TAXATION OF RETAIL SECTOR
What you need to know about taxation of retail sector.
According to Wikipedia, Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and then sells in smaller quantities to consumers for a profit. Retailers are the final link in the supply chain from producers to consumers.
In Nigeria, Retail business owners must be encouraged to appreciate the imposition of tax by the government for the retail business development, where feasible, these retail businesses should be encouraged to develop their businesses. Globally, managing the unexpected is part of running a business which happens to most businesses where money goes out of the business door faster than it comes back into the business and the business account suddenly becomes overdrawn. Such situation could be as a result of rapid development in the business or the reverse in same the business.
The retail sector in Nigeria is subject to various forms of taxation, including Value Added Tax (VAT), Corporate Income Tax (CIT), and Personal Income Tax (PIT). Here’s a brief overview of these taxes:
1. Value Added Tax (VAT): This is a consumption tax levied on goods and services supplied in Nigeria, including those supplied by the retail sector. The current rate of VAT in Nigeria is 7.5%. VAT is collected by businesses on behalf of the government and remitted to the Federal Inland Revenue Service (FIRS) on a monthly basis.
2. Corporate Income Tax (CIT): This is a tax on the profits of companies registered in Nigeria. The current rate of CIT is 30%. Retail companies operating in Nigeria are subject to CIT on their profits.
3. Personal Income Tax (PIT): This is a tax on the income of individuals. Retail companies in Nigeria are required to deduct and remit PIT on the salaries and wages of their employees. The rate of PIT varies based on the income level of the individual.
In addition to these taxes, there may be other taxes and levies that apply to the retail sector in Nigeria, such as local government taxes, education tax, and capital gains tax. This will be explained in detail below.
1. State government taxes are personal income tax, road taxes, pools betting and lotteries, business premises registration and development levy. Others are naming of street registration in state capitals, right of occupancy on land owned by state and market taxes on state financed taxes.
2. Local government taxes are shops and kiosks rates, tenement rates, on and off liquor license fee, slaughter slab fees, marriage, birth and death registration fees, right of occupancy on land in rural areas, market taxes and levies and motor park levies. Others are domestic annual license fees; bicycle, truck, canoe, wheelbarrow, and cart fees, cattle tax payable by cattle farmers only, merriment and road closure levy, radio and television license fees, vehicle radio license, wrong parking charges, public convenience and refuse disposal, customary burial ground permit fees, religious place establishments permit fees, and signboard and advertisement permit fees
The specific tax obligations of a retail business in Nigeria will depend on factors such as its legal structure, size, and location. It is important for retail businesses in Nigeria to stay compliant with their tax obligations to avoid penalties and legal consequences. Tax payment is important for the growth of a retailers because they qualify as a small business and ensuring tax compliance helps to secure the business and avoid any form of default and sanctions. Paying tax as a small business is also advantageous to the retailer as its evidence that the business is a committed one and it helps to also boost the reputation of the business owner especially when dealing with investors.
Wikipedia: Definition of Retail (3 May 2023) https://en.wikipedia.org/wiki/Retail
C.O Otubor, J.C Dariye, R. Gbande & P. Onumah, ‘Assessing the Effect of Tax Imposition on Retail Business Development in Jos Metropolis’(3 May 2023).
Resolution Law Firm: Small Business Taxation in Nigeria (June 2015) https://www.resolutionlawng.com/small-business-taxation-in-nigeria/