Practical Tax planning in Nigeria presentation slides.pdf

PRACTICAL TAX PLANNING
Minimizing Tax Liabilities
Maximizing Financial Efficiency
UBONG AKPEKONG, HND, BSC, MBA, ACA.

Ground Rule:
Prepared by: UBONG AKPEKONG, HND, BSC, MBA, ACA.

Tell us:
• Your name
• Your job role in the office
• Your best hobby
• Select any number from (1 – 4)

1
2 3 4
ANSWER THE QUESTIONS BELOW BASED ON THE
NUMBER YOU SELECTED:

BACKGROUND
• What things would you consider as being
inevitable & how do you handle it?

BACKGROUND
• What things would you consider as being
inevitable?
Change
Passage of time: Day and Night
Death
Inflation
Taxes

BACKGROUND
How to handle things considered as being inevitable?
 CHANGE
- Adaptability and the right mindset
 PASSAGE OF TIME
-Planning, Mindfulness & time management
 DEATH
- Living a purposeful and meaningful Life
 INFLATION
- Prudent financial planning, Investing in viable
assets, diversifying investments, & effective
budgeting.
 TAXES
-Adopting Strategic Tax Planning measures.

SESSION FOCUS:
Minimizing Tax Liabilities
Maximizing Financial Efficiency

OVER-VIEW
• TAX PLANNING IS A FOCAL PART OF FINANCIAL
PLANNING.
• THE PRIMARY CONCEPT OF TAX PLANNING IS TO
SAVE MONEY AND MITIGATE THE TAX BURDEN

INTRODUCTION
• Tax payment is regulated by laws.
• It is a statutory obligation that must be complied.
• To ensure compliance, Stiff penalties are placed.
• There are no options but to pay taxes stipulated by
the laws of the country.
• Consequently, taxpayers have resorted to devising
several means of ensuring that they pay the
minimum possible tax.

DEFINITION
• Tax Planning is simply a legitimate measure for
minimizing the amount of tax paid by taxpayers.

• Tax planning involves making conscious efforts
to consider the tax that will be payable by a
taxpayer at a future date and how much tax can
be minimized.
• Payment of tax is an outgoing from the
viewpoint of a taxpayer and thus needs to be
planned.
DEFINITION

• Understanding the Tax System:
A thorough understanding of Nigeria's complex tax
regulations forms the foundation for successful tax
planning.
• Optimal Business Structure:
Selecting the right business structure can have a
considerable influence on tax responsibilities.
MEASURES FOR EFFECTIVE TAX PLANNING

• Tax Incentives and Exemptions:
Recognizing and taking advantage of tax incentives
provided by the government is crucial. Businesses
should stay vigilant about pioneer status incentives.
• Deductions and Allowances:
Utilizing existing deductions and allowances is
essential for minimizing taxable income.

• Adequate Documentation:
Diligent maintenance of business expense records, coupled
with adherence to criteria for tax deductibility, guarantees
the effective application of deductions and evidence
provision to the tax authorities.
• Investment in Approved Sectors:
Strategic investment in designated "pioneer industries" is a
prudent approach to secure tax holidays or enjoy reduced
tax rates for a predetermined period.

• Capital Allowances:
Clever application of capital allowances for
depreciable assets plays a crucial role in reducing
taxable profits.
• Employee Benefits:
Employee benefits designed for tax efficiency
contribute to both talent retention and attraction.
The implementation of benefits like pensions, NHF,
NHIS, etc., offers favorable tax treatment.

• Transfer Pricing Compliance:
Complying with transfer pricing regulations helps prevent
illicit tax evasion by addressing mispriced transactions
between affiliated entities.
• Value Added Tax (VAT) Planning:
Optimizing VAT relies on careful monitoring of both input
and output VAT. Comprehensive documentation of
transactions related to VAT ensures precise VAT payments
and the possibility of refunds.

