I work as Tax Accountant in a company in Lagos.


Let's share ideas and knowledge and discuss issues taxation here - from students to professionals.

Other tax professionals are also invited to give people advices and answer questions.

Good Day Sir,

As they say, Tax Accounting is interesting and quite challenging, interesting because of the PIT, CIT, Payroll computations and others using spreadsheet programs, also the self assessment form shitties, permit me to say that it is only the PPT area that I haven't touched being that it was just a six-month internship. But the challenge isn't there, you keep doing the same thing, year in, year out. Please sir, disprove my assertions here. Maybe there are some aspects I do not know of, that will make someone like me to say 'bring them on'.

Meanwhile, as per the 'tussle' between CITN and ICAN, the former is winning, but, let me ask this, assuming the supreme court judgement (if the latter eventually appeal at the SC) still favour CITN, does it mean that a chartered accountant will not be able to carry out tax audit exercises? Or there is an act that still backs ICAN members as regard 'tax audit'?

Thanks

Nitrogen.

On the issue of paye, do employees get receipt or any other document after tax has been deducted from their salaries for a particular month, to show that tax has been paid.

Some employers will usually deduct tax but will not remit the tax , in this case what the employee do.

1, Tax Accounting is interesting and challenging. One good thing about it is that with experience it is relatively easier to stand alone and go into consultancy.

2, Taxation is hardly boring, especially if you do it on a large scale, not just computing PIT and CIT for a small company. It has a lot of complexities. A lot of reference to laws, arguments and interpretations, planning etc. You can't have enough. It is hardly monotonous. If you ever have an audit issue with FIRS or LIRS, you will know what I'm saying. Definitely, your internship is never enough to know everything about PIT or CIT. Do you have expats in that organisation? How is it treated? Was tax audit carried out by tax authority during the period and you had to engage the authorities? These are areas your skills and knowledge would come to play, beyond the computations. PPT is a different ball game. There are even different rates for different arrangements within the upstream industry under the PPT regime. And do you know that a single company can be liable to both CIT and PPT? These are complexities that make taxation an ocean you can hardly swim easily.

CITN vs ICAN. Well, the issue is that CITN says before you can practice taxation, you must have CITN certificate. ICAN says no, ICAN certificate is enough. Personally, I go with ICAN argument. I am ICAN-qualified and currently writing CITN, but I must say the 2 courses ICAN devote to tax (Taxation in intermediate and Advanced Taxation in PE2) cover every relevant thing in taxation, and indeed cover all the 8 or so subjects CITN devote to it. Meanwhile in CITN, only one course is set aside as accounting (which is even elementary accounting-foundation) meaning that you can be CITN-qualified(and by extension practice taxation) without knowing much accounting. Not knowing much of accounting, your work as a tax professional is limited. This is why I align with ICAN. But if SC rules in favour of CITN, what that means, I guess, is that you can't practice taxation as a professional (I.e set up tax consultancy outfit) without being CITN-qualified even if you have ICAN. But it doesn't mean a company cannot employ you as internal tax accountant without CITN.

breezey: On the issue of paye, do employees get receipt or any other document after tax has been deducted from their salaries for a particular month, to show that tax has been paid.

Some employers will usually deduct tax but will not remit the tax , in this case what the employee do.

No, employees don't have receipts issued in their names. What is issued is receipt (for the total sum deducted from all employees and remitted) in employer's name.

What employees have is tax clearance certificate (etcc in the case of states that have gone electronic) at the end of the year.

But you can ask for monthly receipt if you have the guts to challenge your employers. In any case, if they don't remit, they will be caught by tax authorities when audit is carried out, and in addition to paying the sums due, they will shell out an additional penalty and interest of 31% combined. So it is in their own interest to remit timely. You can hardly escape, especially in Lagos, except you settle, which will also backfire when the settled officer is replaced some day.

Well said, Oga Jarus!

With all that stated up there, I still think tax accounting is a monotonous work. Like the 'issue(s) with FIRS/SIRS thing', only clarifications and some sorting out is needed, or at worse, a tax audit is carried out in your company.

Arguably, the amendments to those acts brings out challenges (not much anyway), and maybe it is best for amendments to be done every five years.

