Nigeria: Getting And Validating Your Taxpayer’s Identification Number (TIN)

nigerian_tax_payers_indentification_numberNigeria as a country and indeed all socially responsible and law abiding individuals, groups, organizations and corporate citizens will derive valuable benefits from imbibing a culture of tax compliance. The Taxpayer Identification Number (TIN) is a unique number allocated and issued to identify a person (individual or Company) as a duly registered taxpayer in Nigeria. It is to be used by that taxpayer alone. Registration for tax purposes is a legal obligation of every person who is required to pay tax in Nigeria.

The following necessary details for obtaining and updating TIN should be presented to the tax office nearest to the address of the taxpayer.

OBTAINING TIN

For a Company, Enterprise or Business registered with the Corporate Affairs Commission (CAC):

1. Duly completed application form for TIN.
2. Either Certificate of Incorporation (for a company) or Business Name Registration Certificate (for an enterprise) showing clearly the registration number in each case.
3. Documents containing the following information:

•Address of company, enterprise or business
•Principal location of business
•Date of commencement of business

For an Individual who (or whose business) is not registered with the CAC:

1. Duly completed application form for TIN.
2. Any of the following valid identification documents:

•International passport
•National Identity Card
•Staff identity card
•National Driver’s License

The following rules are important:

•All information marked * on the application form must be provided
•(ii) The characters of the name i.e. letters and other symbols constituting the name must not exceed two hundred (200)
•The characters of the address also must not exceed two hundred (200)
•Email address must be unique and active
•Mobile telephone number must be eleven (11) digits e.g. (08763201210).

UPDATING TIN

Updating TIN under the ‘National Single Window’ System is a requirement for taxpayers with incomplete records at the Federal Inland Revenue Service (FIRS).

TIN may be updated at the tax office where it was initially generated by providing the following additional information:

a)Email address
b)Phone number

After updating, the system indicates that “The TIN has been successfully updated”.

The Joint Tax Board TIN (JTB TIN)

It is important for a person to note the following information about the JTB TIN:

1) The JTB TIN is designed to subsequently replace the current TIN and is already in use within FIRS and several other states of Nigeria.

2) The JTB TIN has ten (10) digits, it is uniform and general across Nigeria. It is unique for every registered taxpayer in Nigeria and not limited to FIRS taxpayers alone.

3) The JTB TIN is presently being issued at the point of registration and also updated by FIRS and the states which have so far adopted it;

4) Every taxpayer in Nigeria will ultimately be required to possess and use only the JTB TIN.

VALIDATING TIN

TIN validation is the process of confirming that the updated TIN meets the necessary conditions for transacting business with other organisations such as Nigerian Customs Service (NCS), Central Bank of Nigeria, National Agency for Food and Drug Administration and Control, etc.

A taxpayer can validate his/her TIN directly on the FIRS Trade Portal i.e. www.trade.gov.ng/firs by following the simple procedure below:

i. Enter the TIN and the same email address that was provided to the tax office when updating.

ii. Next, enter the security word (captcha) and click on “Validate”.

iii. If the validation is successful, the following confirmation notice shall be displayed:
“Register with NCS – Done”.

iv. Then an automatic email notification from “Nigeria Single Window” with a log-in password and instruction on how to complete the registration process would be sent to the taxpayer’s email address.

v. Upon completing the validation exercise, an email will automatically be sent to the email address provided confirming successful validation. A taxpayer should therefore check the email.

AUTHENTICATING TIN

This is for the taxpayer to re-confirm his/her updated and validated TIN. A taxpayer experiencing difficulty in validating TIN (receiving error messages) should seek professional assistance from the tax office or send an email to: tinupdate@firs.gov.ng

TAX BENEFITS

The benefits derivable include but are not limited to:

* Providing sustainable finance and funding for governance, public and social services and economic development.

* Promoting civic responsibility, patriotism by citizens and social responsibility by corporate citizens.

* Stimulating priority social and economic activities and sectors while discouraging less preferred ones.

* Bringing about the redistribution of wealth and bridging sharp disparities in living standards.

* Giving taxpayers the moral and legal right to demand for (thereby engendering) a culture of accountability.

* Serving as a gauge for measuring the level, growth and health of economic units and economic activities.

* Individuals and corporate organizations are conferred with definite benefits, rights and privileges in the system based on their tax compliance status.

* Tax compliance enables law abiding citizens to avoid the consequences, penalties and sanctions of non-compliance.

TAX TYPES

For ease of reference this item will address the enabling legislation, the taxpayer, how to pay the tax and where to pay the tax.

The taxes collected by the Federal Inland Revenue are as follows:

COMPANIES INCOME TAX (CIT).

Applicable tax law- Companies Income Tax Act. Persons subject to the Companies Income Tax:

* All companies incorporated in Nigeria with the exception of companies engaged in petroleum operations.
* All non-resident (foreign) companies that earn or derive income from Nigeria.
* All organizations limited by guarantee (institutions of public character or charitable organizations) engaged in profit.
making activities other than the promotion of their primary objects.
* The liquidator, receiver, or agent of liquidator or receiver of any taxable company or organization.

