What records the Nigeria Tax Act says your business must keep

Who counts as a small company

The Nigeria Tax Act describes a small company as one with a yearly turnover of ₦100 million or less and fixed assets of no more than ₦250 million. A small company pays 0% company income tax. Other companies pay 30%.

Be careful with two points. An earlier published copy of the law put the turnover limit at ₦50 million, and some guides still quote that figure. Some copies also say a business that provides professional services can't be a small company. Check which applies to you with the Nigeria Revenue Service or an accountant.

If you trade in your own name rather than as a registered company, you pay personal income tax on your profit instead. The first ₦800,000 of income a year is taxed at 0%.

Every business must keep records

The Nigeria Tax Administration Act says every person must keep books or records of accounts, whether or not they are liable to pay tax. The records must hold enough detail about every transaction to work out what tax is owed.

In practice that means a record of each sale, each purchase and each expense, what you hold in stock, and who owes you and whom you owe. The law allows records to be kept electronically, so a record kept on your phone counts, as long as it is complete.

In English, and for six years

Records must be kept in English. If you keep them in another language, you can be asked for a sworn translation.

They must be kept for at least six years after the year the income relates to. A notebook that gets wet or lost in year two doesn't meet that. Records kept safely in an app do.

What still applies at 0% tax

You still need a Tax ID. It is also needed to take a contract from a federal or state ministry.

A company must still file a return once a year, even when it owes no company income tax, within six months of the end of its accounting year. A small company can file a statement of accounts it signs itself, instead of audited accounts.

A small business doesn't have to file monthly VAT returns, though it can choose to register.

What happens if you don't

The penalty for not keeping records, or not producing them when asked, is ₦10,000 for an individual and ₦50,000 for a company. Filing a return late costs ₦100,000 in the first month and ₦50,000 for each month after.

The bigger cost is usually not the penalty. Without records you can't show you are under the small company limit, you can't answer a question from the tax office, and you can't see what your business really makes.