So, you’ve registered your business. That’s step one. But if you’re not thinking about business tax in Nigeria, you’re basically dressing your hustle in fine agbada — with no trousers underneath. You’ve got your brand new CAC certificate, your business bank account is looking fresh, and maybe you’ve even started selling on Instagram or running ads.
Beautiful. But guess what?
If you’re not handling tax the right way, all that effort might be building a mansion on quicksand. And when FIRS comes knocking, they’re not knocking to gist with you. They’re coming with receipts — and the power to make your business disappear faster than a January salary.
Let’s get into everything Nigerian businesses need to know about tax. No long story. Just the real deal, in the language you understand.
What is Tax and Why Should Your Business Care?
Tax is not a donation. It’s the government’s legal cut from your hustle. It funds roads, salaries, education, and, yes, the same officials that will chase you if you don’t pay…
Oh, yes, you guess right. The FIRS Team, of course!
Once your business is registered, whether it’s a one-man show or you’re building the next Paystack, you owe the Nigerian government taxes.
Are you ignoring it? Just know that this is not a flex. It’s financial self-destruction.
Step 1: Get Your Tax Identification Number (TIN)
TIN is your business’ tax fingerprint. If you don’t have a TIN, you don’t exist in FIRS’ system, at least for now. But don’t be deceived, FIRS will find you, somehow, some day!
How to Get a TIN
For business names: Visit the nearest FIRS office or register online via firs.gov.ng or the Joint Tax Board
For registered companies: CAC usually generates a TIN automatically and links it with your certificate
Free to get, but essential to everything that follows
Nigerian businesses need TIN for tax compliance, business bank accounts, and government contracts.
Step 2: Understand VAT (Value Added Tax)
You see that extra 7.5% you add on top of your product or service price? That’s VAT. And if you’re collecting it, you better be remitting it.
Who Should Register for VAT?
If your business earns ₦25 million or more per year, congrats — you’re in the big leagues (at least in the eyes of the FIRS). And with great income comes great responsibility: you’re legally required to register for VAT.
But here’s the twist — even if you’re not raking in ₦25m yet, registering early isn’t a bad idea. In fact, it can be a boss move. Why?
Because it makes you look legit. Organized. Serious. Structured.
Big brands and corporate clients love that. They don’t want to deal with “vibes and inshallah” businesses — they want suppliers who can issue proper VAT invoices and speak the language of compliance.
Filing VAT Returns:
Whether your business made a billion naira in sales or absolutely nothing, you must file your VAT returns every single month. No exceptions.
Did you get zero sales? Still file.
Sold one bottle of water? File.
Just opened shop and haven’t sold a thing? Yes, file!
And there is a deadline: The 21st of the following month. So, for January’s VAT, you file by February 21st. Simple, right? Mark it, circle it, tattoo it if you must.
The Painful Penalty:
Let’s say you didn’t file, FIRS will start billing you like you’re Netflix. First month: ₦50,000. Every extra month you delay: ₦25,000. Just for not submitting a form. You’re literally paying for nothing. Imagine getting charged for breathing — that’s the level of madness we’re talking about.
So the Bottom Line is for you to make VAT filing a monthly ritual. Just like brushing your teeth. But with way higher financial consequences if you skip it.
Step 3: Know the Types of Taxes You May Owe
By now, you already know that tax is the not-so-fun but absolutely unavoidable part of doing business in Nigeria. So, here’s the lowdown, broken down for clearer understanding, so you know the differences between each.
1. Company Income Tax (CIT)
For Limited Liability Companies (LLCs)
This is the big one. How much you pay depends on how fat your revenue is:
- Revenue ≤ ₦25 million – You’re safe (for now). 0% tax.
- ₦25 million < Revenue ≤ ₦100 million – You’re in the middle zone. 20% CIT.
- Revenue > ₦100 million – Big baller status. 30% CIT.
When to file: Annually, within 6 months after your company’s financial year ends. So if your year ends in December, your CIT is due by June 30.
2. Personal Income Tax (PIT)
For sole proprietors and business names.
Even if you do not have fancy company registration, you’re still not off this hook. And by company registration, I mean a Limited Liability Company. That said, you’re likely either a sole proprietor of a small business or related. You are required to understand that:
- You must file your personal income tax with your state’s internal revenue service (e.g., LIRS in Lagos, or RIRS in Rivers).
- Tax is based on your net profit — not your total income.
- You can be taxed on a graduated scale — the more you earn, the higher the rate.
⚠️ Bonus tip: Even if you’re a one-man business, registering and paying your PIT signals you’re playing by the rules. Banks and corporate clients like that.
3. PAYE (Pay As You Earn)
If you’ve got staff, with pleasure, I say Congrats because you’re officially a tax middleman.
Once you hire employees, you don’t just pay them and call it a day. The government expects you to help collect income tax on their behalf. It’s like being a free tax agent — without the salary.
Here’s what you’re legally required to do every single month as a company or business owner:
✅ Step 1: Calculate and Deduct Their Tax
Each employee’s income tax must be calculated based on their monthly earnings. The more they earn, the more they pay — it’s a progressive tax system.
- Use the Personal Income Tax Rates as a guide (graduated from 7% to 24%).
- You deduct the right amount from their gross salary — before they even see it.
Basically, their take-home pay should be after-tax, and you’re the one slicing off the tax part.