Where to pay the Companies Income Tax:

Companies incorporated in Nigeria and organizations limited by guarantee pay Companies Income Tax through any of the designated banks. Once payment has been captured by the bank collecting system, an e-ticket is issued is issued the company, this e-ticket is proof of payment and when presented at the Integrated Tax Office with jurisdiction an e-receipt will be issued.

Non-resident companies make payment through remittance of tax deducted at source to the designated banks.

How to pay the Companies Income Tax

Resident companies and organizations prepare and submit annual self-assessment tax returns as specified by FIRS accompanied by the evidence of the payment of the full amount or first installment of the tax due. Payment is made to designated banks

Non-resident companies are subject to Withholding Tax (WHT) deductions on the income they earn from Nigeria. This becomes their tax upon filing returns

* PETROLEUM PROFITS TAX (PPT)

* VALUE ADDED TAX (VAT)

* PERSONAL INCOME TAX (PIT)

* WITHHOLDING TAX (WHT)

* EDUCATION TAX (EDT)

* STAMP DUTIES (STD)

* CAPITAL GAINS TAX (CGT)

* NATIONAL INFORMATION TECHNOLOGY DEVELOPMENT FUND (NITDF) LEVY.

How To Register Your Business or Company Name With The Corporate Affairs Commission in Nigeria

register_businessCorporate Affairs Commission was established by the Companies and Allied Matters Act , which was promulgated in 1990 to regulate the formation and management of companies in Nigeria.

The establishment of the Corporate Affairs Commission as an autonomous body was as a result of the perceived inefficiency and ineffectiveness of the erstwhile Company Registry, a department within the Federal Ministry of Commerce and Tourism which was then responsible and administration of the repealed Companies Act of 1968.
Registration of businesses in Nigeria is the exclusive responsibility of the Corporate Affairs Commission (CAC), which has its head office in Abuja but has branches in most states of the Federation. Having your business registered definitely confers some credibility on it, given that it then acquires an identity. In many important business activities or relationships you may want to get involved in, details of your business registration will be required. You do not have to wait for such occasion before getting your business into the register of companies – you may miss an important opportunity just for that omission.

Accredited Agents For Registration
The CAC specifically requires that only accredited parties carry out the actual registration processing. It also limits such accreditation to lawyers, chartered accountants and chartered secretaries. What this means is that you will necessarily have to engage the services of one of these professionals to register you business. However, it will be important for you to understand the issues involved and the choices you need to make. For instance, you need to decide on a business name. You also need to choose a business format under which to operate. You need to know the requirements relating to membership of the company, ownership, etc to enable you make decisions you will remain happy with. The routine process of registration can then be carried out on your behalf by an accredited professional.

Legal Structure
Which legal structure is right for your business? Three major classes of registration are available under the relevant law (the Companies and Allied Matters Act):

Registration of Business Names
Incorporation of companies
Registration of Incorporated Trustees

1. Registration of Business Name
This applies to Sole Proprietorships and Partnerships.

The sole proprietorship is the simplest form of business structure. It is the one-man business, owned by a single person and called ‘enterprise’ in local parlance. The attractions of doing business under this structure include:

Lower cost of registration. It costs a little fraction of the cost of incorporation (see table of current costs below).
Ease of registration as requirements are less cumbersome. The Lagos office of the Corporate Affairs Commission (CAC) will conclude the registration and issue a certificate, while for incorporation it must be forwarded to the Abuja Head Office.

It affords the owner full control and ownership. If the business proves successful, the returns are exclusively to you. In running the business, you have the final say, so decisions are faster.
The business is not subject to corporate tax. The owner is however required to pay his personal income tax at the appropriate personal income tax rate.
You enjoy privacy in the business: no publication of performance reports is required.
There is no requirement to engage an external auditor to audit your business accounts. Note however that it may be in your interest to do so for the success of your business.

On the flip side, consider the following cons of this structure:

There is no limited liability. You are personally liable for the debts and obligations of the business. Your personal assets, even if unconnected with the business, can be applied in meeting the obligations of the business.
The equity capital available to the business is limited to the personal resources of the owner. The scope and growth of the business could be severely hampered, even if the business idea is excellent and potentially capable of rapid expansion.
While it is possible to borrow, this business format may be less attractive to lenders, given the closed nature of its operation.
The business is virtually tied to the person of the owner, implying that the fortunes of the business could suffer if the owner is not available to oversee it. Succession is therefore more difficult than with other business structures involving more than one owner. The death of the owner of a sole proprietorship could threaten the continuity of the business.

Partnership applies to a business where two or more persons agree to jointly own and carry on the business. Ownership may not necessarily be equal but rather in accordance with their agreed individual capital contributions. They will share in the profits or losses of the business. The important thing to note is the need to clearly set out the terms and basis of this relationship to ensure its smooth operation. Given the fairly complex nature, it is best to seek the services of a lawyer or accountant to assist with the details. The benefits include:

The pooling of resources, i.e. capital, skills, contacts, etc and the consequent benefit of synergy.
The partners similarly share in the burden of a loss or liability. It therefore permits the spreading of risk.

