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Frequently Asked Questions
- Personal Income Tax (PIT)
- Religious Unit
- High Net Worth Tax
- Witholding Tax
- Hotel Occupancy & Restaurant Consumption Tax
What is e-TCC
It is the Electronic Tax Clearance Certificate, which acknowledges the payment of tax.
Can e-TCC be issued to anyone?
No. e-TCC is issued only to individuals who have fulfilled the requirement of the Personal Income Tax Act.
How many cards can I have at a time?
Every taxpayer is entitled to a single e-TCC which will be renewed annually.
Where and how do I pay my taxes?
All payments (cash and cheques) should be made as must be paid directly to any of the designated banks, while you can obtain your tax receipt through the same bank
What will I have to show as evidence of tax payment?
Tax payment evidences are; Electronic Tax Clearance Certificate issued by LIRS & Receipt of payment issued by LIRS through Alpha Beta Consulting Ltd/p>
How long will it take to obtain e-TCC ?
72 hours after payment
I lost my e-TCC?
You must pay # 1000.00 to LSBIR dedicated A/C to a Bank branch nearest to you. Apply for a re-issuance of the lost e-TCC to the LSBIR enclosing your LASRRA card
How much do I pay as processing fee, each time I obtain an e-TCC?
There is no need to pay any amount of money as processing fee before obtaining your Electronic Tax Clearance Certificate. It is free.
Under self Assessment do I need to pay any processing or bank charge at bank ?
NO, you don’t have to pay any charge to process your e-TCC at any bank. The banks’ commission is paid by the State Government through LIRS.
What is Personal Income Tax?
It is a tax levied on all incomes of an individual in employment or business. All employers of labour are expected to deduct taxes from their employees and remit same to the tax authority on a monthly basis, while persons in business are expected to file their annual returns and pay accordingly.
Who should pay personal Income Tax?
Any person who earns income in the form of salary, wage, fee, allowance or other gains or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums as or expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain.
Are Temporary or Casual Workers meant to pay tax?
Yes. The Personal Income Tax (Amendment) Act, 2011 combined with the provisions of S.3 (1)(b) and S.3(1)(b)(i) particularly defining the taxpaying employee as either a temporary or permanent employee.
What is CRA?
According to the new Personal Income Tax (Amendment) Act 2011, CRA is the Consolidated Relief Allowance, which combines all previous reliefs (Housing, Meal, Utility, Transport, Leave allowances, etc) consolidated into a single relief of N200, 000 subject to a minimum of 1% of gross income (whichever is higher) plus 20% of the gross income.
What items are tax-exempt from my emolument?
In addition to the Consolidated Reliefs and Allowances (CRA) the following items in the Sixth Schedule table are still tax exempt;
- National Housing Fund Contribution
- National Health Insurance Scheme
- Life Assurance Premium
- National Pension Scheme
How do I know what rate to use in computing my taxes?
After the relief allowance and exemptions have been granted, the balance of income shall be taxed as specified in the following Sixth Schedule Table.
- First N300,000 @7%
- Next N300,000 @ 11%
- Next N500,000 @ 15%
- Next N500,000 @19%
- Next N1,600,000 @ 21%
- Above N3, 200,000 @ 24%.
Which type of taxes does LIRS collect?
- Personal Income Tax from all residents of Lagos State
- Witholding Taxes on all business/economic activities involving a second party who is not a corporate entity
- Business Premises levy from all businesses and companies operating within the state (N10, 000 registration and N5, 000 renewal annually)
- Development Levy from all individuals (N100 per head/yearly)
- Sales Tax
- Consumption Tax.
Why is the amount of taxes payable in Lagos State so high?
Taxes payable in Lagos State is not different from that of other States as all States Internal Revenue operate under the same Constitutional Provisions and Tax Laws. Current Law in use for Personal Income Tax is the Personal Income Tax Act CAP P8 LFN 2004 & (Amendment) at 2011.
