Personal Income Tax Formula: Non-Allowable Expenses

Personal Income Tax Formula: Non-Allowable Expenses – In this re non-allowable expenses for  personal income tax administration and computation in Nigeria. Individuals, Sole Traders or Proprietors, make claimable business expenses to arrive at adjusted profit, assessable profit or taxable income. Claimable business expenses  re the allowable expenses.

Personal Income Tax Formula: Non-Allowable Expenses

As a matter of fact, it’s those expenses that tax officers frown at when assessing your taxable income that concerns us here. As a proprietor, there re expenses which you must not claim for tax purposes. These are Non-allowable expenses. We will try to give you some of them here. We are doing this because we found out that many proprietors don’t know what expenses qualify as allowable expenses for tax purposes.

Personal Income Tax Formula: Non-Allowable Expenses

Tax Non- Allowable Expenses:

The general rule is that only business associated expenses are allowable. Any non-business associated expenses like your personal or other third party individual or business expenses are not allowable.
You mustn’t claim the following.

1. Private expenses
2. Capital withdrawn from trade, and
3. Expenditure of a capital nature.
4. Any loss or expenses recoverable under an insurance or contract of indemnity.
5. Depreciation of asset – always adjusted or replaced with Capital Allowance.
6. Defalcations or pilferage by  employees as far as they are recoverable under an insurance policy,

Personal Income Tax Formula: Non-Allowable Expenses

Others Are:

7. Reserves or unapproved appropriation of profits.
8. Penalties – Tax penalties, traffic offence penalties etc.,
9. Withdrawal of stock for private purpose,
10. Entertainment expenses unless in respect of customers.
11. Expenses of travelling from home to office by employees. Travelling expenses while at work or between offices re allowed.
12. Donations re not allowed under PITA. Only CITA made provision for certain donations to approved charitable organizations, academic and research institutions

Personal Income Tax Formula: Non-Allowable Expenses

Included are:

13. Any pension contribution not approved by Joint Tax Board (JTB)
14. General provisions for doubtful debts,
15. Income tax provisions, and
16. Legal expenses like the following:

• Cost of acquiring a new lease – whether short or long term,
• Cost of renewing as long lease,
• Expenses in defence of traffic offence, and
• Cost of defending a tax appeal.

The Tax Practitioners:

These should be your friend. Your business needs them. Look arround you and you will see some. They will ensure your accounting records are in order, compute taxable income and make your annual tax filings with Relevant tax authority in Nigeria. Complete Full Marks Consultants (CFMC)  Lmited  is one of them.

Complete Full Marks Consultants Limited (CFMC Limited), the owners of this website, is an Accounting firm incorporated in Nigeria. Its services include accounting and auditing services, tax management and business management consultancy services. If you contact us, as your external auditors/tax consultants, you will be saving costs.

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Personal Income Tax Formula: Non-Allowable Expenses

Ane

Deacon Anekperechi Nworgu, a seasoned economist who transitioned into a chartered accountant, auditor, tax practitioner, and business consultant, brings with him a wealth of industry expertise spanning over 37 years.