If your business is engaged in a qualifying production activity you may be able to take a tax deduction for your Nigeria based business activities. Please  contact a tax expert or agency for help.

Have you just started a new business? Did you know expenses incurred before a business begins operations are not allowed as current deductions? If you want to deduct a larger portion of your start up cost in the first year, a new business will want to begin operations as early as possible and hold off incurring some of those expenses until after business begins.

The following are however exempted from tax: –

• Medical or Dental expenses incurred by the employee;
• Retirement gratuities and compensation loss of office;
• The cost of passage to or from Nigeria incurred by the employee;
• Interest on loans for developing an owner-occupied residential house;
• Leave allowance, which is computed as 10% of annual basic salary subject to a maximum of N7, 500 per annum.

Normally all relevant document for VAT transaction will be verified before a refund can be made. The earlier the underlying documents are available for VAT audit, the quicker will the refund process. By a conservative estimate, a maximum period of two months from the date of receipt of the VAT Return Form 002.

You may not receive your refund as quickly as you expected. A refund can be delayed for a variety of reasons. For example, a name or identification number on the tax return may not match the FIRS records. You may have failed to sign the return or to include a necessary attachment, such as Wage and Tax Statement. Or you may have made math errors that require extra time for the FIRS to correct.

If you’re trying to beat the tax deadline, there are several options for last-minute help. If you need a form or publication, you can download copies from the FIRS website. If you find you need more time to finish your return, you can get an extension of time to file. And if you have trouble paying your tax bill, the FIRS has several payment options available.

The extension will give you extra time to get the paperwork to the FIRS, but it does not extend the time you have to pay any tax due. You have to make an accurate estimate of any tax due when you request an extension.

Whether you are self-employed or an employee, if you use a portion of your home exclusively and regularly for business purposes, you may be able to take a home office deduction.

You can deduct certain expenses if your home office is the principal place where your trade or business is conducted or where you meet and deal with clients or patients in the course of your business. If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

Your home office will qualify as your principal place of business if you use it exclusively and regularly for the administrative or management activities associated with your trade or business. There must be no other fixed place where you conduct substantial administrative or management activities. If you use both your home and other locations regularly in your business, you must determine which location is your principle place of business, based on the relative importance of the activities performed at each location. If the relative importance factor doesn’t determine your principle place of business, you can also consider the time spent at each location.

If you are an employee, you have additional requirements to meet. You cannot take the home office deduction unless the business use of your home is for the convenience of your employer. Also, you cannot take deductions for space you are renting to your employer.

Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses. Please contact a tax expert or agency for help.

I don’t buy this scrap

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on FIRS Form.

Here are a few tips to help make sure your contributions pay off on your tax return:

In addition to the income tax exemption granted to NGOs, Section 25(3) of CITA provides that any company making donations to such an organization listed under the 5th schedule to CITA shall enjoy tax deductible donation not exceeding 10% of the total profits of that company for that year as ascertained before any deduction of such donations is made and must not be of capital nature. Goods purchased for use in humanitarian donor funded projects are zero rated under the Value Added Tax Act Cap V1 LFN 2004 as amended.

To be deductible, contributions must be made to qualified organizations.

NGOs includes organizations, institutions and companies engaged in ecclesiastical, charitable, benevolent or educational activities of a public character.

All enquiries on any aspect of this should be directed to:

Executive Chairman, Federal Inland Revenue Service, Revenue House, Plot 15 Sokode Crescent, Off Dalaba Street, Wuse Zone 5, Abuja. E-mail: firsinfo@firs.gov.ng

Be sure to have the organization’s correct name and its headquarters location, if possible.

Convertible debentures can be converted into company stocks whenever the holder pleases, they tend to have lesser rate of return compared to nonconvertible ones. On the other hand, nonconvertible debentures cannot be converted into company equity or stocks. This makes them riskier than bonds or convertible debentures. This is why, as compensation, the interest rates are higher than other debentures.

It is usually suggested that investors should consider putting 5 to 10 percent of investment savings into convertible bonds while keeping the rest in traditional stocks and bonds.

If you can’t meet the deadline to file your tax return, you can get an extension of time to file from the FIRS. The extension will give you extra time to get the paperwork into the FIRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.

EXTENSION OF TIME FOR MAKING RETURNS:

(1) For the purpose of filing income tax returns, a taxpayer may apply in writing to the Board of the FIRS for an extension of time within which to file returns provided the taxpayer: a. Makes the application before the due date of filing returns; and b. Shows good cause of its inability to comply.

(2) The Board may in writing grant the extension of time for making returns to such time as it may consider appropriate.

CONDITIONS FOR GRANTING EXTENSION OF TIME FOR MAKING RETURNS:

(1) In granting any extension, the Board of the FIRS shall take the following into consideration:

a. in the case of an individual taxpayer, on the death of the taxpayer within the period of filing of the returns;

b. in the case of a company, on the death of any principal officer of the company, such as the Chairman, Managing Director or Company Secretary, within the period of filing of the returns; and

c. Where the company experienced a fire or natural disaster within the period of filing.

(2) The company must provide verifiable evidence of the fire or natural disaster or of the death of the principal officer of the company.

CONSEQUENCE OF LATE FILING UNDER THE PERIOD OF EXTENSION:

Where an extension is granted, any late filing outside the period of extension whether accompanied by payment of tax due or not shall be penalized for late filing under these Regulations.

APPROVAL TO EXTEND TIME NOT TO ALTER TIME FOR PAYMENT OF TAXES:

Any approval granted by the Board of the FIRS under 14 of these Regulations shall not be construed as to alter the time within which payment of taxes shall be made under any applicable tax law provision. The filing of returns for VAT is excluded from this extension.

The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may consult a tax expert or agency as many rules apply.

If you owed tax last year or received a large refund you may want to adjust your tax withholding. Owing tax at the end of the year could result in penalties being assessed. On the other end, if you had a large refund you lost out on having the money in your pocket throughout the year. Changing jobs, getting married or divorced, buying a home or having children can all result in changes in your tax calculations.