Tax implications of the new CBN cash withdrawal limits for individuals, MSMEs – Taiwo Oyedele

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PricewaterhouseCoopers (PwC) African Tax Policy Partner and Tax Leader Taiwo Oyedele has explained the tax implications of the Central Bank of Nigeria’s (CBN) new policy on over-the-counter cash withdrawal limits, as well as withdrawal limits for ATMs. and POS.

Oyedele revealed that the new cash withdrawal limit will have tax implications, especially for individuals and Micro Small and Medium Enterprises (MIPYMES).

He noted that the policy will force many people to transact using electronic payments, and these small businesses that currently operate primarily in cash will become visible to tax authorities.

This was announced by Oyedele in a series of tweets on his official Twitter account, where he said that the policy will trigger tax obligations, including income tax.

Possible tax implications

Hear him declared, ”The new cash withdrawal limit will have tax implications, especially for individuals and MSMEs. As many people will be forced to transact using electronic payments, small businesses that currently operate primarily with cash will be visible to tax authorities.

”This will generate various tax liabilities, including income tax.

”If your business is registered as a company, you may be subject to Company Income Tax (CIT) based on your annual turnover (i.e. no CIT if your turnover is less than N25 million, 20% if your turnover is between N25 and N100 million, 30% if your turnover exceeds Naira 100 million) plus education tax of 2.5%.

If your business is not registered as a company, it will be subject to personal income tax based on the graduated bands of taxable income between 7% and 24%.”

Going further, the tax expert said that all businesses must register for Value Added Tax (VAT) and collect 7.5% on their goods and services, except those with an annual turnover of less than N25 million.

As for Pay As You Earn (PAYE), Oyedele noted that all employees who earn more than N30,000 per month are subject to PAYE, which the employer must deduct and pay to the tax authority on a monthly basis. He said these employees may also be subject to other statutory contributions, such as pension, depending on the strength of their staff.

He added that the more transactions these people make, the more intelligence tax authorities will gain to track their income and net worth, making it easier to spot those who evade taxes.

To do

Oyedele listed some of the actions to be carried out by government and regulatory authorities, as well as taxpayers, to ensure the proper functioning of the policy. The steps to follow include;

  • Register with the relevant tax authorities (FIRS and the Internal Revenue Service of the State where you operate).
  • Open a separate business bank account (or set aside one for that purpose if you already have a business account) and don’t mix business with personal transactions.
  • The government, for its part, must sensitize the general public, especially small business owners, and the CBN must ensure proper dealings with the tax authorities. For example, the conditions for excess cash withdrawals could include a tax identification number.

to catch

Remember that on December 6, 2022, the CBN in a new circular placed limits on cash withdrawals at the teller, ATM withdrawals and point of sale (PoS) withdrawals.

The lead bank in the new policy stated that depository banks and other financial institutions must ensure that over-the-counter cash withdrawals by natural and legal persons do not exceed N100,000 and N500,000, respectively, per week.

After the policy takes effect, all cash withdrawals above the stated limits will incur 5% and 10% processing fees, respectively.

… Tax implications of the new CBN cash withdrawal limits for individuals, MSMEs – Taiwo Oyedele Read more at … Naijaonpoint.

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