The Finance Act, 2019 amends the provisions of Section 77 of the Companies Income Tax Act Cap C21 LFN 2004 (as amended) on timing for the payment of income taxes. The Finance Act amended subsection 5 as thus:
i. Every company shall make payment of tax due on or before the due date of filing.
ii. Where the taxpayer pays in installment, the taxpayer shall first write, with evidence of payment of the first installment, and obtain approval of the FIRS to pay in such number of installments as may be approved by the Service.
iii. The final installment must be paid on or before the due date of filing.
Section 77 (5A) also provides that a company that pays its tax 90 days before before due date shall be entitled to a bonus of:
i. 2% of the tax paid in case of a medium-sized company***
ii. 1% of the tax paid for any other company
This credit shall be available as credit against the company’s future taxes.
Any tax due and unpaid by the due date of filing shall attract interest and penalties as provided in the extant tax laws.
The Federal Inland Revenue Service (FIRS), in the information circular released to give clarifications on sundry provisions of the Finance Act, gave the illustration below to explain the provisions of Section 77:
ABZ Limited makes up its accounts to 31st December 2019, in essence, its due date of filing is 30th June 2020. As such, the company is expected to pay its tax due on or before the due date of 30th June 2020 in one lump sum or by installment. Where it desires to pay by installments, the final installment must be paid on or before 30th June 2020 (the due date).
The Service further clarifies that:
The due date of filing and due date of payment have converged. Consequently, any additional tax arising as a result of incorrect disclosure or reporting of profits shall attract interest and penalty from the date the tax was first due for payment irrespective of when the incorrect disclosure was discovered or the additional tax assessed.
As contained in the information circular, the Service may, at any time, withdraw or replace this Circular or publish an amended or updated version.
***A medium-sized company means a company that earns gross turnover greater than N25,000,000 but less than N100,000,000