Limited liability companies
are liable to pay company tax on their profit. In addition, the company must
account to the board of internal revenue for income tax on the following:
are liable to pay company tax on their profit. In addition, the company must
account to the board of internal revenue for income tax on the following:
(a) Dividends paid out of profits
(b) Other distribution of profit and
(c) Interest payment and annual charges
Company tax is not charged
in dividend received by a company because these dividend have been taxed at
source (company paying the dividend). Withdrawing tax is a form of income tax
paid by individuals and companies on dividends they receive from shares they
invested their money in.
in dividend received by a company because these dividend have been taxed at
source (company paying the dividend). Withdrawing tax is a form of income tax
paid by individuals and companies on dividends they receive from shares they
invested their money in.
The following should be
borne in mind in company taxation:
borne in mind in company taxation:
1. Financial
year – This means the accounting period. This is the financial year of the
board if internal revenue.
year – This means the accounting period. This is the financial year of the
board if internal revenue.
If we go by accounting
periods that are segment like this- 1st April-March 31st 1993, 1994.
periods that are segment like this- 1st April-March 31st 1993, 1994.
If we have two segment as above
making one financial year we can compute our income tax using the next example.
making one financial year we can compute our income tax using the next example.
Financial year 1990 – 40%
Financial year 1991 – 35%
The assessment will be as
follows:
follows:
1st July 1990 – March 31, 1991 (9 months)
Assume that XYZ Company Ltd
made an accounting profit ofN663,000
for the year ended 30th June, 1985. The computation of the company’s tax profit
is as shown after deducting expenses and all deductibles.
made an accounting profit of
for the year ended 30th June, 1985. The computation of the company’s tax profit
is as shown after deducting expenses and all deductibles.
Accounting profit year
ended 30/6/85 663,000
ended 30/6/85 663,000
Add back:
Depreciation 62,000
Sundry disallowable
(example entertainment)
3,000 65,800
3,000 65,800
Company tax profit
728,800
728,800
Again deduct capital
allowances ofN85,500, then you have
company tax allowance of
allowances of
company tax allowance of
=
Note
(1) Accounting
profit and company profit are both deducted after debenture interest its paid.
profit and company profit are both deducted after debenture interest its paid.
(2) Depreciation
is a deduction in computing accounting profit but in computing company tax
profit, capital allowance is substituted.
is a deduction in computing accounting profit but in computing company tax
profit, capital allowance is substituted.
