Assessment levied on dividend provision where no tax is computed or payable
Section 19 of CITA empowers the Board to raise assessment on amount of dividend paid to shareholders as if such dividend declared is the total profit of the company for the year of assessment to which the accounts relates. Such a situation may arise where a company declares dividend to its shareholders when it has no tax payable reported as a result of:
o No total profits; or
o Total profits which are less than the amount of dividend paid.
In all case where dividend is declared, officers should always compare the total profits to the amount of dividend declared.
Other assessments/levies
There are other levies or imposition usually encountered in the course of assessment duties, among which are:
Penalty for late returns:
Penalty is normally imposed when a taxpayer’s audited accounts and tax computations are submitted late to the Revenue Authority. The amount of penalty at present is N25,000 for the first month in which the failure occurs and N5,000 for each subsequent month of failure. It is a form of assessment raised whenever the returns are submitted late. The amount is subject to review from time to time at the discretion of government.
Pre-operational levy:
This is levy imposed on companies that fail to commence business within six months after their incorporation. The levy is N20,000 in the first instance and N5,000 for any other year, if it still has not commenced business.
It is to be levied when the taxpayer applies for current Tax Clearance Certificate (TCC). Pre-operational levy should not be imposed for any previous years when the company did not apply for TCC; neither should it be raised in arrears to cover earlier years.
Education Tax levy:
This is a levy being imposed on all taxable companies in Nigeria to assist government in the development of education in Nigeria. It is charged at the rate of 2 percent of the assessable profit and should be assessed alongside the normal tax assessment for each year. Pioneer companies are usually not assessed to Education Tax in view of the income exemption status from tax payment that they enjoy during the pioneer period.
