Nigeria is a developing economy and an economy which recently overtook South Africa to become the continent’s largest economy following the recalculation of GDP and the world’s 26th largest economy, the economy attracts foreign investors and local investments. An entrepreneur plays an important role in economic growth and development and there is an impressive rise in the number of self-employed individuals we have in the country today, former American President - Ronald Reagan 1986 address to the White House Conference on Small Business said, “the government’s view of the economy could be summed up in a few short phrases: If it moves, tax it” as the economy is moving its crystal clear the government will become stricter with tax policies. Most entrepreneurs or intending entrepreneurs do not know the basics of taxation have regards starting business in the country and will be found wanting by the law.
Registration of business with Federal Board of Inland Revenue Department of the Ministry of Finance for income tax and VAT.
(FIRS) requires that an applicant who seeks registration for Income tax and VAT completes tax registration forms for corporate income tax registration as well as VAT. The applicant submits an application letter to the tax authority for a tax clearance certificate and, for income tax purposes, registers at the integrated tax office. The registration process requires submitting a completed tax office–issued application (taxpayer registration input form, TRIF/2006/001 COYS) and the following documents:
1) Completed FIRS questionnaire
2) Memorandum and articles of association (copy)
3) Certificate of incorporation (copy)
4) Directors’ names and addresses
5) Tax advisor’s name and address
6) Letter of appointment of a tax adviser and corresponding letter of acceptance
7) The date the company commenced business
And for larger companies:
i) Names, addresses and mobile numbers of major promoters and the chairman of the company, including their email addresses
ii) Other sources of income of the chairman and the promoters of the company
iii) Name and addresses of the principal officers of the company including the chairman, managing director, legal adviser and accountant
To register, the company must submit the taxpayer registration input form in triplicate, and the original certificate of incorporation must be presented for review by the controller. Upon the completed taxpayer registration input form and all other documents being received, a tax reference number is allocated. An application must be filed for the tax clearance certificate; its issuance is not automatic.
There are Fee schedule for tax clearance certificate:
• Registration within 6 months of incorporation: no cost will be incurred on this.
• Registration after 6 months of incorporation this will attract:
1. A pre-operation levy of NGN 20,000 for first-year requests and NGN 25,000 for each subsequent year request, until the company files a notice of commencement of business as per amendment to section 29 of the Companies’ Income Tax Act No. 11 of 2007.
2. Companies that register after the start of operations must file a set of audited accounts. TCC is issued based on tax paid for 3 years. If the position is at a loss, the TCC will be issued to reflect the position.
Companies required to register for VAT complete the VAT registration form VAT Form 001, which is obtainable free of charge from all FIRS offices and return it to the integrated tax office, which will issue a taxpayer identification number . Companies required to register for VAT must do so within 6 months from the date of starting business operations. Since the registration for corporate income tax and VAT are done in the same place; 1 Tax Identification Number (TIN) is issued to companies for all federal taxes.
Registration of personal income tax PAYE at the State Tax Office
Employers shall register with the relevant state tax authority for income tax withholding. Once the application is filed, with a copy of the certificate of incorporation attached, a reference file is opened for the company. It is safer to adhere to the law than face its wrath, and adequate compliance to the tax authorities puts the mind of an entrepreneur at rest.
BY: Sogo Akinola
Sogo Akinola Nathan(firstname.lastname@example.org) is a young commercial lawyer at Gbenga Biobaku and co. He specializes in Taxation, oil and gas law and intellectual property. He is a graduate of obafemi awolowo university and the Nigerian law school lagos campus. He is a member of the Nigerian bar association and a member of the Young International Arbitration Group and also an intending associate member of the Chartered Institute of Taxation of Nigeria.