Why Do Companies & Individuals Have Tax Query in Nigeria?

Why Do Companies & Individuals Have Tax Query in Nigeria? 

Why Do Companies & Individuals Have Tax Query in Nigeria?  - From time to time companies, individuals and business have their tax returns queried by the tax authority, why? Query does not come for no reason. There must be certain reasons for which tax returns are queried.  This is what this article is all about.  You will get to know what tax query is and how it emanates, why tax query, and their remedies.

Consequently, this write-up is for every tax payer, tax practitioner, and students of taxation in the higher institutions and at the professional levels.  If you are a business man or a tax practitioner you have to take care of the pitfalls highlighted in this article.


Why Do Companies & Individuals Have Tax Query in Nigeria?

Why Do Companies & Individuals Have Tax Query in Nigeria? 

What then  is the meaning of tax query?

Query in its literal meaning, is the expression of doubt or suspicion that something is not very correct or that there is a risk in giving approval to something. 

Tax query is a question or enquiry on the tax payer, based on the tax return,  to prove that the elements of the tax return that posses suspicion of doubt for its correctiveness is in deed correct.

 As long as the tax payer proves that the doubts are baseless, his problems on this tax return, are all over. Therefore, it' a thing that is always resolved amiably. 

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How does tax query come about?

Tax query originates from the tax office desk examination. As soon  a tax return is made and received in the tax office, such tax return will be subjected to examination by the tax inspector. 

One of the focus of the examination is to ensure that the return is accompanied by the necessary, complete documents. The inspector will also look for errors and mistakes in the tax computation and in the accompanying financial documents. 

At this time queries are sent out for any error or mistakes or incomplete documents found. This is the origin of tax queries.

The next question you would like to ask is; what does the tax queries cover? 

Some have been mentioned above, but the tax inspector examines every tax return and its supporting documents to ascertain whether –
  • Tax payer income is complete
  • Tax payer income is understated
  • Tax relieves are not overstated
  • Expenses deducted from the income is wholly, exclusive, necessary, and reasonably incurred in the generation of the income.
  • Capital expenditure are included a operating expenses
  • Tax avoidance programme are in place
  • Supporting documents for assets and liabilities are in the name of the tax payer
  • Private/family expenses are included in the computation
  • Relevant documents for VAT, Insurance claim, invoices etc.  agree with the financial statements
  • PAYE, With-holding tax, VAT as shown were promptly paid as stipulated by tax law
  • Capital expenditure ( depreciation), general bad debts provisions are included in the computation
  • Donation are only to the approved bodies and within the ratio stipulated by law
  • Loss rule relating to carry forward rules are observed
  • Commencement rule, change of accounting date rules etc are observed
  • Related party transactions are adjusted
  • Transfer pricing policy of the federal government is effected
  • That return is made within the time limit.

Why Do Companies & Individuals Have Tax Query in Nigeria? 

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The tax authority aims at raising revenue judiciously:

There are a lot more reasons why tax return are examined and may be queried. You must bear in mind that what the tax authority aims at is to raise revenue, but judiciously. Therefore, any accounting, auditing and tax computation/manipulation that will deny it the desired revenue will be frowned at and resisted. 

I give you an example;  you as a director of a company will not be drawing an annual allowance of say N12m, live in a house rented at M7m pa. and using a car valued at N6m , and be making a tax return for the company that shows loss or less than N100,000 tax. The tax authority will not agree to this. For them these your benefits are not reasonable judging from the performance of the company/business.

Do you also know that there is what is called ‘Industry standard’. If a bakery of an equal standing ,turnover-wise, pays N500,000, why should your own be only N100,000?

Why Do Companies & Individuals Have Tax Query in Nigeria? 

You think you are smart? Just be careful.

Get a tax consultant to facilitate your tax matters, and you will not have any tax query, where there comes a tax query the tax consultant is equal to the task.

As you can see, if you don’t handle your tax query properly it may result into full scale tax audit or tax investigation. That will be a big problem for you. Yet, at this point, you will get the tax consultant. The reason being that, just as the lawyer represents you in the court of law, so would the tax consultant represent you before the tax authority, at the tax  audit or tax investigation processes.

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What are the remedies for tax query?

If you don’t want to be having tax queries, ensure that –
  • A tax advisor/consultant in place
  • Your financial statements are complete and authentic
  • Keep proper books of account, with a functional internal control system
  • Avoid relate party transactions
  • Expenses and claims are wholly, exclusively, necessarily, and reasonably incurred for the business.
  • You make your returns within the stipulated legal timing 

Why Do Companies & Individuals Have Tax Query in Nigeria? 

Do you need my advise?

My humble advise for you is to get a tax consultant today. Click here to get one. Tax consultant will institute a wholesome tax management scheme that will make you avoid every tax man’s embarrassment.

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