COURSE OBJECTIVES

By the end of this course, you will be able to:

Understand the advantages of ethical practices

Review taxation laws of the state and the country especially the LIRS requirements for all returns

Understand the requisite levies, business accreditation and business formation requirements

Attain quality and industry standards and compliance with statutory regulatory requirements - NAFDAC, SON, Licenses, Permits, LIRS, CAC, etc.)

CONTENTS

• Ethics and small businesses

• Business taxation in Nigeria

• Levies and requirement for business formation in Lagos State

• Statutory and industry regulators

• LSETF fund obligations

Ethics and small businesses

SESSION 1

WHAT ARE ETHICS? Potter Stewart

“Ethics is knowing the difference between what you have a right to do and what you can do.”

WHAT IS ETHICS: BUSINESS STAKEHOLDERS

There are: social, environmental and moral considerations that guide your objective of increasing shareholder wealth.

EXAMPLES OF ETHICAL ISSUES

• Business integrity

• Loyalty and treating customers fairly

• Diversity

• Decision making issues

• Compliance and governance

• Social responsibility

BENEFITS OF ETHICAL BEHAVIOUR

Being good is good business Anita Roddick

Improved reputation

Better external stakeholder relationships

Improved employee retention and relationships

“More customers and sales

SESSION 2

BUSINESS TAXATION IN NIGERIA

TAXES FOR SMES AND MICRO-BUSINESSES

• Company Income Tax

• Education Tax

• Personal Income Tax

• With holding Tax

• Value Added Tax

COMPANY INCOME TAX • These are taxes paid by companies from profits

computed from your audited financial statements at the end of the financial year.

• The tax rate is 30%

• The tax authority is the Federal Inland Revenue Service

• The tax must be paid within six months of the end of your financial year, or it generates penalties

EDUCATION TAX • These are taxes paid by companies from profits

computed from your audited financial statements at the end of the financial year.

• The tax rate is 2%

• The tax authority is the Federal Inland Revenue Service

• The tax must be paid within six months of the end of your financial year, or it generates penalties

PERSONAL INCOME TAX • Pay as you earn (PAYE) – This is tax

calculated on your defined income

• Direct Assessment (Self Assessment) – This tax calculated on undefined income. The tax payer determines his income and pays tax on it

• PITA (PAYE) is computed

• Gross pay – tax exempt – tax relief = taxable pay

TAX EXEMPT

The legal Tax Exempts available are as

follows;

1. Pension deductions,

2. NHF deductions ( National Housing Funds)

3. Gratuity payment

4. NHIS (National Health Insurance Scheme)

5. Life Assurance

TAX RELIEFS • Consolidated Relief: This relief is equal to N200,000

or 1% of Gross income (Entitlement) whichever is higher. Please note that the amount is annualized. So applying this to monthly pay, you must divide the amount by 12

• Percentage of Gross Income Relief (PGI): This relief is graduated and it is based on your Gross income. The higher your income, the more relief you receive. PGI relief is currently 20%. For example, if your Gross income per annum is N1,550,000 ,then your PGI would be N310,000.

PERSONAL INCOME TAX The tax rates, in relation to the earning, are as follows:

Annual Monthly Rate

First N300,000 First 25,000 7%

Next N300,000 Next 25,000 11%

Next N500,000 Next 41,666 15%

Next N500,000 Next 41,666 19%

Next N1,600,000 Next 133,333 21%

Over N3,200,000 Next 266,666 24%

WITHHOLDING TAX Withholding tax is basically an advance and indirect source of taxation deducted at source from the invoices of the tax payer. It’s main purpose is to capture as much tax payers that may have evaded tax into the tax net.

VALUE ADDED TAX

• VAT is a consumption tax payable on the goods and service consumed by any person, whether government agencies, business organizations or individuals. The target of VAT is consumption of goods and services and unless an item is specifically exempted by law, the consumer is liable to the tax.

• It can also be defined as a tax on spending/consumption levied at every stage of a transaction but eventually borne by the final consumer of such goods and services. It is levied at the rate of 5%.

VALUE ADDED TAX Exempted Goods

• All medical and pharmaceutical products;

• Basic food items;

• Books and educational materials;

• Baby products;

• Fertilizer (locally produced), agricultural and veterinary medicine, farming machinery and farming transportation equipment;

• Plant and machinery imported for use in the export processing zone or free trade zone; provided that 100% production of such company is for export;

• • All commercial aircraft and aircraft spare parts imported for use in Nigeria

Exempted Services Medical services;

Services rendered by Community Banks;

People’s Banks and Mortgage Institutions;

Plays and performance conducted by the educational institutions as part of learning;

All exported services.

