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Nigeria's free digital learning hub. Videos, lecture notes, practice questions and leaderboards aligned with CCMAS, NBTE, NCCE, WAEC, NECO, IJMB and JAMB curricula.
Accounting · 200 Level
This is the complete lecture note for TAX 223 Business taxation 2, prepared for Accounting students at 200 Level. You can read it online below, open it in the full viewer, or download the PDF for offline study. It pairs with the course's video lectures, so you can read and watch together.
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS TAX 223: Business Taxation II (3 Units C: LH 45) Course Code: TAX 223 Course Title: Business Taxation II Course Unit: 3 Units C Series 1: Withholding Tax And Value Added Tax Series 2: Output And Input Taxes In Nigeria Series 3: Stamp Duties And Their Administration Series 4: Customs And Excise Duties Procedures Series 5: Taxation Of Goods And Services In Nigeria Series1 Withholding Tax And Value Added Tax • Part 1.1: Concept And Determination Of Withholding Tax • Definition and purpose of withholding tax • Determination of withholding tax liability • Part 1.2: Assessment And Collection Of Withholding Tax • Procedures for assessment • Methods of collection and remittance • Part 1.3: Concept And Determination Of Value Added Tax (VAT) • Definition and characteristics of VAT • Determination of VAT liability • Part 1.4: Assessment And Collection Of Value Added Tax • Procedures for assessment • Collection, remittance, and compliance requirements Introduction Taxation is a vital tool for generating revenue and ensuring the smooth functioning of government services. Among the different forms of taxation in Nigeria, withholding tax and value added tax are particularly significant because they directly affect both individuals and
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS businesses. Withholding tax ensures that taxes are collected at the source of income, while VAT applies to the consumption of goods and services. Together, they form the backbone of Nigeria’s indirect tax system. The aim of this Series is to equip you with the knowledge and skills to define, explain, and apply the concepts of withholding tax and value added tax, including their determination, assessment, and collection procedures. We shall commence this Series by examining the concept and determination of withholding tax. Next, we will explore the procedures for assessment and collection of withholding tax. Following that, we will study the concept and determination of value added tax, focusing on its characteristics and liability. Finally, we will conclude with the assessment and collection of VAT, highlighting compliance requirements and remittance procedures. Series Learning Outcomes Upon completing this Series, you should be able to: • SLO 1.1 define withholding tax and explain its purpose, • SLO 1.2 demonstrate how withholding tax liability is determined, • SLO 1.3 describe the procedures for assessment and collection of withholding tax, • SLO 1.4 define value added tax and explain its characteristics, • SLO 1.5 analyse how VAT liability is determined, and • SLO 1.6 explain the procedures for assessment, collection, and remittance of VAT. 1.1 Concept And Determination Of Withholding Tax 1.1.1 Definition and purpose of withholding tax Withholding tax is a tax deducted at source from payments made to individuals or companies for goods, services, contracts, or investments. It is collected by the payer on behalf of the government and remitted to the relevant tax authority. The purpose of withholding tax is to ensure early collection of revenue, reduce tax evasion, and spread the tax burden fairly across taxpayers. It also serves as an advance payment of income tax, which is later credited against the taxpayer’s final liability. Fill in the blank: Withholding tax is deducted at ______ from payments made to individuals or companies.
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS Figure 1.1: Flow of withholding tax deduction and remittance 1.1.2 Determination of withholding tax liability The liability for withholding tax depends on the type of transaction and the applicable rate. Different categories of payments attract different rates, such as contracts, rent, dividends, interest, and professional fees. For example, contracts may attract a rate of 5 percent, while dividends may be taxed at 10 percent. The payer is responsible for deducting the correct amount before making payment to the recipient. Fill in the blank: The liability for withholding tax depends on the type of ______ and the applicable rate.
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS Table 1.1: Common withholding tax rates in Nigeria Transaction Category Individuals (%) Companies (%) All aspects of Contracts & Agency 5% 5% Professional / Technical / Management Fees 5% 10% Consultancy Fees 5% 10% Rent 10% 10% Dividends 10% 10% Interest 10% 10% Director's Fees 10% 10% Commissions 5% 10% Construction (All aspects) 5% 5% Pilot questions 1.1 1. What is withholding tax? 2. Why is withholding tax deducted at source? 3. Who is responsible for remitting withholding tax to the authority? 4. Name two types of payments that attract withholding tax. 5. What determines the liability for withholding tax?
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS 1.2 Assessment And Collection Of Withholding Tax 1.2.1 Procedures for assessment The assessment of withholding tax refers to the process of determining the amount of tax to be deducted from a payment. This is based on the nature of the transaction and the applicable rate set by law. For example, professional fees may attract a different rate compared to dividends or rent. The payer must carefully assess the payment to ensure that the correct percentage is deducted before remittance. This assessment is crucial because errors can lead to penalties for either under-deduction or over-deduction. Fill in the blank: The assessment of withholding tax is based on the nature of the ______ and the applicable rate.
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS Figure 1.2: Assessment procedure for withholding tax 1.2.2 Methods of collection and remittance The collection of withholding tax is carried out by the payer, who deducts the tax at source before making payment to the recipient. The deducted amount must then be remitted to the relevant tax authority, such as the Federal Inland Revenue Service (FIRS) or the State Board of Internal Revenue (SBIR), depending on the type of transaction. Remittance is usually done monthly, accompanied by schedules that list the names of taxpayers, the amounts deducted, and the nature of the transactions. Proper collection and remittance ensure compliance and help government agencies track revenue effectively.
LA-NET | ONLINE LEARNING VIDEO PLATFORM FOR POST-SECONDARY & HIGHER INSTITUTION STUDENTS Fill in the blank: Withholding tax deducted at source must be remitted to the relevant ______ authority. Table 1.2: Collection and remittance process for withholding tax Pilot questions 1.2 1. What does assessment of withholding tax involve? 2. Why is correct assessment important? 3. Who is responsible for collecting withholding tax? 4. To which authorities are withholding taxes remitted? 5. How often is withholding tax usually remitted?
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