It is no longer news that the Federal Government is bent on exposing tax evaders across the country, especially through its Voluntary Assets and Income Declaration Scheme, which was designed to boost the country’s revenue. But several Nigerians are ignorant that there are legal ways to pay less on tax.
Financial managers explained that though business taxes are certain, its payment runs parallel with running a business, adding that the goal of every business is to reduce cost and that, finding ways to minimise taxes can be done legally. If you can follow the steps below, you are bound to pay less for tax this year:
Ensure you keep all expenses receipts, invoices and records of all you buy. If you do this successfully, you will save yourself a lot because little costs on items add up when it is time to pay tax. So, the more you can claim, the less tax you have to pay
·Pick tax-friendly business Structure
Before you start your business, first consider different tax benefits of several kinds of organisational structure.
A financial Manager, Dr. Ayodele Esho, said that some business structures might require that the business pay taxes on the money it earns all through the year, and that in some cases, might make the business owner pay double taxes on the income earned.
“This results in a double taxation scheme that costs the business twice. When structuring your business, choose a business structure to avoid double-taxation, and that helps you meet your tax-saving goals.
Tax holiday
Target some countries or sectors that government gives incentives to, like tax holiday/havens. Discerning investors take advantage of the tax benefits they stand to gain by being situated in that particular country/sector. You can situate your head-office and subsidiaries in such a country or invest more in such a sector, because of no/low tax rate.
Target wholly export-oriented business
The Managing Partner, A & E Associates, an auditing firm, Mr. Peter Adebayo, said that dividends and profits made from businesses that are wholly export-oriented are exempted from tax in Nigeria. “The Implication is that, if you solely export goods, the dividends paid out to your shareholder will not be subjected to tax.
“Also, if a supplier supplies raw materials that are exclusively required for the manufacture of exports, then the profit made by that supplier will also be exempted from tax. All the export company needs is to provide a Certificate of Purchase of Inputs to the supplier,” he said.
Consider sectors promoted by the government
Fortunately, the Nigerian government usually gives incentives to get people to invest in certain industries, which they are interested in investing in. One of such incentive is a Pioneer Status. Companies under the approved pioneer industries are exempted from paying income tax for a minimum period of three years and a maximum of five years. Dividends paid out of profits during the pioneer period are also exempted from taxes.
Give your employee benefits and not salary increase
Another way you can pay less on taxes for yourself and employees is to compensate staff with benefits and not giving them the same amount in terms of a salary increase.
“By giving employees a raise, a percentage of the pay would go into income tax and pension contribution, and you as the employer would in turn have a percentage to pay as well. Sticking with benefits would drastically reduce taxes. The employer saves and the employee saves,” he added.
Keep all expenses receipts
Ensure you keep all expenses, receipts, invoices and records of all you buy monthly. If you do this successfully, you will save yourself a lot because, little costs on items add up when it is time to pay tax.
While paying tax, your total profit is your income, minus the expenses you can claim. So, the more you can claim, the less tax you have to pay.
