The Lagos State Internal Revenue Service (LIRS) has urged owners of restaurants, hotels, and event centres operating in the state to contribute to the state’s development by prioritising the monthly collection and remittance of a five per cent consumption tax on all consumables and personal services.
On 22nd June 2009, the state enacted the Hotel Occupancy and Restaurant Consumption Law of Lagos State, otherwise called Hotel Consumption Law, which imposes consumption tax at five per cent on the value of goods and services consumed in hotels, restaurants and event centers within the state. The tax base is the total cost of facilities, consumables or personal services supplied to a consumer in, by or on behalf of the hotel, restaurant or events centre.
LIRS’ Director of New Growth, Mr. Jimi Aina recently said on The Tax Talk programme on Television Continental that, while the consumption tax is a major source of revenue for the state government, which uses the funds to provide public amenities and services such as healthcare, education, transportation, and security, owners of restaurants, hotels, and event centres, among others are obligated to register with the LIRS as collecting agents.
Aina submitted that contrary to the misconception a lot of people have about consumption tax, the state has not imposed additional taxes on restaurants, hotels and event centres, rather, consumers who purchase taxable goods or services in the state are responsible for paying the consumption tax. The tax is already included in the price of the goods or services and is paid to the collecting agent who collects it on behalf of the state government.
He explained: “Many people misunderstand the concept of consumption tax. It is often thought that this tax is an additional burden on hotels and restaurants, but this is not the case. In reality, it is the customers who are taxed when they dine out, attend events, or have drinks at a bar. The tax rate is five per cent. By paying the consumption tax, consumers contribute to the development and maintenance of these amenities and services.
“According to Section 1 of the Lagos State Consumption Tax Law, consumption tax is defined as a tax on the supply of goods and services in Lagos State, which is charged and payable by the consumer.
“Consumers who purchase taxable goods or services in Lagos State are responsible for paying consumption tax. The tax is included in the price of the goods or services and is paid to the collecting agent who collects it on behalf of the Lagos State Government”.
The New Growth Director also said that, while collecting agents (restaurants, hotels and event centres) have the responsibility of collecting these taxes from consumers and remitting to the LIRS, it is important to factor in the deadline for remittances.
He explained: “According to the Lagos state consumption tax law, the remittances must be made not later than the 20th day of the month following the month of collection. For example, consumption tax collected in September must be remitted to the LIRS on or before the 20th of October”.
He noted that there are legal implications to non-remittances by collecting agents who failed to remit consumption tax collected from consumers to the LIRS within the prescribed time.
“Where a Collecting Agent fails to make a return or remittances as and when due, LIRS may make an estimate of the total amount due and such estimate shall become due not later than 21 days of service of such a notice.
“Failure to remit the tax collected within the stipulated time will attract a 10% penalty of an amount not remitted plus interest at 5% above the prevailing Monetary Policy Rate of CBN of Nigeria. Such collecting agent may also face sanctions including closure of business and prosecution”, he said.
According to the LIRS, the monthly filing of returns on sales using UCL 2 form must be accompanied by a report stating:
- The total amount of payments made for all chargeable transactions during the preceding reporting period.
- The amount of consumption tax collected by the agent during the reporting period.
- Any other information required by LIRS to be included in the report.
“Every collecting agent is required to keep, maintain and preserve such records, books and accounts in respect of all transactions chargeable under the Law as hotels, restaurants and other businesses affected by this Law are required to register with LIRS and keep records of Evidence of registration as a Collecting Agent” Aina also said.
