Practical steps to effective tax compliance by SMEs - Vanguard News Nigeria

For SMEs, an effective bookkeeping system is perhaps the most important requirement for effective tax compliance. It provides the first line of defence, in the possible event of a tax audit. Proper record keeping makes computing/estimating tax liabilities easier as the elements for key accounts are readily available. In addition, it provides proof that transactions claimed actually took place and are not fictitious or a sham.

Another recommended best practice is the clear separation of non-business expenses from business expenses. Though it seems quite basic, failure to inculcate this practice make businesses lose many tax-deductible expenses that would have hitherto reduced their corporate income tax liabilities. Having separate business accounts that are used strictly for business transactions is highly recommended.

Finally, it is very important for SMEs to stay informed on developments in tax laws and regulations. Revenue authorities and tax consultancy firms regularly publish updates on developments in the local tax regime, and it is recommended that SMEs subscribe to such updates.

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