January 29, 2022

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Taxable and Non Taxable Benefits in Kind in Nigeria

Taxable and Non Taxable Benefits in Kind in Nigeria
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In a previous article, I explained the term benefits in kind. In this article, the focus is on those BIK that are taxable and not taxable.

Taxable Benefits in Kind (BIK)

Below is the taxable income from BIK. This is based on the ICAN study pack and is applicable in Nigeria.

Assets

This includes motor vehicles, furniture and fittings, equipment, generators, and so on. These items may be owned by the company or employer. Also, the employer may rent or lease the assets on behalf of the employee. Where the assets are owned by the company, 5 percent is charged yearly on the cost/market value of the assets. If it was rented, then the actual rent or lease payment is charged as BIK. Note that the market value stated above is the market value of the assets at the acquisition date. And market value is used when the cost is not known. Plus, it is determined by the tax authority.

Residential Accommodation

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The employer can provide accommodation for an employee. In such a case, the benefits in kind are the amount payable as rent for the apartment. The amount recognized as BIK is determined by the relevant tax authority. Here, the employer will prefer to rent an apartment that the annual rental value is less than the one determined by the tax authority.

Domestic Staff

The employer can provide domestic Staff to the employee. This could be a driver, housemaid, garner, or award at the home of the employee. The domestic Staff could be casual or contract staff. That means he or she was not employed by the company, then the benefit in kind is the taxable income of the employee. If otherwise, the employee pays the BIK.

Tax-Exempt Benefits in Kind (BIK)

The following are exempted benefits in kind that are not taxable.

Expenses by the employer on meals to all employees. It could be meals provided by the company in the office. Or through a restaurant outside the office premises.

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The employer may provide uniforms, overalls, protective clothing, or other items needed by the employees to carry out their duties in a secure manner. These expenses are tax-exempt BIK.

Finally, any expenses incurred as a result of a change in the employee’s residence as a result of a change in employment are tax exempted. A change in employment could be a transfer from one location to another.

Conclusion

In final words, taxable or tax-exempt benefits in kind are income to employees that aren’t in the physical cash at hand or in the bank. It is usually for the benefit of the individual employee or the staff in general. However, it is important to check if you need it. If not avoid it, to avoid paying high taxes.

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