How do I confirm if taxes deducted from my monthly emoluments are remitted to the State Government?
You can officially obtain information on all taxes paid on your behalf through the Executive Chairman of LIRS
Is it necessary for full time house wife and other jobless persons to pay tax to Lagos State Government?
The position of the law is that all adult from the age 18 and above must pay Personal Income Tax except those exempted by the law as stipulated in the Third Schedule of PITA 104 CAP P8 LFN 2004 & (Amendment) at 2011
What is the difference between PAYE (Pay As You Earn) and Direct Assessment?
PAYE and Direct Assessment are two ways of assessing individuals to tax. PAYE is for individuals under paid employment and Direct Assessment is for Self Employed individuals.
Can I use withholding taxes deducted on me to offset my Personal Income Tax liability?
Yes, Withholding Taxes is recognized as part of taxes paid and can be net off from liability assessed for the year and balance is paid.
What is Self Assessment?
It is the ‘do it yourself’, easier and convenient approach recently introduced by LIRS which enable a new tax payer to assess him/herself, make payment through any of the designated banks and obtain his/her e-TCC without visiting any tax office or officer.
Can everybody pay under Self Assessment Approach?
No, for continuity and adequate record keeping, Tax payers who have tax records at any LIRS office should approach the same office for proper assessment on a yearly basis. This is important for proper coordination.
What is the deadline for submitting annual returns?
Every employer shall be required to file a return with the relevant tax authority of all emoluments paid to its employees, not later than 31st January of every year in respect of all employees in its employment in the preceding year.
Is there a penalty for failing to file my returns?
The penalty for failure to file returns according to the Personal Income Tax (Amendment) Act, 2011 is N500, 000 for corporate organizations and N50, 000 for individuals.
Are Religious Organizations liable to taxes?
No. The third schedule (section 19 (1) 74) Item 12 to Personal Income Tax Act CAP P8 LFN 2004 as amended “exempts the income of any ecclesiastical, charitable or educational institution of a public character from taxation provided the income is not derived from a trade or business carried on by such institution”. The import of this provision is that incomes of the religious bodies from religious activities e.g. tithe, offerings, donations, are not taxable. The following are however taxable:
Income derived from business activities e.g. letting of properties, transportation, production and sales of Journals , Periodicals, Audio & Video CDs etc, where these activities are carried out in the name of a separate entity or for profit.
Where religious organisations’ funds are used to acquire assets i.e. motor vehicles, landed property etc. in a name different from that of the religious organisation or in the name of an individual who is associated with the religious organisation, funds so expended become income in the hand of the entity/individual and as such taxable.
What are the other tax obligations of Religious Organizations?
- Pay as You Earn (PAYE): As employers of Labor, they are required to deduct appropriate tax from the income of their employees and pay same to Lagos State Internal Revenue Service on or before 10th of the following month through any designated Lagos State revenue collecting bank.
- Withholding Tax: Whenever a Religious body pays an individual or an unincorporated entity Rent, Royalty, Management Fees, Consultancy Fees, Technical Service Fees, Agency Fees, Supplies and Contracts, appropriate withholding tax must be deducted and remitted to Lagos Internal Revenue Service through any of the designated Lagos State revenue collecting bank.
We received the Demand Notice but thought it was not from the Tax Authority.
Always read through the letters sent by the LIRS and endeavour to see the undersigned Officer or visit the address stated on the letter.
Why did the Audit team/Consultant not discuss their findings with us?
The audit team or the Consultant that carried out the audit are not authorised to discuss their findings of the audit with the Company/Taxpayer. Their role is to compile and submit documents provided by the taxpayer to the Tax Authority.
Why were we not called for a reconciliation meeting after we objected to the liability on the demand notice?
There is a time frame for objections to be submitted to the LIRS by the taxpayers and it is 30 days from date of receipt of Demand Notice. This is stated in (Section 58 & Section 104(1) of PITA Cap P8 LFN.)
