With the turn of the new year comes the setting of financial goals and business strategies and the rush to gather financial records, crunch numbers, and file annual tax returns. Do you ever wonder what the annual tax returns filing process in Lagos, Nigeria is like as well as what laws govern it? What authorities are responsible for collecting these annual returns and enforcing these laws? Let’s dive into the topic of annual tax returns in Lagos and how you can stay on the good side of tax authorities.

Don’t Miss Out: The Importance of Timely and Accurate Tax Filing

The term FOMO means “the fear of missing out.” It describes the fear of missing out on benefits that others may enjoy. It’s more commonly tied to investments and other financial instruments. It’s more widely linked to investments and other financial instruments. For instance, the possibilities of wealth creation preached by NFT-faithful led many to invest in digital assets, even when they didn’t understand how blockchain technology worked, mainly because they had lost out on the rise of crypto and didn’t want to repeat the same loss. FOMO isn’t precisely an emotion most people associate with taxes, even when it should be. Here’s why. 

Filing annual tax returns is an essential responsibility for individuals and businesses in Lagos, Nigeria. Of course, you already know it’s required by law, but accurate and timely filing also has numerous benefits.

The perfect document for your applications

One significant benefit is that filing provides proof of income and is often important when applying for loans, mortgages, or other financial services. Tax filing is also helpful for expatriates (expats), as many visa, work, business, and permanent residency applications require proof of income. A tax return can serve as evidence of income and financial stability.

Moreover, your tax return filing indicates you comply with Nigeria’s laws and regulations. If you have ‘japa’ plans in store, this can help with a positive review of your visa status and show your prospective country that you are a law-abiding citizen.

A key ingredient to successful business operations

Filing is mandatory for obtaining a tax clearance certificate, which is essential to obtain business licenses such as trade (NUPRC & NCC) licenses, gaming licenses, import or export licenses, and government contracts. If you’re looking to take on business operations in these sectors, you will need those licenses, and filing your tax returns on time can provide you with that crucial paperwork.

No penalties, no fines & more pocket money…

No one likes being on the wrong side of the law, where there are fines, penalties, and sometimes even a jail sentence. 

However, timely and accurate tax returns can help avoid penalties and fines. The Nigerian government takes non-compliance with tax laws very seriously. Those who fail to file or pay taxes on time can face significant financial penalties, and that’s never a good look.

Furthermore, tax filing lets you take advantage of tax deductions and credits that can lower your overall tax liability. These deductions and credits imply more money for savings, investments, or other financial goals. You can book a call with a TaxPal expert today for more information on timely and accurate tax filing. 

Now, let’s break down what annual tax returns are.

What are annual tax returns?

Annual tax returns refer to submitting documents to the tax authorities detailing information about a company’s or individual’s income and taxes paid for a specific tax year. The purpose of annual returns is for the tax authorities to determine whether the correct taxes have been paid and to assess any additional taxes owed.

As mentioned earlier, both companies and individuals can file annual tax returns. Companies file annual tax returns, known as Corporate Tax Returns, which detail information such as taxable income, gross income, and taxes the company pays. It also provides information on tax deductions or any tax credits the company may have claimed. 

On the other hand, individuals file annual personal income tax returns. These returns generally include information about how much the individuals earn, pay in taxes, and any deductions or credits.

The deadline for filing annual tax returns generally depends on the country and the type of tax involved. The Federal Inland Revenue Service (FIRS) and the respective state revenue services collect taxes and supervise all tax-related issues in Nigeria. Some common types of taxes in Nigeria include, but are not limited to:

• Value-added tax (VAT): This is a consumption tax applied to most goods and services at a rate of 7.5%.
• Companies income tax: This is a tax on companies’ profits, currently charged at 30%.
• Personal income tax: PIT is the tax on individuals’ income and is charged progressively (the higher your income, the higher your tax), with rates ranging from 7.5% to 24%.
• Petroleum profit tax: This is a tax on the profits of companies involved in the exploration, production, and sale of petroleum products in Nigeria. The rate varies from 85% to 87.5%

TaxPal Tips: To ensure a smooth and seamless tax return filing experience, businesses and individuals should keep accurate and up-to-date records of their financial transactions throughout the year. Visit TaxPal for more information on how we can help with your tax filings.

Who is responsible for collecting taxes and enforcing tax laws in Lagos?

The Lagos State Internal Revenue Service (LIRS) collects taxes and enforces tax laws in Lagos, Nigeria. The agency implements the Lagos State Government’s tax policies and regulations, ensuring that corporate entities and individuals comply with tax laws. They collect both state and federal taxes within the state.

Deadlines for Tax Returns Filing and Payments

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Filing and payment of annual tax returns in Lagos state are typically due on or before the 31st of January 2023, as set by the Lagos State Internal Revenue Service.

Both individuals and organizations should file their tax returns on time, whether or not they owe any taxes. Any failure to file tax returns on time can result in penalties and interest charges. You should also pay any taxes owed on or before the 31st of January deadline.

Penalties for defaults can include fines, liabilities, and additional interest on any taxes owed. According to the LIRS, taxpayers who miss the annual returns filing deadline face a penalty of 0.5% interest per month on the tax due. In addition, a minimum fine of NGN10, 000 (Nigerian Naira) applies.

In some cases, the penalty can be much higher, up to a maximum of NGN 500,000 (five hundred thousand Naira), as stipulated in the regulations.

How to file your annual tax returns

You can only file annual tax returns in Lagos state electronically through the LIRS e-filing portal. Generally, the process for filing and paying annual tax returns includes the following steps:

• Gather the necessary documentation, such as financial statements, invoices, receipts, and any other relevant information.
• Register with the LIRS and obtain a Tax Identification Number (TIN)
• If you’ve already registered, Log on to the ETAX platform
• Log in to your e-tax profile with company payerID and password
• Select the returns module
• Select the returns type and download the appropriate template
• Fill the template with taxpayer info and upload the updated file [should you encounter a validation error
• Using the Taxpayer’s National Identification Number (NIN), kindly substitute it with the Taxpayer’s Bank
• Verification Number (BVN)]
• Choose a file to upload the updated returns template.
• Click the Submit button to upload the file.
• Repeat steps 4 to 7 for all respective returns type
• You can view each return item submitted before you confirm submission.

If you owe any taxes, you should endeavour to pay them before the deadline. You can make these payments instantly using electronic payment channels on the LIRS e-filing portal. Always keep proper records from now on so subsequent filings can be stress-free.

Bottomline

In conclusion, filing and paying annual tax returns is complex and time-consuming. Still, it is crucial to keep to the Lagos State Internal Revenue Service regulations and avoid penalties and fines.

Ultimately, compliance with these tax laws is vital for maintaining a healthy and successful business in Lagos and building Nigeria. 

We understand that filing taxes on your own can be tasking, especially with all the records and ensuring accuracy. That’s why we offer a range of professional services to help make the process as smooth as possible, including tax planning, compliance, and representation. Send us a message today, and an expert will be on hand to walk you through it.