Btw, the new PITA has got something unclear to many, maybe 'una' can help out.
Here we go:

'CRA (Consolidated Relief Allowance), which replaces personal relief is to be computed as the higher of #200k or 1% of gross income, plus 20% of gross income'

Meanwhile gross income isn't defined by the act (as amended), but gross emoluments, does that automatically replace our gross income?

So which work or aspect of accounting is not monotonous?

nitrogen:
Btw, the new PITA has got something unclear to many, maybe 'una' can help out.
Here we go:

'CRA (Consolidated Relief Allowance), which replaces personal relief is to be computed as the higher of #200k or 1% of gross income, plus 20% of gross income'

Meanwhile gross income isn't defined by the act (as amended), but gross emoluments, does that automatically replace our gross income?

Yes, it does. Gross income = gross emoluments.

Jarus: So which work or aspect of accounting is not monotonous?

Management Accounting

Jarus:
Yes, it does. Gross income = gross emoluments.

I thought as much, thanks.

@Jarus,enlighten me more on WHT and VAT: On what invoices and transactions is WHT & VAT deducted? AND In a situation where a company pays VAT but intentionally does not charged charge to its customers due to obvious reasons,how do u go about,do u require any receipts from those suppliers who charges you VAT,knowing fully well that most companies dont remit VAT to the Govt,but keep on including it in the invoice.am ACA and ACTI QUALIFIED but i still need clarification from a practical aspect.

Jarus,enlighten me more on WHT and VAT: On what invoices and transactions is WHT & VAT deducted?

General principle:
WHT - if an income is subject to Nigerian corporate tax (i.e the payment is to a Nigerian company or to a foreign company that performed the service in Nigeria), WHT is applicable. Otherwise, it is not applicable.

Exceptions:
-if the transaction is in the ordinary course of business
-if there is no contract or PO
-Over-the-counter transactions e.g you just walk into a shop and buy something, WHT is not applicable.
-if it is a reimbursement, provided there is 3rd party evidence to that effect
-From the above and other explanatory notes issued by FIRS, the following specifically are not subject to WHT (telephone bill, hotel invoices, you just walk into Megaplaza and purchase grocery etc)

VAT
General principle: Applicable in all transactions, except those listed by the VAT Act as exempt.

Those exempt include
Medical and pharmaceutical products and services (hospital bills, drugs etc)
Educational materials (books etc)
Basic food items
Oil exports
Agric transactions/equipment
Plant & equipment for a gas project
Exported services
Plays/performance for education
etc

NOTE: If a foreign vendor performs the service entirely outside the shore of Nigeria (i.e earned the income from abroad), it is not subject to Nigerian WHT or VAT.

AND In a situation where a company pays VAT but intentionally does not charged charge to its customers due to obvious reasons,how do u go about,do u require any receipts from those suppliers who charges you VAT,knowing fully well that most companies dont remit VAT to the Govt,but keep on including it in the invoice.

I'm not sure I got this well.

Jarus:
I'm not sure I got this well.

A manufacturing company buys raw materials from its suppliers,on the suppliers invoice,VAT is charged and when the same manufacturer sales its finished goods to its customers it excludes VAT from its invoices to increase sales,how do u treat these transactions for tax purposes,bearing in mind that input and output VAT needed to be netted off each other?

niceprof:

A manufacturing company buys raw materials from its suppliers,on the suppliers invoice,VAT is charged and when the same manufacturer sales its finished goods to its customers it excludes VAT from its invoices to increase sales,how do u treat these transactions for tax purposes,bearing in mind that input and output VAT needed to be netted off each other?

Ok. I now get you. Such manufacturer's product is either zero-rated (which according to the VAT Act can only be non-oil exports, goods purchased by diplomats or for philantropic activity) or exempt (oil exports, drugs etc) .

In the case of zero-rated, you can recover your input VAT (VAT you paid to the raw material supplier) by completing appropriate forms with FIRS and presenting evidence. They will however need to audit you to ascertian you genuinely suffered the VAT.

If exempt, you cannot recover the input VAT you suffered. You have lost if permanently and add it to your cost of production.

pls. house, what is tax clearance certificate? i work in a bank though jux joined nt too long ago after nysc. buh we were given a form in d office to fill that we wll be issued tax clearance certificate soon. so my quests. are: what is this cert? what is the importance if it has any? waiting for ur explainable reponds.

