Nigeria like most other countries that employ largely bureaucratic manual tax administration rather than a technology driven risk based approach have problems. As a result, companies seeking to do business in Nigeria and many other operating in the country require a professional tax and management advisor to give support. In order to address and deal with demand and possible issues and demands arising from tax authorities and regulatory provisions. SIAO offers professional and support services in this area.
A company seeking to do business in Nigeria and those already doing business in Nigeria require to consider the various tax provisions and the basic requirement for commencing and sustaining such business. Tax provisions which companies are meant to consider will include company registration, Value Added Tax, Personal Income Tax, Provision for repatriation of capital and expatriate staff arrangements.
Below are some sectors of the economy where the Federal Government has taken fiscal measures to shore up investment in the country:
- Export Promotion and Manufacturing
- Tourism and Hotel Related Services
- Gas Utilization
- Solid Minerals
- Pioneer Status
Requirements For Doing Business In Nigeria
Based on the existing legal framework in Nigeria, any investor that wishes to do business in Nigeria is required by law to register a company with the Corporate Affairs Commission (CAC) and pay stamp duties with the Federal Inland Revenue Services (FIRS). Payment of Stamp Duties on share capital is compulsory for all incorporating companies, and varies according to the company's share capital amount.
Value Added Tax
A company must be registered for VAT. Such a company is expected to render VAT returns of activities on a monthly basis to the Tax Office treating the tax matters of the company. The activity of a particular month is reported on the VAT returns of the following month which is due for submission on or before the 21st of that month.
The Value Added Tax (Nigeria) is a tax on supply of goods and services which is eventually borne by the final consumer but collected at each stage of the production and distribution chain at the rate of 5%.
Free Trade Zones (FTZs)
The FTZs are designed to attract foreign direct investment(FDI). There are presently 31 FTZs with 14 operational and 17 under construction as at April 2015. Notable amongst the operational FTZs are: Calabar Free Zone, Kano Free Zone, Lekki Free Zone, Tinapa Free Zone and Tourism Resort, Onne Oil and Gas Export Free Zone, Olokola Free Zone. Foreign investors can setup businesses directly in FTZs without necessarily incorporating accompany in the customs territory. Registered companies are also eligible to register separately and operate in an FTZ. Such registered FTZ entity would have a suffix FZE at the end of its name. An FTZ entity enjoys the benefits of 100% capital and profit repatriation, exemption from all federal, state, and local government taxes, levies and rates, and waivers on customs and import duties.
Nigeria Tax Regime:
Personal Income Tax
All Business name owner who earns an income in Nigeria either from employment or from carrying on a business Nigeria is subject to tax under the Personal Income Tax Act.
An Employee in Nigeria shall be liable to pay tax for each year of assessment on the aggregate amount from every source of income for the year. This includes the profits from trade or business, salaries, wages, fees, allowances or other gains or profits from employment including compensations, bonuses, premiums or benefits given or granted by an employer to an employee, profits and premiums arising from rights granted to another person for the use or occupation of property, dividend, interest, annuity.
Nigeria Tax Regime: Incorporated Companies
The Companies Income Tax Act is the applicable tax law for Companies in Nigeria.
For a company doing business in Nigeria, tax shall be assessed on profits, rent, premiums, interest, royalties, discounts, charges, annuities, benefits, any fees, dues or allowances and shall be payable at a rate specified by the relevant tax authority.
Every year of assessment, the company shall pay tax at the rate of 30% in respect of the total profit assessed plus a Tertiary Education Tax at the rate of 2% on the assessable profits of the company.
However, in an instance where the company's turnover is in the sum of =N=500, 000.00 or below and the assessable profit results in a loss, the company's minimum would be the higher of:
0.5% of the gross profit; or
0.5% of the net assets; or
0.25% of the paid up capital;
0.25% of the company's turnover for the year
Every company must file a self-assessment tax return with FIRS at least once a year and the return must contain:
- The audited accounts, tax, capital allowances computation for that year of assessment and amounts of profits from each source computed.
- A duly completed self-assessment form as prescribed by the FIRS
- Evidence of payment of either the whole or part of the tax due into a bank designated for collection of the tax.
The Company's annual return must be filed with the FIRS as follows:
- In the case of a company that has been in business for more than 18 months, not more than 6 months after the end of its accounting year; and
- For a newly incorporated company, within 18 months from the date of the company's incorporation or not later than 6 months after the end of its accounting period, whichever is earlier.
Where a company defaults in filing their annual returns with the relevant authority within the prescribed period, a penalty of N25, 000.00 in the first month of the default and N5, 000.00 for each subsequent month in which the default continues shall be charged.
Certificate Of Capital Importation
Investors who wish to remit capital must first obtain a Certificate of Capital Importation (CCI) from a Nigerian Bank in order for the payment to be transferred into Nigeria.
Repatriation of Capital and Profits
Under the provisions of the Foreign Exchange (Monitoring & Miscellaneous Provision Act No. 17 of 1995), foreign investors are free to repatriate their profits and dividends net of taxes through an authorized dealer in freely convertible currency.
Furthermore, in accordance with the NIPC Act No. 16 of 1995, every company with foreign participation after incorporation with Corporate Affairs Commission (CAC) must register their company with the NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC). The Act permits foreigners to own up to 100% of any business with the exception of businesses under the negative list.
Such enterprise, in which foreign participation is involved, shall also obtain Business Permit and Expatriate Quota before commencing operations in Nigeria with the Ministry of Interior. The Citizenship and Business Department of the Ministry of Interior has responsibility for administering and enforcing the provisions of the immigration Act. 1963 as they relate to the establishment of business in Nigeria and the employment of expatriates.
Any agreement under which a foreigner is to provide foreign technology, management, or assistance, to a Nigerian company must be approved by the National Office for Technology Acquisition and Promotion (NOTAP). Fees to be paid for the provision of such technology or services must be approved by NOTAP.
Companies are expected to be licensed by DPR in order to operate in the Oil and Gas Industry. Permits are issued upon application for particular operations to be carried out by a company and the fees payable depend on the category of operations for which a company applies.
National Agency for Food and Drug Administration and Control (NAFDAC) registration is mandatory for the registration of foods, drugs, cosmetics and medical devices manufactured or imported into Nigeria. Companies are to register all products other than those regulated by NAFDAC with the Standard Organization of Nigeria (SON).The Investment and Securities Act encourages merger or acquisition that reduces competition and regulate the placement of securities. Thus public companies who desire to place their securities either as private placement or public offer must register such securities with the Securities and Exchange Commission (SEC).
Companies intending to operate as private operators of telecommunications services are required to obtain the relevant licenses from the Nigerian Communications Commission (NCC) via the license application process and also comply with the stipulated requirements.