✅ Step 2: Remit the Tax
The deducted tax doesn’t stay in your pocket (tempting, but illegal). You must remit it to your state’s internal revenue service — not the FIRS.
- If your business is in Lagos, that’s the LIRS (Lagos Internal Revenue Service).
- Every state has its own tax office — know yours.
💡 Important: PAYE is a state tax, not a federal one — don’t send it to the wrong place, it may never be recovered!
✅ Step 3: File the Monthly PAYE Return
By the 10th of the following month, you must file a PAYE return that shows:
- How much you paid each employee,
- How much tax you deducted,
- And confirmation that it was remitted.
Even if you didn’t pay salaries that month — you still need to file a nil return. Skipping it is like ignoring a text from your landlord. It won’t end well.
⚠️ What Happens If You Slack Off?
Late or no filing? Delayed remittance? The taxman will find you — and when he does, he doesn’t come empty-handed. Expect:
- Penalties
- Interest charges
- Possibly even a visit you won’t enjoy
Think of PAYE like laundry: ignore it too long, and the pile (and consequences) get out of hand real quick.
4. Withholding Tax (WHT)
This is the government’s way of saying, “We don’t trust anyone — so you, dear business owner, do the collecting for us.”
This tax kicks in not when you earn, but when you pay someone else — like a vendor, freelancer, consultant, or contractor. If you’re paying for services, you might need to withhold a percentage of their fee and send it straight to the tax authorities.
Yep, you become the unofficial tax collector. Welcome to the club.
Here’s How WHT Works:
- Let’s say you hire a graphic designer to create your company logo and their invoice is ₦100,000.
- Instead of paying them the full amount, you withhold 5% (that’s ₦5,000) and pay them ₦95,000.
- Then, you remit that ₦5,000 to the tax authority — typically the FIRS — on their behalf.
Withholding Tax (WHT) – Who Gets It? FIRS or State IRS?
✅ If you’re paying a company (i.e., a Limited Liability Company)
- You remit the WHT to FIRS (Federal Inland Revenue Service), regardless of where your business is based — Lagos, Abuja, Kano, doesn’t matter.
- Why? Because corporate taxes fall under federal jurisdiction.
✅ If you’re paying an individual, sole proprietor, or business name
- You remit the WHT to the State Internal Revenue Service — for example, LIRS in Lagos.
- This is because individuals’ income taxes (and by extension, WHT on individuals) are handled by the state.
You’re not pocketing it. You’re just passing it along like a very responsible middleman.
WHT Rates Vary by Service
- Professional services (like lawyers, consultants, designers): 10%
- Contracts & supplies: 5%
- Rent, construction, commissions, etc.: Different rates — all defined in tax regs
If you’re not sure, check the official WHT rate list or ask a tax professional. Guessing can get expensive.
Give Them a WHT Credit Note
After remitting the tax, you must issue a WHT credit note to the person or company you paid. This document is proof that the tax was deducted and paid — and they’ll need it when filing their own taxes.
Think of it as a “Hey, we paid your tax for you. You’re welcome… kinda.” You know?
🤔 Why Is This Even a Thing?
Because some people get paid and then ghost the tax system. They vanish like small chops at a wedding. So the government said, “Forget it. We’ll collect it before the money even hits their account.”
⚠️ If You Don’t Withhold and Remit?
You, not the vendor, will be held liable. That means:
- You pay the tax out of your own pocket
- You may get slapped with penalties and interest
- You could lose tax clearance or mess up your books
The bottom line is If you’re making payments to vendors or service providers, check if WHT applies and handle it properly. You don’t want to pay twice — once to them, and once to the government.
Step 4: Tax Clearance Certificate (TCC) — The Document That Opens Doors
You want to:
- Bid for government contracts?
- Apply for grants?
- Register with bigger partners?
They’ll ask for your Tax Clearance Certificate. It shows your business is in good standing with FIRS.
No TCC = No deal.
TCC is proof that you’ve been filing and paying your taxes for the last 3 years — or since your business started.
Nigerian business owners need TCC for tenders, contracts, and funding opportunities.
What Happens If You Don’t File?
FIRS has powers. Like real powers. Here’s what can happen:
- Freeze your business bank account
- Fine you daily for non-compliance
- Lock up your premises
- Charge you interest and penalties that pile up like PHCN bills
And guess what? They’ve gone digital. They don’t need to visit your shop to catch you — they can track transactions online. One bank alert too many, and boom: audit.
How to Stay Tax Compliant Without Losing Your Mind
Let’s be honest — taxes can be confusing. But you don’t have to suffer.
Here’s your checklist:
- Register for TIN
- Register for VAT (if applicable)
- File VAT monthly (before the 21st)
- File CIT or Personal Income Tax yearly
- Deduct and remit PAYE for staff
- Apply for TCC every year
- Keep all invoices, receipts, and records tidy
How we can help
We help Nigerian businesses:
- Get their TIN, VAT, and TCC
- File monthly and yearly tax returns
- Avoid heavy fines and business interruptions
Call or WhatsApp: 08036509056
Mail to: info@qflex.com.ng
Because this tax thing? It’s either you’re on top of it, or under it. And trust me — FIRS no dey pity last born.
Stay structured. Stay smart. Let’s handle your tax wahala before it becomes tax gbas gbos.
