to file returns is proved to have been committed by the consent or connivance or to be attributed to, any neglect on the part of any director, manager, secretary or other similar officer, servant or agent of company as well as the company, Section 55(5) of CITA 2004 as updated in 2007 provide the penalty of fine not exceeding N100, 000.00 or imprisonment of not less than 6 months or both fine and imprisonment.
• Where there is a failure to furnish a statement or information or keep the records required, Section 85 of CITA 2004 as updated in 2007 provides a penalty of N20,00.00 and N2,000.00 for each day during which the failure continues and 6 months imprisonment in default of payment.
• Any person who aids, abets, counsels, incites or induces any other person to make or deliver any false return or statement under the CITA, keep or prepare any false accounts or particulars concerning any profits on which tax is payable under the CITA, or unlawfully refuse or neglect to pay tax will be subject to the provisions of Section 94(2) CITA, 2004 as updated in 2007 to a penalty of N1000 fine or 5 years imprisonment or both, fine and imprisonment.