• Retirement Planning:
Contributions to acknowledged pension schemes
offer dual advantages: they diminish taxable income
while simultaneously securing retirement funds.
• Timely Filing and Compliance:
Strict adherence to tax filing deadlines is imperative.
Submitting a comprehensive and punctual tax return,
incorporating all eligible deductions and exemptions,
prevents the imposition of penalties.

• Tax Credits:
Investigating tax credits customized for specific
activities, such as R&D or renewable energy
initiatives, and the use of Credit notes effectively
reduces tax liabilities.
• Charitable and other allowable Donations:
Donations to authorized charitable organizations
offer a twofold benefit: they promote philanthropy
while alleviating tax burdens.

• Avoiding Aggressive Tax Avoidance Schemes:
Avoiding involvement in aggressive tax avoidance
schemes is crucial. These schemes exploit legal
loopholes and can result in significant penalties and
damage to one's reputation.
• Professional Advice:
Enlisting the expertise of tax professionals, including
chartered accountants and experienced tax
consultants, provides detailed insights into the ever-
changing landscape of tax laws.

• Timing of fixed assets acquisitions and
disposals.
• The choice of the accounting date for a
business entity.
• Payment of all taxes as at when due.
Other tax planning Measures

Session Reflection

Payment of tax should not be a burden, however;
According to Professor C.S. Ola:
"To some, tax is the shepherd they did not want;
It maketh them lie down in great anxiety;
It led them beside the still factories;
It disturbed their souls on the path of financial
destruction;
Yea, though they walk through the valley of
depression;
They anticipate no recovery, for taxes are with them;
Tax officials and their offices, frighten them;
Their expenses runneth over.“
Surely taxes are inevitable!!!

Leveraging on Tax consultant
• It is advisable to appoint a tax Consultant,
especially for a large company who will assist
in effective tax planning.
• Appointment of a Tax Consultant is often
communicated via a Letter of Engagement
from the taxpayer to the Tax Consultant with a
copy sent to the tax authorities.
• Working with tax consultants and providing
them with all relevant documents significantly
assist in achieving effective tax planning

Leveraging on Tax consultant

PAYE/PAYROLL TAX PLANNING

WITHOLDING TAX PLANNING

COMMUNICATION WITH TAX AUTHORITIES
• The tax authorities rely on documents and first-
hand information provided by any taxpayer (or
the Tax Consultant), in determining the possible
tax liabilities of the taxpayer.
• Additional information from third parties such as
Banks, Insurers, Landlords, Tenants, Suppliers,
Customers, Shareholders, Registrar of
Companies, and Other Stakeholders may be
required by the tax authorities for assessment
purposes.

COMMUNICATION WITH TAX AUTHORITIES
Communication with tax officials will usually
cover the following:
(a) Registration with tax authorities for Income
and other taxes using Standard questionnaires.
(b) Filing of tax returns within time limits
provided by the tax laws.
(c) Self Assessments and Objections to Best of
Judgment (BOJ) assessments.
(d) Tax queries and replies.

RECORDS WITH TAX AUTHORITIES
The following details together with CTC of
Incorporation documents (Originals to be
submitted for verification), will be provided in a
formal letter addressed to the Chairman of the
relevant tax authority in respect of every
prospective taxpayer:
(a) Name, Registration Number, and Date of
Incorporation/Registration.
(b) The registered or residential address (as
applicable).
(c) The business address.

(d) Names and addresses of the directors.
(e) Names and addresses of the shareholders together with
their shareholdings.
(f) Any other directorship held by the directors.
(g) The precise nature of business.
(h) Whether or not the business has any predecessor(s).
(i) The date of commencement of business.
(j) The accounting year-end.
(k) Details of Company Secretary (where applicable).
(l) Details of the appointed Auditors and Tax Consultants.
(m) Details of appointed Bankers.
(n) Any other information which may help the tax authority in
this regard.
RECORDS WITH TAX AUTHORITIES

• Any company registered in Nigeria must submit
relevant information to the tax authority within six
months of the accounting year end.
• A new company must file its tax returns within 18
months of incorporation or 6 months after its first
accounting period, whichever is earlier.
• Filing of tax returns for Individuals and Corporate persons
are done using prescribed self assessment forms, with
supporting documents.
Filing of Tax Returns

Filing of Tax Returns
The following are usually forwarded to FIRS as tax
returns, within eighteen months of incorporation of
the company or six months after the end of the
accounting year-end (whichever is earlier):
(a) Signed Audited Financial Statements together with
a cover letter from the Tax Consultant.
(b) Capital Allowances and Income Tax Computation.
(c) Self Assessment Forms for Income and Education
Tax.

