Seminar on Tax Requirements For MSMEs in

Nigeria

Organized by:

FATE FOUNDATION

Thursday, 11TH February 2016

TAX

COMPLIANCE

REQUIREMENTS

FOR MSMEs in

LAGOS

By

Olufolarin Ogunsanwo

Executive Chairman Lagos State Board of

Internal Revenue

&

Chief Executive Officer Lagos State Internal

Revenue Service

INTRODUCTION

The role of Micro, Small and Medium Enterprises (MSMEs) in economic development cannot be overemphasised. They play a pivotal role in several pathways not limited to job creation. They are largely responsible for driving innovation and promoting competition in developing economies.

MSMEs classifications are based on two criteria, employment and non fixed assets as shown below

SIZE CATEGORY EMPLOYMENT ASSETS (# MILLION)

Micro Enterprises Less than 10 Less than 5

Small Enterprises 10 - 49 5 - 49

Medium Enterprises 50 - 199 50 - 500

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INTRODUCTION

In a case whereby for example an enterprise has assets worth #8 Million but employs 7 persons, the employment – based classification takes precedence and the enterprise will be deemed a micro enterprise

SIZE CATEGORY TOTAL NUMBER

IN NIGERIANUMBER IN LAGOS

Micro Enterprises 36,994,578 3,224,324

Small Enterprises 68,168 11,044

Medium Enterprises 4,670 619

TOTAL 37,067,416 3,235,987

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TAXABLE PERSONS

Every individual resident in Lagos State other than members of the Armed Forces, Police Force and Naval Force

Registered Business domiciled in Lagos State Staff PAYE,

Personal income tax,

Development levy

Business premise levy,

Consumption tax

Withholding tax (individuals only)

Partners with principal office in Lagos State

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TAXES COLLECTABLE BY LIRS

Personal Income Tax in respect of individuals resident in Lagos State.

Withholding tax (individuals only)

Capital Gains tax (individuals only)

Stamp duties on instrument executed by individuals

Business Premises levy

Development levy

Pools betting, lotteries gaming and casino taxes

Hotel occupancy and Restaurant consumption tax

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SPECIFIC REQUIREMENTS FROM LIRS (Individuals)

File a return of income within the first 90 days of every year of assessment S. 41 PITAM 2011

Walk into the nearest Tax Station to be assessed by the Tax Authority (S.54) and pay the assessed sum at any designated bank in Lagos State

Walk into the nearest Tax Station to apply for the issuance of a tax card (ETCC);

Necessary books of accounts of income from all sources must be kept and available when required (S.52)

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REQUIREMENTS FROM LIRS

At the commencement of operations, every business owner is required to register with LIRS for tax deduction purpose.

File an annual return of all emoluments paid to its employees not later than 31st January of every year in respect of all its employees in the preceding year (S. 81(2))

PAYE deductions must be made in the prescribed form from emoluments of staff monthly and remitted to LIRS.

All business owners are to apply for and obtain ETCC for their employees.

Notify LIRS of relevant organisational change as they occur.

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CONSEQUENCES OF NON-COMPLIANCE

Any employer who fails to file returns as prescribed, shall be liable on conviction to a penalty of #500,000 for corporate body and #50,000 for individual (S.81(3) or files incorrect returns shall be liable to #20,000 fine (S.95)

Refusal to keep books of account shall attract a penalty upon conviction of #500,000 for corporate body and #50,000 for individual (S.52)

Failure to deduct or remit tax within 30 days of deduction attracts penalty of 10% of such tax S74).

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LIRS FORMS

FORM A – Income Tax Form & Claims for Allowances & Reliefs.

FORM ‘A’ – Abridged (Self Assessment). To be Abolished.

FORM L1 – Notice of Assessment (Direct Assessment/ Individual)

FORM H1 – Employers Annual Declaration.

ETCC FORM – For Procurement of Tax card.

FORM HCL1 – Registration Form (HORCL)

FORM HCL2 – Remittance (Return) Form.

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MAKING TAX PAYMENTS EASIER FOR MSMEs

Introduction of filing annual returns by e mail

24 hour Customer service to attend to all enquiries from tax payers

Provision of mini tax stations at strategic places for easy access by MSMEs

Upgrade of MTCCs printed for non professionals to ETCC

Professional and highly skilled tax officers to educate owners of MSMEs and assist with filing of various tax forms

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Conclusion

To move Lagos State forward, all taxable adults must ensure they perform their civic obligations by remitting their taxes when due.

The Lagos State Government in return will provide a conducive environment for growing businesses through the provision of infrastructure, adequate security, good governance and empowerment schemes to promote profitability.

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THANK YOU FOR LISTENING.

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