TAXES AND LEVIES – STATE GOVERNMENT

State Government Personal Income Tax (PAYE,

Direct Assessment) Withholding tax for

Individuals Capital gains tax for

individuals Stamp duties on instruments executed by individuals.

Pools betting, lotteries, gaming and casino taxes.

Road tax.

Business premises registration Development levy for individuals Naming of street registration fees in State Capitals. Right of Occupancy fees on lands owned by the State Government. Market taxes and levies where State finance is involved.

SESSION 3

LEVIES AND REQUIREMENTS FOR BUSINESS REGISTRATION IN LAGOS

STATE

TAXES AND LEVIES – LOCAL GOVERNMENT

• Shops and, kiosks rates • Tenement rates • On and off liquor license fees • Right of Occupancy fee on

lands in rural areas, excluding those collectable by the Federal and State Governments.

• Market taxes and levies excluding any market where State Finance is involved.

• Motor Park levies. • Domestic animal license fees.

• Bicycle, truck, canoe, wheelbarrow and cart fees, other than a mechanically propelled truck.

• Cattle tax payable by cattle farmers only

• Radio and television license fees

• Vehicle radio license fee (to be imposed by the local government of the State in which the car is registered.

• Wrong parking charges. • Public convenience, sewage

and refuse disposal fees. • Signboard and

advertisement permit fees

HOW TO REGISTER A COMPANY • Reserve a name at the CAC

• Prepare incorporation documents and pay stamp duty

• Sign the declaration of compliance form before commissioner for oaths or notary public

• Register at CAC and pay the required fees

• Make a seal

HOW TO REGISTER A COMPANY

• Register for income tax and VAT at FIRS

• Register for personal income tax and business premises at LIRS

INCORPORATION AND BUSINESS STRUCTURES

• Business name • Company limited by shares • Companies limited by

guarantee • Unlimited company • Incorporated trustees

SESSION 4

STATUTORY AND REGULATORY REQUIREMENTS

STATUTORY AND INDUSTRY REGULATORS

• These are agencies that have powers to set out the requirements for operating in the relevant sectors, guidelines for registration, monitoring and supervision, and sanctions for non-compliance.

STATUTORY AND INDUSTRY REGULATORS

• Central Bank of Nigeria • Securities and Exchange Commission • National Agency for Food Drug and

Cosmetics • Nigerian Communications Commission • National Office for Technology Acquisition

and Promotion • Standards Organisation of Nigeria • Consumer Protection Council

STATUTORY AND INDUSTRY REGULATORS

• Federal and State environmental protection agencies

• NEPC – Nigeria Export Promotion Council

• Industry associations – MAN, NACCIMA, NASSI, NECA, SMEDAN, PCN, ICAN etc.

• State and Local Government departments

• CAC, FIRS, LIRS

SESSION 5

LSETF FUND OBLIGATIONS

LSETF MISSION

“Enabling Lagos residents realize their aspirations by providing leverage & access to finance”

GUIDELINES FOR ASSESSING FUNDS – SMES

• An SME should have: • Annual turnover of between N5m and

N250m • Minimum monthly turnover of N500,000 • In operation for one year • Registered with CAC • Evidence of tax payment or exemption

certificates

GUIDELINES

• Applications should be filled in the prescribed form and submitted to the executive secretary of the board with the following:

• LASRRA card

• Valid BVN

• Evidence of tax payment of the company and directors

GUIDELINES

• Evidence of registration with CAC

• A business proposal that would show:

- Existence of veritable and economically stable market for goods and services

- A good understanding of the business

CONDITIONS FOR GRANTING LOAN

• Loan limit of N5,000,000

• 5%/annum interest rate

• 36 months repayment period/ months moratorium

• Personal life protection policy, noting the fund as first loss payee – born by fund

• Comprehensive insurance cover – born by fund

CONDITIONS FOR GRANTING LOAN

• 5% equity contribution • Clean credit report from the fund’s bankers • Personal guarantee of Business

owners/promoter • Two guarantors to cover loan and interest,

who must be a permanent Lagos residents with LASRRA card

• All company asset debenture (fixed and floating)

• BVN of guarantors

LOAN ELIGIBILITY

• Businesses operating within Lagos

• Micro-businesses in groups or clusters in the various local governments, verified by the Ministry

• Trade and business associations, registered cooperative societies verified by the Ministry

• Referrals from local government areas

LOAN ELIGIBILITY

• Already identified businesses operating across various sectors

• Corporate organizations targeting SMEs

• Donor agencies like USAID