Why were we distrained after we had made part-payment upon receipt of the Demand Notice from the LIRS?
All payments to the LIRS with respect to tax liabilities are received and would be considered as part payment and do not stop the process of recovery, except full payment is made by taxpayer before distrain is levied.
Why were we distrained based on a Demand Notice that was sent to the Company and received, but was not brought to the notice of the management?
That is an internal lapse, as it behoves on the staff or Company representative to bring it to the notice of the officer in charge to do the needful.
Why did the Distrain team come into our office with a police man?
It is a provision of the law for the purpose of ensuring the security of the Tax Officers. Section 104(4) P.I.T.A Cap P8 LFN.
Why was I not served court processes and informed of the date to appear before the court before the warrant was levied?
The law provides that the application to the High Court will be by ‘Exparte Motion’ which only requires that the Tax Authority must prove that they have fulfilled all statutory requirements and have documents to support their claim and the order to levy distrain may then be granted by the judge.
Why were we sent out and our property sealed?
The law governing distrain provides for the sealing of the property and sale of goods, chattels and real estate to recover outstanding tax. Section 104 (1(a-b) Cap P8 LFN.
Why does the distrain team use a cameraman?
To act as an unbiased arbiter where contentious issues arise.
Why must i pay Cost of Distrain?
Because it is a provision of the law and the tax defaulter must bear the cost of levying the distress. Section 104 (5) P.I.T.A Cap P8, LFN.
What is the Hotel Occupancy and Restaurant Consumption Law?
Hotel Occupancy and Restaurant Consumption Law is a law enacted by the Lagos State House of Assembly which imposes Tax on goods and services consumed in Hotels, Facility or Event Centres within the territory of Lagos State.
Who pays the Hotel Occupancy and Restaurant Consumption Tax?
Any person, Corporate or otherwise who: Pays for the use or possession of any hotel, facility or event centre; or Purchases consumable goods or service in any restaurant whether or not located within a hotel in Lagos state.
Who is a Consumer?
A consumer includes a hotel guest or any person who makes use of a hotel, restaurant, event center or hotel facility for a fee.
What is an Event Center?
It Includes halls, auditoriums, fields and places designated for public use at a fee.
How do you define a Hotel?
It includes a motel, guest house, apartment for short letting, tavern, meeting room and function hall whether or not described as a hotel by the operator.
How do you define a Hotel Facility?
It includes a room, suite, hall, open space or other facility or resource center which may be let out for a fee within a hotel or other facility covered by this law under a lease, concession, permit, right of license, contract or other agreement.
What is a Restaurant?
It includes any food sale outlet, bar, tavern, inn or café whether or not located within a hotel.
How do Hotels, Facilities or Event Centres Register?
Any Hotel, Restaurant or other business affected by this law shall, within 30 days of the commencement of this law (22nd of June 2009) or upon commencement of business, whichever is earlier, register with the Lagos State Internal Revenue Service (LIRS) for the purpose of this law.
What Consumables and Services are Taxable?
The amount to which this Tax applies is the total cost of Facilities, Consumables or Personal services supplied to a customer in, by or on behalf of the hotel, restaurant or event centre.
What is the Consumption Tax Rate?
The rate of tax imposed by the law is 5% of the total bill issued to the customer excluding Value Added Tax and Service Charge.
Who are the Collecting Agents?
TA person owning, managing or controlling any business or supplying any goods or services chargeable under section 1 of the Law shall collect this for and on behalf of the State, the tax imposed by the Law based on the Amount charged or Payable by the Customer in accordance with the provisions of Section 2 of this Law.
When was the Effective Date of the Consumption Tax Law?
The Consumption Tax Law became effective on 1st of August, 2009.
What is the Process of Remittance?
