The system of taxation is a significant basis for the economy of any country. Every citizen is obligated by law to pay tax. In this post we will tell you what is taxable income, and how important it is for the state.
Importance of taxes and taxable income in Nigeria
Tax plays a main role in building up markets, institutions, and democracy in the country. Tax system helps to develop the economic situation in the country. It is the main source of government revenue that regulates the economic sectors of the state.
Every citizen of the country can affect the whole economic situation just by paying taxes. First, we should define what is personal income tax. This type of tax is the most common tax applicable to business owners and employees.
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Personal income tax levied on all kinds of income of Nigerian citizens employed by organizations or business. Self-employed citizens are expected to pay taxes in accordance with annual earnings.
Taxable income examples
Taxable income - is every kind of reward or any compensation that attracts taxable liability. Today, there are two types taxable income in Nigeria. First, one is namely earned income, these are such types of income:
The other type is unearned income:
All private or government employers have to deduct Pay As You Earn (PAYE) taxes from the wages of employees. Monthly remittance of the tax should be done before the 10th day of the month.
Details of a types of taxes and income
- Companies Income Tax
This is a tax for resident or non-resident companies that work in Nigeria. Resident companies should submit their annual tax return. The payment should be done by appointed banks. Non-resident companies can pay this tax through remittance.
- Petroleum Profit Tax
The tax for companies or individuals who explore or produce any petroleum products. This is a kind of pre-paid tax.
- Value Added Tax
The tax for any company or individual who buys or consumes any taxable service or product. This tax is collected by the seller while selling or providing taxable service or item.
- Educational Tax
The companies registered in Nigeria should be ready to pay Educational Tax. It should be paid annually by designated Bank.
- National Information Technology Development Fund
All the telecommunication, GSM or internet providers should pay 1% of their profit as a tax.
There is a punishment in the amount of N50,000 for individuals and N500,000 for corporate bodies for the case of failing the payment of taxes.
Remember that your role in the economic system of the country is significant, so be diligent in paying taxes.