Hassanjj: pls. house, what is tax clearance certificate? i work in a bank though jux joined nt too long ago after nysc. buh we were given a form in d office to fill that we wll be issued tax clearance certificate soon. so my quests. are: what is this cert? what is the importance if it has any? waiting for ur explainable reponds.

TCC is just evidence that you have paid your taxes. It is issued in a year for taxes paid in previous year. You will notice from your payslip that a monthly deduction called PAYE is deducted from your salary. That is your monthly tax. It is remitted to state government of your state of residence on monthly basis. So the TCC is the evidence that you pay your taxes for the last 3 years (or less if you haven't earned taxable income for up to 3 years).

If you don't have it, there are some trasactions with state governments, especially Lagos, that you won't be able to do or forced to pay tax again at the point of having that issue with state government. In lagos, if you are caught for traffic offence, wants to process land documents, change car ownership officially etc, your tax clearance is required.

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niceprof:

A manufacturing company buys raw materials from its suppliers,on the suppliers invoice,VAT is charged and when the same manufacturer sales its finished goods to its customers it excludes VAT from its invoices to increase sales,how do u treat these transactions for tax purposes,bearing in mind that input and output VAT needed to be netted off each other?

You mean that the seller refuses to charge VAT so that he doesn't increase his prices even after paying VAT while buying from the supplier? If that is the case then it is an offence not to charge VAT for vat-able goods. When the taxman comes calling, they usually calculate all the outstanding VAT to b paid including penalties and interest. VAT incurred from buying from suppliers can be cancelled out even if the seller decides to charge VAT to cost of his goods. This is done through input-output VAT.
Most traders don't like charging VAT because of competition. VAT increases the cost of the goods as it is 5% of sales.

@Jarus and Aqva

Please I presently work for a small consulting firm and I have been with them for approx. 3 years now but the problem is although PAYE tax is deducted from my salary every month I have never received a tax clearance from the company within these years. When i querried the Accountant he said the reason why they don't apply for individual staff tax clearnace is because what is being deducted from our salary as PAYE is very little compared to the actual amount. Please i would like your assistance in knowing my actual PAYE from the detail below because i want to ask the company to start deducting the actual PAYE and get me my tax clearnce.

Basic salary: 36,000.00
Housing allowance: 30,000.00
Medical allowance: 24,000.00
Dressing allowance: 15,000.00
Training allowance: 15,000.00
Total 120,000

breezey: On the issue of paye, do employees get receipt or any other document after tax has been deducted from their salaries for a particular month, to show that tax has been paid.

Some employers will usually deduct tax but will not remit the tax , in this case what the employee do.

u are right i work in ABC and some company deduct taxes but will not remit it but as a staff of a particular company always ask for receipt for ur PAYE since d card u are using last fo 4 yrs and u will not know if u have been credited. u can always ask for certificate of payment as a proof that ur money was remitted to state account then u can kmow if ur ETCC card has been credited.
i have a friend that works in a company whose act is always debited but payment was paid for him only once since 2008 and the company always deduct his money

@jarus can i give u my private contact so we meet,am in lagos also.And by the way we read same course almost same grades and professional qualifications. Thanks

Aqva(m): 10:08am
Tax is a complex profession, it's difficult to knw it all with all the CIT, VAT, WHT laws which are complex. For the records, accounting is not taxation, I disagree that having ACA means u have knwn Abt taxation, an accountant knws very little indeed.
To become a taxman u need yrs of on the job practice of taxation. Tax accounting is just one area. Other.complex areas include returns processing, payment processing, debt and arrears recovery, enforcement etc. All these areas have their laws too that needs mastering

Oga i disagree with your comment which i reproduce "accounting is not taxation, I disagree that having ACA means u have knwn Abt taxation, an accountant knws very little indeed" let me react to your comment by asking you this simple question. How would you generate the figures in computing your tax liability? that an accountant knows very little indeed is a falacy, without a financial records can you compute CIT or PIB? What makes you a taxman? you can not seperate the head from the body, accounting is a universal set while taxation is subset. Do you know that as an accountant i can start my tax planning from posting into ledgers. for example, if have a donation that does not fall within the exceptions clause which i know that tax officer would query, I would rather put such transation on allowable expenses. Am not a CITN member but am a trained Chartered Accountant with years of experience in Audit and taxation.

@ Jarus nice job you are doing.

