CBN’s Cash withdrawal limits will have tax implications for individuals MSMES

parallel forex rates

A tax expert and the Africa Tax Leader at PwC, Mr Taiwo Oyedele, has said that the cash withdrawal limit announced by the Central Bank of Nigeria (CBN) on Tuesday will have tax implications for individuals as well as small and medium size businesses.

The CBN had, in a letter to deposit money banks and other finance houses, pegged the cash withdrawal for individuals and businesses at N100,000 and N500,000 weekly respectively. The policy takes effect from January 9, 2023.

Oyedele, in a series of tweets on Wednesday, said that since “Many people will be forced to carry out transactions using electronic payments, small businesses that currently operate mostly on cash will become visible to the tax authorities.”

According to him, this would trigger various tax obligations including income tax.

Read:  Nigerians to apply for forex online as CBN deploys e-form ‘A’

Expatiating, he said, “If your business is registered as a company you may be liable to Company Income Tax (CIT), depending on your annual turnover (i.e. no CIT if your turnover is below N25m; 20 per cent if your turnover is between N25 and N100m; 30 per cent if your turnover is more than N100m) in addition to Education Tax at 2.5 per cent.

“If your business is not registered as a company then you will be liable to personal income tax based on graduated taxable income bands between 7 per cent and 24 per cent.”

The tax expert also stated that small businesses that hitherto had been evading Value Added Tax (VAT) may no longer be able to do that.

Read:  NDEP bags NIPR CSR award

He said, “All businesses are required to register for VAT and charge 7.5 per cent on their goods and services except those with annual turnover below N25m.”

On Pay As You Earn (PAYE), he said, “All employees earning more than N30,000 per month are liable to PAYE which must be deducted and paid to the tax authority by the employer on a monthly basis. You may also be liable to other statutory contributions such as pension depending on your staff strength.”

For individuals, Oyedele noted that, “The more transactions you make electronically the more the tax authorities will get the intelligence to track your income and net worth making it easier to fish you out if you are a tax evader.”

Read:  AIICO bags 2021 BAFI awards

The tax expert then reeled out some pieces of advice to businesses on the steps to take.

He said, “If you’re a small business owner, you need to take some steps now:

“Register with the relevant tax authorities (FIRS and the State Internal Revenue Service where you operate)

“Open a separate bank account for your business (or dedicate one for that purpose if you already have a business account) and don’t mix business with personal transactions.”

On what the government should do, Oyedele said, “Government on its part needs to sensitise the general public especially small business owners, and the CBN should ensure a proper handshake with the fiscal authorities. For instance, the conditions for excess cash withdrawals could include Tax Identification Number.”

Related posts

FG removes 5% tax on calls, data


Mutual Fund Industry In Nigeria Grows To N1.52 Trn.


FAAN to introduce ‘park and pay’ at Abuja airport


Trading Value Dips 52% as Investors Stake N9bn


TAJBank receives 3 ISO certifications for service excellence


Zenith emerges Nigeria’s best bank for 4th year


Leave a Comment