21 Common CITA Offenses Nigerian Businesses Should Avoid

 

The Nigerian Company IncomeTax Act (CITA) is a critical piece of legislation governing how companies operating in Nigeria are taxed. Compliance is not optional, and the consequences for breaching these rules can be severe. Here’s a comprehensive list of 21 offenses under CITA you must avoid, alongside their penalties and practical advice to stay compliant. 

 

1. Failure to File Tax Returns

Not filing your annual returns within six months of the end of your financial year is a common offense. The penalty for this offence is ₦25,000 for the first month of default and ₦5,000 for each subsequent month. 

Quick Bite: Filing tax returns refers to the process of submitting required tax-related documents and information to a tax authority, such as the Federal Inland Revenue Service (FIRS) in Nigeria. These documents provide details about a company's income, expenses, and taxes owed or already paid for a particular financial period.

 

2. Late Payment of Taxes

Taxes not paid on time attract penalties that can grow into substantial sums.  The penalty is 10% surcharge on unpaid taxes plus interest at the Central Bank of Nigeria (CBN) monetary policy rate. 

 

3. Failure to Deduct Withholding Tax (WHT)

Failing to deduct WHT on applicable payments like rent, royalties, or dividends is a violation of the tax law. And the penalty for this is 10% of the amount not deducted, plus interest at the prevailing rate. 

 

4. Non-Remittance of Withholding Tax

Deducting WHT but failing to remit it to FIRS is another common offense which attracts a penalty of 10% of the amount not remitted, plus interest at the prevailing rate. 

 

5. Submission of False or Misleading Information

Providing incorrect details to reduce tax liability can lead to harsh penalties in the form of fines, imprisonment for up to three years, and recovery of the unpaid tax as a civil debt. 

 

6. Failure to Obtain a Taxpayer Identification Number (TIN) 

A TIN is mandatory for every business and is required for filing taxes and other financial transactions.  This infraction carries a mild penalty in the form of restricted access to banking and possible sanctions from FIRS. 

 

7. Failure to Notify FIRS of Business Changes

Not informing FIRS about changes like a new address, directorship, or business structure breaches compliance rules.  And the penalty is ₦5,000 for each day the failure continues. 

 

8. Late Submission of Returns

Filing returns late, even by a few days, can attract fines.  And it attracts a penalty in the sum of ₦50,000 for the first month and ₦25,000 for each subsequent month of delay. 

 

9. Tax Evasion

Deliberate avoidance of taxes through illegal means is a severe offense.  The penalty could be fines, imprisonment, or both, in addition to recovery of the unpaid tax. 

 

10. Operating Without Registration

Failing to register your company under CITA is a fundamental breach which carries a penalty in the form of full tax liabilities with interest, fines, and possible legal actions. 

 

11. Failure to Keep Proper Records

Companies are required to maintain accurate and comprehensive records of their financial transactions. Failure to do this, a penalty in the sum of ₦50,000 for the first month and ₦25,000 for each subsequent month of non-compliance will be slammed on the erring organization.

 

12. Underreporting Income 

Deliberately declaring less income to lower your tax liability is prohibited and attracts a penalty in the form of fines, recovery of unpaid tax, and additional interest charges. 

 

13. Overstatement of Expenses

Exaggerating operational costs to reduce taxable income is a violation which attracts fines and reassessment of tax liability, plus interest. 

 

14. Non-Deduction of VAT

Failing to deduct Value Added Tax (VAT) on applicable transactions breaches tax laws. 

The penalty is 5% of the unpaid VAT plus interest. 

 

15. Late Payment of VAT 

Collecting VAT and not remitting it within the stipulated time frame is an offense which attracts additional fines and interest charges. 

 

16. Failure to Comply with FIRS Notices 

Not responding to FIRS requests for documents or additional information violates CITA provisions.  If you are guilty, you are playing with fines, additional scrutiny, and potential legal actions. 

 

17. Non-Compliance with Self-Assessment Guidelines

Self-assessment filings must be accurate and comply with FIRS standards.  Penalties vary depending on the discrepancies in self-assessment. 

 

18. Non-Remittance of PAYE

For companies with employees, failing to remit Pay-As-You-Earn (PAYE) tax to the appropriate authority is a breach.  This violation attracts fines and interest on the unremitted amount. 

 

19. Refusal to Deduct Tax on Contracts

Payments to contractors or consultants must have the appropriate tax deductions.  Penalty is 10% of the unpaid tax plus interest. 

 

20. Incorrect Filing of Capital Gains Tax (CGT)

Failing to correctly calculate or remit CGT on applicable transactions is an offense that carries penalties such as additional liabilities, fines, and interest. 

 

21. Non-Compliance with Stamp Duties

Stamp duties must be applied to certain documents and agreements as required by law. 

Penalties are financial penalties and potential invalidation of the documents involved. 

 

How to Stay Compliant

1. File Taxes on Time: Create a filing calendar to avoid missed deadlines. 

2. Maintain Proper Records: Invest in accounting systems to keep clean and accurate financial records. 

3. Engage Tax Experts: Professionals can guide you through compliance and help you avoid costly mistakes. 

4. Stay Updated: Tax laws change frequently, so keep yourself informed about updates to CITA. 

 

Final Thoughts

Understanding these 21 offenses under the Nigerian Company Income Tax Act is crucial for any business operating in the country. By avoiding these pitfalls and implementing proper compliance measures, you can focus on growing your business without fear of penalties or disruptions. Remember, the cost of non-compliance often outweighs the effort of doing things the right way. Stay compliant, stay successful!