Self Assessment

Due Date for Payment of Taxes

Best of Judgment (BOJ) Assessment
Where the taxpayer fails to file Self-
assessment forms and pay the normal tax
within the time limit specified under the law,
BOJ assessment is raised on the affected
taxpayer.
A valid objection must be raised within 30
days of service of such notice, stating valid
grounds for objection.

Tax Queries and Replies
Tax queries emanate from desk examinations of
tax returns by tax officials.
Returns are examined,
Supporting documents are required to confirm;
• If taxpayers’ income is understated,
• Reliefs not overstated,
• Expenses deducted are “ wholly, exclusively,
necessarily and reasonably incurred” in the
production of those incomes.

The following issues may be raised from related
documents, collected or verified by tax officials, to
eliminate any private or capital expenditure from the tax
returns and also guide against tax avoidance to some
reasonable extent:
(a) Whether there exists, supporting documents for
assets, liabilities income, and expenditure in the name of
the taxpayer.
(b) Whether private expenses were included in the
Accounts.

(c) Whether relevant documents such as
Input VAT, Invoices, supporting invoices,
Premium claims, invoices on administrative
and operating expenses, etc agreed with
amounts stated in the accounts.
(d) Whether PAYE deducted from salaries and
Withholding taxes from supplies or
professional fees were promptly remitted.

(e) Whether capital expenditure in the
form of cost of the increase in Capital or
Incorporation expenses, general bad
debts, and depreciation have been
written back to profit.
(f) Whether losses and carry forward
rules have been adequately observed.

• Replies
When replying to tax queries, it’s best to do the
following:
• Be more ethical and use subtle language.
• Avoid quoting decided cases or tax laws when one is
not too sure that circumstances or scenarios are
similar.
• Make use of relevant supporting documents from
both the client’s office and his working papers.

The matters in the under-listed checklist
should be considered while planning tax:
(a) List of approved taxes and levies
(b) Timing of fixed assets acquisition
(c) Timing of fixed assets disposals in
view of balancing adjustments
(d) Timing of capital allowances claim
and amount to claim
Tax Planning Checklist

(e) Hire of assets as an alternative to outright
purchase – full hire charge is tax deductible.
(f) Where to invest
(g) Making specific instead of general
provisions
(h) PAYE properly deducted
(i) Withholding tax properly deducted
(j) Note Critical Dates
(i) Filing of Tax Returns

(ii) Filing of Notice of Objection
(iii) PAYE Monthly Remittances
(iv) PAYE Year-end Returns and Final Payment
(v) Withholding Tax Remittances to Revenue
(vi) VAT Returns and Remittances to Revenue
(vii) National Social Insurance Trust Fund (NSITF).

In Nigeria, some people evade tax thinking it
is tax planning, the following actions are tax
evasion and not tax planning:
(a) Understating income,
(b) Overstating expenditure,
(c) Making false claims for allowances and
reliefs, and
(d) Omission from tax returns of chargeable
income.
What Tax Planning is not

CONCLUSION
Planning has been simply defined as ‘deciding in
advance what to do, how to do it when to do it
and who is to do it’ (Ujo 1994:157 citing Koontz
1980).
Effective Tax Planning therefore, means deciding
on how to reduce the Tax burden of a Tax Payer;
avoiding Penalties, and taking advantage of the
various incentives in the Tax Laws.

UBONG AKPEKONG.
UBONG AKPEKONG.HND,BSC,MBA,ACA
Email: Ubongakpekong@gmail.com
Phone: 0706-420-5536

Practical Tax planning in Nigeria presentation slides.pdf

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