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How to obtain Tax Clearance Certificate (TCC) under Pay As You Earn (PAYE)
What is TCC?
This is a document issued to an individual or organization by a relevant Tax Authority on application as an evidence of settlement of tax liabilities.
Like withholding tax, Tax Clearance Certificate (TCC) is a measure adopted to reduce tax evasion.
A taxpayer can demand for his tax clearance certificate from the relevant tax authority and the certificate is expected to be issued to him within two weeks of demand, which shows that the taxpayer has been cleared of all the tax liabilities for the past three (3) years preceding the current year of assessment.
Where the document is not issued within the period of two (2) weeks, a refusal letter has to be written to the taxpayer and reason(s) stated.
The relevant tax authority will issue the certificate if, according to section 84(1):
– The tax assessed on the income of a person for the three years immediately preceding the current year of assessment has been fully paid; or
– No tax is due on the income or that the person is not liable to tax for any of those three years.NOTE: It is not compulsory that the current year’s tax must be paid before the certificate is issued except the applicant is leaving the country finally.
Requirement for Issuance of TCC:
A taxpayer applying for TCC is expected to do the following:
– Obtain taxpayer Identification Number (TIN) from the office of Internal Revenue Service.
– Complete form A (Abridged) and Form No: IRS/APTC/1 at the relevant tax office.
– Provide a letter of identification from the employer, and evidence of taxes remitted for the three years preceding the year of application.
– Provide a month pay slip for each preceding year.
What are the requirements for Tax Audit Exercise?
Please check the list handed over to you, the Taxpayer
What is the revenue code for Tax Arrears?
It is 401007
How do we properly calculate PAYE liabilities?
Tax guide is handed over to the Taxpayer for proper study.
You can also use the online Tax Calculator by clicking here
How is withholding Tax calculated?
It’s 5% contract & supply and consulting and 10% Rent, dividends, interest, commission & professional services
For how long will my Tax clearance certificate be valid?
Till 31st December of the same year it is issued.
My company was just registered this year, why am I to pay tax for preceding year?
According to the law on taxation (PITA, cap. P8 2004 LFN), personal income Tax is not levied on the business/company but on the individual earned income
I have more than one registered business, can I be issued Tax clearance certificate for each of them?
No, personal income Tax is levied on the sum of all of an individual’s earned income.
What is JTB TIN?
JTB TIN is an acronym for the Joint Tax Board Taxpayer Identification Number.
JTB Unit is responsible for electronic system of taxpayers’ registration, which uniquely identifies all taxpayers and is available nationwide.
- This unit seeks to create a harmonized electronic taxpayer identification and registration system which would facilitate the sharing of information among the tax authorities.
- This would eliminate multiple taxpayer registration among respective tax authorities.
- It will increase tax compliance and create a competitive and conducive environment for investors. It will also widen the tax base through the registration of all eligible taxpayers.
- This would enhance greater compliance and returns as the available information of each taxpayer would enable proper tracking and more effective collection processes.
- This would lead to an increase in revenue collection.
Why do I need a JTB TIN?
You need the JTB TIN to perform transactions within the country. It also uniquely identifies you as a taxpayer.
How do I obtain a TIN?
You have to complete an application form with a valid means of identification. Provide required biometric information. Upon confirmation, a card will be issued to you.
What are the benefits of JTB TIN?
The JTB TIN will form the basis for :
- The automation of tax administration in the state.Increase in revenue.
- Reduction of cost of tax administration with improved compliance by both tax payers and tax authorities.
- Increase of tax base. Reduction of tax evasion. Easy access to information.
- Reduction of multiple taxation. Provide basis for planning, budgeting and appropriation of government resources.
- Provide data for relevant government agencies.
- Provide information for national security purposes as may be required by the state.
What is Direct Assessment?
Direct assessment is an income tax which is imposed on self-employed persons. The self-employed include but is not limited to professionals. E.g lawyers, Architects, Accountants, Surveyors, Consultant, Contractors, Politicians, Mechanics, Traders, Welders, Vulcanizes, Farmers, Carpenters, Tailors, Hair dressers etc. and all residents in Cross River who have any source of income.
What are the methods of assessment?
A Taxpayer can be assessed after he has filed his annual Tax Returns for the relevant year of assessment.
He can also be assessed through Best Of Judgment (BOJ) where the tax Authority uses the information available to raise an assessment on a Taxpayer who fails to file his returns within a period as allowed by law.
What is due date for returns?
The due date for return of filing return is or before 31st March in any given year
Is installment payment allowed for assessment?
What is the meaning of due date?
Due date is the date prescribed by the law for filing of Tax returns and making payment by Taxpayers.
Can a Taxpayer pay to any collecting bank branch?
Yes all approved collecting banks can collect tax payment.
What is Personal Income Tax?
Personal income Tax is a Tax that is levied on the income of individual(s) who are either in employment or are engaged in their own business. The tax maybe PAYE & Direct Assessment.
What is the current tax rates applied on taxable income?
The current rates applicable to the taxable or chargeable income are as follows.
1st 300,000 @ 7%
Next 300,000 @ 11%
Next 500,000 @ 15%
Next 500,000 @ 19%
Next 1,600,000 @ 21%
Next 3,200,000 @ 24%
What should I do if I receive a summons to appear before the revenue court?
Appear in court on the date stated on the summons along with all necessary documents and receipts of remittance.
What should I do if I believe that my assessment is excessive?
Write a letter of objection addressed to the executive chairman stating the basis and grounds of your objections clearly and you will be responded to or invited to the tax audit review meeting to review your assessment.
Who pays Personal Income Tax and how?
All persons who earn income, whether employees or individual (self employed) pays Personal Income Tax. The self-employed are required to file their returns and make payment on annual basis.
As the owner of a startup business of less than a year should I pay tax?
As an individual starting a new business which is less than a year, you are not due. That is to say your Tax for 2016 for the first year will be remitted in year 2017 (the following year) and the return must be filled on or before 31st March, 2017.
If I live in another state and pay my tax there can I obtain my TCC in Cross River State?
No, one can only obtain his/her TCC from the tax authority where the person has been paying his/her taxes in compliance with the law.
Can I use withholding tax deducted on me to offset my personal income tax liability?
Yes, withholding taxes is recognized as part of taxes paid and can be net off from liability assessed for the year and balance is paid. It is an advance payment
What is tax evasion?
This is a deliberate and illegal act of the taxpayer not to pay tax. It entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions.
What is tax avoidance?
This is a systematic way of taxpayer avoiding payment of correct tax. It involves using lapses in the tax law to obtain a tax advantage that the government never intended. It frequently involves contrived, artificial transactions that serve no purpose other than to reduce tax liability