12 Mar, 2023
TAX SERIES FOR BUSINESS
Written by Victory Aburime
A taxpayer Identification Number (TIN) is a unique identifier for tax purposes.
The Federal Inland Revenue Service (FIRS) is the issuing body for TIN for every registered Business, Company and Not-for-Profit in Nigeria.
Every registered business entity with the Corporate Affairs Commission (CAC) must apply for TIN for tax purposes and to open/operate a corporate account in the name of the entity.
Business owners sometimes mistake the date of registration with the commencement date.
Let's quickly draw a difference between the commencement and registration dates.
The registration date is when your entity was registered with the CAC.
The commencement date is when you started or commenced business operations.
You can register a business in 2009 but start operation in 2020.
COMMENCEMENT OF BUSINESS DEFINITION ACCORDING TO THE FINANCE ACT
The Finance Act makes it clear that a business shall be deemed to have commenced in Nigeria on the day that the entity carries out its first transaction.
This shall be the earliest of the dates on which it:
a. Begins to market or first advertises its products or services for sale;
b. Obtains an operating license from a regulatory authority in Nigeria;
c. Carries out its first sale or purchase;
d. Executes its first trading contract after incorporation;
e. Issues or receives its first invoice;
f. Delivers or receives its first consignment of goods;
g. First renders services to its customer(s).
TAX IMPLICATION OF COMMENCEMENT DATE
Your tax obligations start when you commence business, not when your business is registered. Some business owners make this error when registering for TIN/Value Added Tax by using the business registration date as the commencement date. This simply implies you have commenced business and you are supposed to pay your taxes and file returns at the commencement of business.
When you apply for TIN/VAT you would be required to state the commencement date, if you are yet to commence business operation you can use 'not yet commenced business".This error may cost you a lot in tax liability as you are expected to start filing/paying for taxes at the commencement of business. You can state the commencement date if you have commenced business operations which may differ from your registration date with the CAC.
Also, always involve a tax professional for tax matters or if you are not clear on any tax term.