Investor Presentaiton

53 The Country and its institutions Business Organisation Labour and Social and Regulation Security Regulations The Nigerian Financial Tax System Services Industry Foreign Exchange Transactions Investment in Nigeria Accounting and Auditing Requirements Importation of Goods Exportation of Goods COVID-19 Economic and Fiscal Measures 5.2.3 Taxable Income 5.2.4 Gross Income Though the employer is statutorily required to make tax deduction from the emoluments paid to an employee, not all the income is liable to tax. Under the PITA (as amended), any salary, wages, fees, allowances or other gains or profits from an employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted to an employee (temporary or permanent) are chargeable to tax, except the following: • • • • • • • reimbursement of expenses incurred by the employee in the performance of his duties, and from which the employee is not expected to make any profit; relocation allowance paid an employee by reason of a change of the employee's employment which requires the employee to change his POR; retirement gratuities and compensation for loss of office; interest on loans for developing an owner-occupied residential house; contribution to any pension, provident or other retirement benefits fund approved by the JTB; expenses proved to the satisfaction of the RTA to have been incurred by the individual on research for the period, including the amount of levy paid by him under the National Agency for Science and Engineering Infrastructure Act; National Housing Fund contributions; and • National Health Insurance Scheme contributions. Employment income earned by an individual whose employer is in Nigeria, or has a fixed base in Nigeria, is deemed to be derived from Nigeria, and is liable to tax in Nigeria. Please refer to 5.2.9 below for specific comments on the taxation of expatriates. Aside from employment income, incomes earned by an employee from other sources (e.g., trade, business, rental income, etc.) are liable to PIT. Furthermore, incomes/ profits earned by other categories of individuals other than employees (e.g., sole proprietors and self-employed individuals, such as partners in a firm) from trade, business, profession, vocation or investments are chargeable to PIT. 5.2.5 PITA did not define "gross income" rather, it only defined "gross emolument" in relation to individuals in paid employment. This created ambiguity in determining the appropriate base for calculating Consolidated Relief Allowance (CRA) granted to taxpayers under the Act. The above gap was addressed in Finance Act, 2020 which has defined "gross income", as "income from all sources less non-taxable income, franked investment income, National Housing Fund contribution, National Health Insurance Scheme contribution, life insurance premium, National Pension Scheme contribution, gratuities, allowable business expenses and capital allowances." Statutory Reliefs These are granted to a taxpayer, depending on his circumstances, to reduce his tax liability. These reliefs, except the CRA, can only be granted if claimed by the taxpayer on his/her Income Tax Form for Return of Income and Claims for Allowances and Relief (Form A). The RTA may also require documentary evidence in order to substantiate any claim made by the taxpayer. The various types of tax reliefs are as follows: • • CRA: This is computed as the higher of #200,000 or 1% of gross income, plus 20% of gross income. Pension contribution: Statutory pension contribution which is calculated as 8% of at least basic, housing and transport allowances, and voluntary pension contributions. • Life insurance premiums. • National Health Insurance Scheme contributions. • • National Housing Fund contributions. Interest on loans for developing an owner-occupied residential house. Interest on money borrowed and employed as capital in acquiring income. • Rents payable in respect of land and buildings occupied for the purpose of acquiring the income. • Repairs and maintenance expenses for premises, plant, machinery, or fixtures used in generating income. Investment in Nigeria Guide - 8th Edition KPMG

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