TAXPAYERS · CORPORATE
Limited companies
A company’s own income tax is federal. What a company owes the State is the PAYE of its employees, withholding tax on payments to individuals, business premises registration, land use charge, consumption tax where it applies, and the fees and levies of the MDAs it deals with.
Where the State’s claim on a company begins and ends
A limited company is a separate legal person and its profits are charged to company income tax under the Companies Income Tax Act — a federal tax administered by the Federal Inland Revenue Service. The State has no claim on that profit and does not assess it. Companies that arrive at Revenue House expecting to pay corporation tax are, quite properly, sent to the FIRS.
What the State does claim is substantial nonetheless, and it is mostly money the company holds on behalf of other people. PAYE deducted from employees is the largest single item: it is the employees’ tax, withheld by the company as agent and owed to the State from the moment it is deducted. Withholding tax on payments to individual contractors and landlords works the same way. Neither is the company’s money at any point.
The company’s own liabilities to the State are the ones that attach to premises and activity: business premises registration for every location, land use charge on property it owns, consumption tax if it runs a hotel or restaurant, mast and signage levies, environmental levies, sector licences, and motor licensing on its fleet.
Corporate obligations to the State
| Obligation | Frequency | Due date | Penalty for default |
|---|---|---|---|
| PAYE deduction, schedule and remittance | Monthly | 10th of the following month | 10% plus interest at MPR + 5%; employer personally liable |
| Employer annual return (Form H1) | Annually | 31 January | ₦500,000 |
| Withholding tax on individuals and enterprises | Per payment | Within 30 days | 10% plus interest |
| Business premises registration and renewal | Annually per premises | 1 January | ₦50,000 plus arrears |
| Land use charge on company property | Annually | 30 June | 25% rising to 100% |
| Consumption tax (hospitality operators) | Monthly | 20th of the following month | 10% plus interest; premises may be sealed |
| Signage and advertisement levy | Annually | 31 March | ₦150,000 plus removal costs |
| Telecommunication mast levy | Annually | 31 March | Interest and enforcement |
| Environmental and effluent levies | Annually | As assessed | Fines under the Environmental Protection Law |
| Motor licensing on the company fleet | Annually per vehicle | On expiry | ₦25,000 per vehicle plus arrears |
| Directors’ personal income tax | Annually | 31 March | Assessed on each director individually |
What a corporate tax audit looks at
The Service audits employers on a rolling cycle, and the audit is narrower than companies often fear: it is a PAYE and withholding tax audit, not an examination of corporate profit. The auditor is establishing whether the right amount was deducted from the right people and remitted on time.
The most common findings are not evasion but classification. Benefits in kind not valued and added to emoluments; contract staff treated as consultants when the relationship is one of employment; allowances treated as non-taxable when the Sixth Schedule says otherwise; and withholding tax deducted at the company rate when the recipient was in fact an individual.
Audits cover up to six years. Where a company cooperates, produces records and settles an agreed finding, the Service will normally accept an instalment arrangement. Where records cannot be produced, the assessment is raised on best judgement from the payroll register, the bank statements and the audited accounts.
- Payroll register reconciled to the monthly schedules filed.
- Benefits in kind valued under the Sixth Schedule to the Personal Income Tax Act.
- Contract and casual staff tested against the employment indicia.
- Withholding tax on rent, contracts, professional fees and directors’ fees.
- Remittance dates checked against the 10th-of-the-month deadline.
- Employee TINs matched so that every deduction is credited to a person.
Records a company must keep for six years
- Payroll register showing gross pay, reliefs, deductions and net pay for every employee.
- Monthly PAYE schedules as filed, with the payment references and receipts.
- Employee tax deduction cards issued each January.
- Contracts of employment and consultancy agreements.
- Withholding tax schedules, remittance receipts and credit notes issued to payees.
- Tenancy agreements and rent payment records for premises occupied.
- Business premises certificates for every location.
- Bank statements for every account through which emoluments or contract payments passed.
- Audited financial statements and the FIRS company income tax filings.
Large taxpayer arrangements
Employers with more than 200 employees or an annual PAYE remittance above ₦120 million are assigned a named relationship officer at Revenue House and may operate a dedicated virtual account for remittances.
Large employers may also agree a payroll file format with the Service so that schedules are generated straight from the payroll system without manual re-keying. Contact the Director of PAYE & Employer Compliance to arrange it.
File your monthly schedule
Upload, validate against the statutory bands, pay with a single reference and credit every employee automatically.