Tax collected during a particular month must be paid to a Lagos State Government designated revenue collecting bank on or before the 20th day of the following month into the following revenue codes as applicable: Tax on Food: 425-32128, Tax on Drinks in bar: 425-4010042, Tax on Accommodation/Rental: 425-4010043, Tax on other Transactions: 425-4010044. Evidence of Remittance must be forwarded to the office of the Executive Chairman LIRS and must include:
- The total amount of payments made for all chargeable transactions during the preceding month.
- The amount of tax collected by the agent during the preceeding month.
What are the Penalties for Non-Remittance?
If a collecting Agent fails to file a report and remit taxes collected within the time allowed by section 6(2) of the Law, that Agent shall, in addition to penalty of 10% of the amount of tax due, pay interest at the rate of 5% per annum above the prevailing Central Bank of Nigeria Minimum Rediscount Rate as determined at the time of actual remittance. Furthermore, any Director, Manager, Officer, Agent or Employee of the collecting Agent who fails to comply with the provisions of the law, shall be guilty of an offence and liable on conviction to a penalty of Six (6) months imprisonment or a fine of Two Million Naira (2,000,000.00) or both.
What happens to the Sales Tax Law?
As from the commencement of the Law, Sales Tax Law, Cap. S.3, Laws of Lagos State 2003 shall not apply to any facilities or transactions covered by this law.
Am I a High Net worth Individual?
Yes, if you are a professional or/ and entrepreneur, owner, or manager of establishment(s), and or owns investment assets from which you derive substantial income and your assets exceed liability. Also a person of considerable influence within the society can also be classified as High Net worth Individual.
Are High Net worth Individuals taxed differently from other Individuals?
No. Their income is subjected to tax like other individuals in line with provisions of the Personal Income Tax Act. However because of the peculiarity and complex of HNWI income and tax profile and to ensure administrative efficiency in dealing with this category of tax payers and their consultants, Lagos State Internal Revenue Service (LIRS) has dedicated a unit that manages the tax return and assessment of HNWI.
As an HNWI when am I supposed to file my tax returns?
You must file returns of your income from all sources and claims for reliefs and allowances relating to the preceding year with LIRS within 90 days from the beginning of every year (i.e on or before the 31st of March).
What happens if I fail returns of my income within 90 days?
LIRS will assume your income based on appropriate economic and social variables applicable to you, and ascertain your tax liability in accordance with Section 54(3) of the Personal Income Tax Act, as amended i.e. raise Best of Judgment Assessment on you.
Which documents do I need to file my tax returns?
Duly completed and signed Income Tax Form for Return of Income and claims for allowances and reliefs (Tax Form “A”) are;
- Financial Statements (where applicable).
- Your own Tax Computation/Position.
- Evidence of payment/contribution to Pension, Life Assurance Premium, National Health Insurance Scheme.
- Evidence of tax paid at source (PAYE, Direct Assessment, Withholding Taxes)
Can I file my returns and pay tax under self assessment?
Yes. All you need to do is fill self assessment form and pay your tax at any branch of Lagos State Government designated revenue collecting bank. However, LIRS will subject such returns to review to ascertain the correctness of information provided therein and tax paid.
I am an Individual in the paid employment PAYE is deducted by my employer from my salary income
Yes, if you earn income from other sources other than the employment income. Such income includes Director’s Fees, Rental Income, Sitting Allowances, Bonus, Benefits in kind.
Why do I need to declare my income from Dividend and Interest I am aware that withholding taxes on these sources of income deducted at source are final tax?
Sections 41(3) & 36 of the Personal Income Tax Act (as amended) make it mandatory for you to declare income from all sources. However in doing this, all relevant documents relating to such income with the relevant withholding tax credit notes should be submitted along with tax returns.
What is withholding tax?
Withholding Tax is the specified amount deducted at source from payment accruing or made to individuals or corporate entities in respect of income receivable for service(s) rendered or from investment and remittance of same to the Relevant Tax Authority in line with the provisions of Personal Income Tax (PITA) and Companies Income Tax Acts (CITA)
Is Withholding Tax another form of Tax?
