There are a number of things that can help accelerate your business and it is very important to note this when planning your strategy for the new year. A glimpse indicates that cashflow, tax, marketing and a digital enabled collection and payment solution are key components that help grow sustainably.

No doubt that profit and cash-flow are the two drivers of business. We will share insight on profit in another episode of the newsletter; however, we shall be focusing on cash-flow in this episode.

You need cash to pay bills, employees and rent. If you don’t have cash you will not be able to stay in business for very long. In fact businesses can operate for years without being profitable but you will not operate for long maybe a month or two if you don’t have cash. You need to know and plan for the times when you will be cash rich or cash poor and how do you do this?

There is something called the cash-flow report and to do this in an official way which pleases your bank, all you need is a simple excel spread sheet that shows you how much cash you have now, how much cash you expect coming in, going out and how much you will have at the end.

This is how it breaks down;

Cash at the beginning + Cash in - Cash out = Cash at end

 

In this context, cash does not refer to income but includes all payments that are expected to be received within the specified period for example within a month. Hence, you shall be looking at your cash flow per month.

No one is expected to be 100% accurate as this is only a projection and it is better than nothing, especially when you have a cyclical business you will be able to tell those months when you are cash poor and will be able to plan for them whether by setting aside cash for those cash poor months or adopting a cash flow management techniques.

Another key factor that affects every business is Tax. According to reports, the President underscored four strategies to improve revenues including:
• enhancing tax and excise revenues;
• reviewing the effectiveness of policies for tax waivers and concessions;
• increasing customs revenue through technology; and
• preserving the revenue derived from the oil and gas sector

Therefore every business owner should be interested in knowing what their tax obligations are, and making sure they are operating their business while paying the right taxes. 

As you are aware, tax liabilty is an important area of your business and a key understanding of the tax regime will help you stay tax compliant. Below are some of the different taxes which are relevant to all businesses in Nigeria.

  • Companies Income Tax
  • Capital Gains Tax
  • Education Tax
  • Valued Added Tax
  • Personal Income Tax
  • Withholding Tax

On an annual basis, a company must file the following documents with the tax authority:

  • Tax computation for the relevant year of assessment.
  • The audited financial statements for the respective period; this should be in conformity with the International Financial Reporting Standards (IFRS).
  • A duly completed and signed self-assessment form for CIT.
  • Evidence of remittance of the income tax liability (partly or in full)

Though some business segments enjoy tax holidays, it is key to know the areas where tax exemptions apply and if such includes your type of business.

Here are some Tax Update to note:

The Federal Inland Revenue Service (“FIRS”) issued a public notice (“the Notice”) on 4 January 2022, withdrawing the suspension of local filing provision stipulated under Regulation 4 of the Income Tax (Country by Country (CbC) Reporting) Regulations 2018 (“the Regulations”).

The FIRS had previously issued a public notice on 6 May 2021 suspending such requirements for branches and subsidiaries of Multinational Enterprises (MNE) Groups whose headquarters are either not in Nigeria or are situated in countries who do not have existing Automatic Exchange of Information frameworks with Nigeria.

Accordingly, effective 31 January 2022, all Nigerian constituent entities of MNE Groups who are not Ultimate Parent Entities or whose headquarters are based in countries that are not signatories to the Multilateral Competent Authority Agreement on the Exchange of CbC Reports are expected to comply with the local filing obligation stipulated under Regulation 4 of the CbC Reporting Regulations by submitting the CbC Reports to the FIRS, in line with the specific circumstances provided in the Regulations.

In addition, all Nigerian constituent entities are still required to file annual CbC Notification which provides information on the identity and tax residence of the entity making the CbC Reporting disclosures on behalf of the relevant MNE Group before the end of its reporting fiscal year.

 Taxpayers are encouraged to take note of this communication ahead of their respective MNE Groups’  reporting fiscal year-end when the CbC Report/Notification should be due, to avoid being sanctioned by the FIRS.