13 October Managing Taxes for Small Businesses

Transcription

1 13 October 2017 Managing Taxes for Small Businesses

2 Agenda Small Businesses and Tax: The Facts How You See Yourself How the Government Sees You Taxes and Tax Compliance Requirements The Evolving Tax Landscape Getting it Right Value Drivers Going Forward Managing Taxes for Small and Medium Businesses PwC 613 October

3 Small Businesses and Tax: The Facts Tax compliance places a large burden on small business in aggregate but relative to large companies Small businesses are more likely to avoid or underpay taxes either intentionally or unintentionally The current tax laws in Nigeria offer large business several advantages over smaller businesses Small companies however enjoy the benefit of flexibility in corporate structure to enjoy tax benefits. Tax is usually the last thing on the minds of small businesses PwC 3

4 Small Businesses and Tax: The Facts Small business are not immune to the current apathy to government s use of revenue from taxes. Small businesses now leverage on technology for sales and marketing but not for financial reporting and taxes. Tax compliance enforcement on small businesses is more expensive for the tax authority than larger companies. PwC 4

5 Poll In your opinion, should SMEs be required to comply with tax laws? A Yes, SMEs should comply with tax laws, just like every other business. B Yes, but the tax regulations should be simplified and the tax rate reduced C No, SMEs should not be required to comply with tax laws. PwC 5

6 How you see yourself Do I really need to pay taxes? Will the government even know that I exist? I am not even making a lot of profit, I should be benefiting from this government Maybe I should just pay a small amount or settle some of the tax officials What are the benefits I will get from paying taxes? What if I don t pay taxes, what can happen? PwC 6

7 How the Government See You: The Importance of SMEs to a Developing Economy Key contributor to job creation Stimulates competition Boosts tax revenue Largest contributor to economic growth Flexible structure Change agents Fosters a diversified economy PwC 7

8 How the Government See You: How the Tax Authority sees you 2 1 Means of achieving revenue targets Culture of non compliance 4 Limited knowledge of tax laws No special treatment 3 PwC 8

9 Some Common Taxes Some of the common taxes/ levies or contribution are: Federal Taxes State Taxes Other Taxes o Companies Income Tax o Tertiary Education Tax o National Information Technology Development Fund (NITDEF) Levy o Capital Gains Tax o Withholding Tax o Value Added Tax o Personal Income Tax o Withholding Tax o Personal Income Tax o Business Development Levy o Consumption Tax o Property Tax Categories of Taxes o Industrial Training Fund contribution o National Housing Fund contribution o Employee Compensation Scheme o Pension Contribution PwC 9

10 Tax compliance obligations At a glance Description CIT TET CGT Rates Basis of Assessment 30% 2% 10% Taxable profit Assessable profit Chargeable Gains Due Date for filing On or before 6 months from accounting year end No specific date, usually submitted with income tax returns No specific date, usually submitted with income tax returns Due Date for Payment Two months from the filing due date 60 days from service of an assessment. Penalties and offences Late filing= N25,000 (first month; then N5,000 for each subsequent month of failure Late Payment= 10 % of tax due + i15% interest at Monetary Policy rate Late Payment= 10 % of tax due + interest at Monetary Policy rate 10 % of tax due + interest at Monetary Policy rate PwC 12 10

11 Tax compliance obligations At a glance Description VAT WHT PIT/PAYE Rates 5%,0% Dependent on type of transaction (5% or 10%) Graduated scale of between 7% - 24% Basis of Assessment Vatable goods and services Payment to vendors Employment income Due Date for filing Due Date for Payment On or before 21 st day of month following the month of transaction WHT deducted from companies is due to the FIRS within 21 days after the duty to deduct WHT arose and 30 days for payments to state tax authorities 10 th of the month following the payment of salary. Annual returns must be submitted on or before 31 st January. Penalties and offences N 5,000 per month for default. 10 % of tax due + interest at Monetary Policy rate 10 % of tax due + interest at Monetary Policy rate Non filing of annual returns= N500K. 10 % of tax due + interest at Monetary Policy rate PwC 11

12 The Evolving Tax Landscape 1 2 Increased VAT rate E-filing of Tax returns Sanitised tax incentives Threshold for VAT registration More detailed tax audits PwC 12

13 Poll Based on your experience so far, what are most important factors that lead to noncompliance? A Size of business profit B Burdensome compliance requirements C Complex tax laws C D General apathy arising from perceived misuse of tax revenue PwC 13

14 Poll How many taxes (levies, rates, etc.) does your business pay? A None at all B At least one, but less than five C C D DE At least five, but less than ten Ten, but less than twenty More than twenty PwC 14

15 Getting it Right Value Drivers Proper Documentation Think Tax Strategy Develop tax processes and control framework Seek Expert Opinion Unified front - Invoices - Accounting records - Contracts/ Agreements - Legal entity - Business model - Contracts/ Agreements - Automate tax process - Clear reporting lines - Tax accounting - Data specialist - Tax consultants - Lobbying - Engagement with authorities PwC 15

16 Going Forward Tax review/ health check Engage relevant regulatory authorities Prompt filing of tax returns Proper invoicing and documentation PwC 16

17 Going Forward Cont d. Utilise WHT credit notes Implementation of VAIDS Consider tax impact of contracts/agreements Tax dispute resolution PwC 17

18 Questions? PwC 18

19 About Moshood Insert text here. Tax Partner and General Counsel for West Africa Market Area at PwC Contact Details Insert text here. LinkedIn: linkedin.com/in/moshood-olajide-849b4a85 Phone no: Work Experience Insert text here. Complex corporate and finance structuring for local and international companies. Small Business Taxation. Regulatory Compliance. Employee taxation, immigration and other regulatory services. Managing Taxes 613 October 2017 PwC 19