Yes. It is another form of tax but simply an advance payment of tax, as the tax deducted at source can be set-off against any subsequent tax liability payable on such income by the recipient (tax payer).
Do I have a duty to deduct and remit withholding taxes?
Yes. You are a collecting agent of Government. Whenever you or your firm pays an individual or corporate entity any of the under listed, appropriate withholding tax must be deducted and remitted to the Relevant Tax Authority (State Internal Revenue Service or Federal Inland Revenue Service).
What are the services/payments on which withholding taxes must be deducted?
Withholding Taxes must be deducted from payments due to corporate bodies and individuals on Rent, Commission, Management / Professional Fees, Consultancy Fees, Technical Service, Dividend, Directors’ Fees, Agency Arrangements/Agreements, Tenancy Agreement Dividend, Supplies.
What are the rates of taxes that must be deducted?
Types of Payment
Interest & Rent
Commissions, Management Fees
Consultancy, Technical Service
All Types of Contracts
To which Revenue Authority do I remit withholding taxes deducted from individuals or corporate bodies?
Withholding tax deducted from payments due to corporate entities and individuals resident in Federal Capital Territory(FCT) or from individuals and corporate entities that are not resident in Nigeria are payable to Federal Inland Revenue Service.
What is the currency of deduction and remittance of Withholding Taxes?
The currency in which tax is to be deducted and paid over to the Relevant Tax Authorities is the currency of transaction. Where the transaction is in foreign currency, tax is to be deducted in the foreign currency and remitted to the Relevant Tax Authority. Which could be paid in local currency at the instance of the Revenue Authority.
When is the remittance date for withholding taxes deducted?
Taxes withheld from payments due to corporate bodies and individuals must be remitted to the Relevant Authorities on the earlier of 30 days for individuals and 21 days for corporate entities from the date the amount was deducted and from the time the duty to deduct arose.
Is there any penalty for failure to deduct and/ or remit withholding taxes
Yes. A person or body corporate who fails to deduct or having deducted fails to remit such deductions within 30 days shall be liable to a penalty of an amount of 10% of the tax not deducted or not remitted in addition to the amount of tax not deducted or remitted plus interest at the prevailing monetary rate of the Central Bank of Nigeria.
I am told withholding taxes on some payments are final tax what does this implies
The implication is that the income cannot be subjected to further taxes in the hands of the recipient apart from the withholding taxes earlier deducted.
How do I claim withholding taxes deducted from my income
You must ensure that the individual or corporate entity (collecting agent) to whom you render services remits the withholding taxes deducted from your income to government coffers and obtains certificate of payment issued by LIRS in your name
The Certificate of payment should be included in your Tax Return for the relevant year
Once your income from all sources have been assessed and tax due ascertained, the amount of withholding tax paid at source will be set-off against the tax due to arrive at net tax payable
It is important to emphasize that the presentation of a letter from the collecting agent showing that a taxpayer has suffered deduction is not enough for LIRS to grant Withholding Tax Credit.
Similarly, Government Treasury receipts issued by other government departments showing that they have deducted tax from a taxpayer are not enough to grant tax credits.
What are the payments in respect of which withholding taxes are final?
Withholding Tax on dividend, interest, rent and royalties when suffered by individuals or corporate entities not resident in Nigeria represent final tax. Also, with effect from January 1996, Withholding tax on interest and dividend represent final tax on these incomes in the hands individuals’ resident in Nigeria.
What is the difference between Withholding Tax and Value Added Tax (VAT)?
Withholding Tax is paid to the Relevant Authority depending on whether the taxpayer is a corporate body or an individual. VAT on the other hand, can only be paid to the Federal Inland Revenue Service under the Nigerian Tax Laws.
VAT is a form of indirect tax(Consumption ) while Withholding Tax is a direct tax(Income ).
Withholding Tax is deducted from income while VAT is added to the invoiced value of goods and services.
The individual who suffered Withholding Tax has the right to set it off against future tax liability, VAT cannot be so set-off.