Q&A: BUSINESS EXPENSES

Q: CAN I DEDUCT ALL MY BUSINESS EXPENSES FROM MY TAX RETURN?

A: You can deduct all ordinary and necessary business expenses on your tax return. However, there are some limitations and exclusions, so it’s important to consult with a tax professional to ensure that you are claiming all the deductions you are entitled to.

you can deduct legitimate business expenses from your taxable income when filing your tax return. The Federal Inland Revenue Service (FIRS) is responsible for administering and enforcing tax laws in Nigeria. Here are some important points to consider regarding deducting business expenses in Nigeria:

1. Allowable Deductions: The FIRS provides guidelines on allowable deductions for businesses. These deductions include expenses incurred wholly, exclusively, and necessarily in the production of income. Common examples of deductible business expenses in Nigeria include rent, salaries and wages, utilities, advertising, professional fees, office supplies, and travel expenses directly related to your business activities.
2. Documentation: It is important to maintain accurate records and documentation of your business expenses. This includes receipts, invoices, bank statements, and other supporting documents that validate the expenses you claim as deductions. Adequate documentation is necessary in case of an audit or review by tax authorities.
3. Non-Deductible Expenses: Not all expenses are eligible for deduction. Some expenses explicitly disallowed by the FIRS include personal expenses, capital expenses (which are typically depreciated over time), fines, penalties, and expenses incurred for non-business purposes.
4. Transfer Pricing: If your business engages in transactions with related entities or individuals, such as foreign subsidiaries or affiliates, specific transfer pricing rules may apply. These rules aim to ensure that transactions between related parties are conducted at arm’s length and reflect fair market value.
5. Tax Professional Advice: Given the complexity of tax laws and regulations, it is advisable to consult a qualified tax professional or accountant in Nigeria. They can provide guidance tailored to your specific business situation and help ensure compliance with tax laws while maximizing your allowable deductions.

It’s important to note that tax laws and regulations can change, so it is always wise to stay updated with the latest information from the FIRS or consult a tax professional who is knowledgeable about the current tax laws in Nigeria.