I would like to advise the business owners among us or someone who is about to incorporate his /her company to register with FIRS for your tax identification number ( TIN) to get your TIN is free but if you fail to do so within the stipulated time, be ready to pay penalty. Also if you are a business owners and you have commenced business ensure you remmit your VAT every month, doing so will help you to process your Tax clearance certificate ( TCC)easily without going to bribe tax officers.
For some whose WHT has been deducted from source always go back to your clients to demand for the WHT receipts, from the experience most company dont remmit the portion deducted from you.
N.B there is no more hiding place for tax evaders as the govt is doing everything to ensure conformity to tax law, that is why you see bank asking you for TIN before you can open a corporate account.

crownboss: @Jarus and Aqva

Please I presently work for a small consulting firm and I have been with them for approx. 3 years now but the problem is although PAYE tax is deducted from my salary every month I have never received a tax clearance from the company within these years. When i querried the Accountant he said the reason why they don't apply for individual staff tax clearnace is because what is being deducted from our salary as PAYE is very little compared to the actual amount. Please i would like your assistance in knowing my actual PAYE from the detail below because i want to ask the company to start deducting the actual PAYE and get me my tax clearnce.

Basic salary: 36,000.00
Housing allowance: 30,000.00
Medical allowance: 24,000.00
Dressing allowance: 15,000.00
Training allowance: 15,000.00
Total 120,000

Your actual PAYE, based on new Personal Income Tax Act (PITA) which took effect June 2012, is calculated thus:

GROSS ANNUAL PAY= 120,000*12 = 1,440,000
Less Reliefs & Allowances
- Pension 7.5% of Annual Basic, Housing & Transport = 792,000*7.5% = 59,400
- Consolidated Relief Allowance = 200,000+ 20%*1,440,000 = 488,000
NB: Monetised medical allowance is not accepted as a relief

TAXABLE PAY = Gross pay - Reliefs = 1,440,000 - 59,400 - 488,000 = 892,600

TAX

First 300,000 @ 7% = 21,000
Next 300,000 @ 11% = 33,000
Remainder 292,600 @ 15% = 43,890

TOTAL ANNUAL TAX = 97,890
Monthly Tax = 8,157.50

NOTE: I converted to annual, did the calculation in annualized figures, and reconverted to monthly, because I don't have time to be dividing by 12 at every stage. The relief and tax rates are stated in annual terms. It will result in same thing, except for months you earn extra income like christmas bonus, 13th month etc.

Meanwhile, your company is only postposing evil day. It can't escape the tax. When the authorities come and carry out audit, they will not only recover at actual rate, but also impose penalty and interest, which, together, can be up to 31%. For a small company, this can hit his P&L seriously in the year of audit, except he has been making provision.

Hassanjj: pls. house, what is tax clearance certificate? i work in a bank though jux joined nt too long ago after nysc. buh we were given a form in d office to fill that we wll be issued tax clearance certificate soon. so my quests. are: what is this cert? what is the importance if it has any? waiting for ur explainable reponds.

TCC is very important to companies. It's one of the pre-requisites of participation in govt bids and tenders. Thumbs up to Jarus for the explanation given. If you break traffic law and your vehicle is impounded, you are required to provide your TCC as one of the requirements to process your fine

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where have i been all this while? i am so following this thread. Thanks to the moderator for putting it on the front page.

A few lines:

1) Accounting is wide. Modern day accounting that is. Anyone is free to choose and specialize on areas he/she finds fascinating. there is no point going to a discussion on why one is more/less challenging/interesting than the other

2) Its a lie to say tax clearance cant be issue to individuals. All companies must file in returns at the beginning of a new year in respect of the previous year just ended. failure to do so is N500,000 for corporate and N50,000 for individuals. I hear from insider sources the government is about to INVOKE the N500,000 fine.

3)Failure to charge VAT is not a smart move. Eventually they have to pay these VAT's that should have been borne by the consumer plus penalty and interest.

Great thread. Subscribing. I'm a Tax Analyst myself.

Nice one my people, let me join other gurus in the house like jarus and other to atttend to tax questions from nairalanders, please start sending your questions on tax and you will get your urgent feedback asap.....kazeem ACA, ACTI, ifrs expert

Please can you explain the computation of PIT with respect to employeee
i mean how a coy can structure basic salary and allowances so that you end up paying little tax.

thanks