Assessment Procedure (1)

The overriding objective of the assessment function is to ensure that all taxpayers, within a defined tax jurisdiction, are brought into the tax net and assessed correctly in order to plug all possible leakages. Generally, taxpayers are categorised according to the legal status of their businesses, which includes the following:

• Individuals/enterprises, usually sole proprietorship or self-employed.

• Partnership, association of two or more persons coming together in business with a view to making profit.

• Corporate entities/public companies, usually limited by shares

• Non-governmental organisations, usually unlimited or limited by guarantee.

A brief description of each of the above business entities will help in the understanding of their respective duties and obligation under the tax laws.

Individual/enterprises – This is a taxable person who is chargeable to tax in his own name or in the name of a receiver, or his agent. Usually, the tax affairs of this category of taxpayers are to be handled by the State Internal Revenue Service (SIRS), where the taxable person is domiciled or resides. Individuals are assessed to tax under the Personal Income Tax Act (PITA).

Partnership: This category of businesses is assessed to tax under the PITA in the same manner as individuals/enterprise. In Nigeria, partners are assessed in their individual names, based on the share of partnership profits allocated to them.

Non-governmental organisations – These are non-profit making organisations which are qualified for income tax exemption under Section 23(1)(i) of the Companies Income Tax Act (CITA) C21 LFN, 2004). They are often unlimited or at best limited by guarantee. These types of organisations have the duty to apply for exemption. The form in which NGOs are registered determines which tax authority will handle their tax affairs.

Corporate entities/public companies – These are limited liability companies or public companies registered with profit motive in mind. Their tax affairs are handled by the federal tax authority.

Classes of Assessment

Assessments are normally raised on the income or profit of companies or corporations from trade or business carried on in Nigeria. Assessment is to be imposed on the profit of an enterprise in relation to an accounting period. There are two principal classes of assessments, namely;

Self Assessment:- This assessment scheme aims at shifting the duty of raising assessment to the taxpayers themselves. Under this system, the taxpayer is expected to accompany its tax returns with a self-assessment notice and an evidence of payment to the Federal Inland Revenue Service through appropriate designated collecting banks.

Government Assessment:- This is an assessment raised on behalf of the government by the tax authorities. Examples of which are:

• Assessments raised in accordance with audited accounts and computations filed by the taxpayers.

• Best-of-judgement assessment based on estimated profit or profit perceived to be fair and reasonable.

• Protective/jeopardy assessment.

• Amended/additional assessment.

Types of Assessment

Assessments based on taxpayers’ returns

These are assessments based on the information contained in the taxpayer’s returns. The tax computations together with the capital allowances computations are enclosed along with the audited accounts and such assessments could either be self-assessment or government assessment.

Minimum Tax

Minimum tax is payable by every company in Nigeria when the total profits of the company from all sources have produced on tax, or tax payable which is less than the minimum tax specified by the law. However, the followings are exempted from the payment of minimum tax:

• Companies engaged in agricultural trade or business.

• Companies with at least 25% imported equity capital.

‘TEJUTAX’