Should I register for tax now?
Dear Worried Business Owner,
If a business has not started earning income, it is not subject to income tax. There is what is called minimum tax, but a company in its first four years of operations is exempted from it (i.e minimum tax). So again, you are covered. Your business doesn’t have revenue yet, and it has also not been operating for 4 years. So you have no income tax obligations.
You however have to file with the Federal Inland Revenue Service (FIRS) within six months of the end of your financial year or eighteen months of registration(incorporated), whichever comes earlier. This filing does not involve paying any money (tax). Just send your audited reports and a letter to the effect that you have no income to be taxed. If you don’t do that within the stipulated time, you will pay a penalty of N25,000 for the first month of default, plus N5000 per subsequent month of default.
There is nothing wrong in registering your company now, provided you will be able to file your returns before the end of 18 months, in which case you will not pay anything (provided you have not commenced operations or commenced but have no taxable profits).
Although applying for and obtaining the Tax Identification Number (TIN) brings you into tax authorities’ net, not obtaining actually doesn’t help you either. This is because the important thing the tax authorities will look at is when you are registered (i.e incorporated), not when you obtain your TIN. So even if you don’t register for TIN now, you will register at a point in the future and you would have only postponed the doomsday.
In summary, you can only borrow time in the timing of your business registration (which counts in tax filing), not in the timing of your registering for tax.
I hope that helps.
Jarus