More operational flexibility as partners can easily share responsibilities. For instance. a partner could be located in Kano to run the northern operations while another stays in Lagos to control the Southwest. Statutorily, the business is not required to publish its results.
The partnership is not liable to corporate tax. The income from the partnership is therefore not taxed twice as in the case of incorporated companies.

The disadvantages include:

If the terms of the relationship are not properly set out, internal frictions can arise which could cripple the partnership. Partnerships often seem a veritable ground for disagreements, largely because of the failure to recognize the need to structure them properly.
There is unlimited liability, except where there is limited partnership (limited partner engaged in management is still fully liable).
Related to this is the fact that a partner is bound by the actions of another partner which could, unfortunately, impose commitments.
Its more complicated in structure than a sole proprietorship
The death of a member effectively terminates the life of the partnership (though not necessarily the business)

2.Incoporation of company
There are four options to choose from under incorporation:

a. Private Limited Company (Ltd)
b. Public Limited Company (PLC)
c. Company Limited by Guarantee (Ltd/Gte)
d. Unlimited Company (Ultd)

Incorporation recognizes the business as a unique entity, separate from the owners, with statutory powers to own property and sue or be sued. There is thus the concept of limited liability, implying that the individual owner (shareholder)’s liability relating to the business is limited to the amount of his share subscription. This structure therefore shields the shareholder from personal liability for the company’s commitments.

Requirements:
Membership – minimum: 2 for each case; maximum: 50 for private limited company, no limit for public limited company.
Sharecapital – Minimum N10,000 for private N500,000 for public minimum subscription in each case is 25%

Benefits
Mainly the limited liability for the individual shareholders (except for unlimited company). The standing of the business is enhanced before financial institutions and other parties it does business with. It consequently could have better access to credit and on even better terms. The business is distinct from the individuals; the death of a member does not dissolve the company.

Major disadvantages
Registration requirements are more complex and the cost of registration much higher than for sole proprietorship or partnership. The tax burden on individual members is higher since the company is subjected to corporate tax while the individuals still suffer tax on their share of earnings by way of dividend. For public limited companies, requirements of public disclosure and external audit are additional challenges.

3. Registration of incorporated Trustees
This registration category applies to usually to public institutions and associations, operated by a Board of Trustees.

The Choice Of Business Format
The choice of which structure to adopt will depend on the nature of the business, the ownership and an evaluation of the benefits and pitfalls of each format, as outlined above. The accredited professional you choose for the registration process should also be able to provide further advice. As a trained practitioner, he is also familiar with the registration requirements for each business format and the processing procedure.

The Requirements for Incorporating A Private Company in Nigeria

CACThe Companies and Allied Matters Act (CAMA) recognises 6 corporate structures in Nigeria:
1. The Business Name
2. The Private Company Limited by Shares.
3. The Public Limited Company
4. Unlimited Company
5. Company Limited by Guarantee; and
6. Incorporated Trustees.

But for the purpose of this blog post, however, let me just proceed to the business of the day.

REQUIREMENTS FOR INCORPORATING A PRIVATE COMPANY IN NIGERIA.

Irrespective of whatever you must have read elsewhere, the steps for incorporating a new company at the nation’s registry, The Corporate Affairs Commission, can be summarised in the following 10 steps:

1. Submission of the proposed Company Names to the CAC. This is the first step in the entire process. The promoters of the company must decide on a company name and submit for approval. The government officials reserve the right to approve or deny company names submitted for a number of justifiable reasons – availability, suitability, legality, similarity, etc. It takes an average of 5 business days to get availability results.

2. Details of Directors. Long story short, you will be required to provide the biodata of the Directors of the proposed company. These information include: Full Names, Residential Address, Nationality, Age, Valid Identification Document and Signature of the Directors. The minimum number of directors for a private company is 2 and maximum is 50. There is no maximum for public companies. There are statutory requirements for being a director, one of which is that the directors must not be less than 18 years old.

3. Shareholders/Subscribers. The legal minimum number of shareholders in a private company in Nigeria is 2 and a maximum of 50. The shareholders subscribe to the memorandum and articles of association and are alloted shares in the company.
PS – the shareholders can also double as the directors of the company.

4. Appoint a Company Secretary. Every Nigerian company must appoint a Nigerian Company Secretary, as it has become a legal requirement. The company secretary of a private limited company needs no formal qualifications. It is the directors responsibility to ensure he/she has the appropriate knowledge and experience to act as a Secretary of the company. The company secretary could be an in-house person or an outside consultant. Some of the roles of a company secretary include:
a. Maintaining the Statutory Registers;
b. Liaison between the company and the CAC and other relevant government agencies;
c. Providing members and auditors with notice of meetings.

5. Registered Address of the Proposed Company. The company must have a Nigerian business address. This requirement needs no much explanation and not debatable either.

6. Core Areas of the company’s business activities (Nature/Objects of company). Nigerians and Non-Nigerians are allowed to carry on all forms of business provided it’s legal and not in the “negative list”. If the company will engage in specialist services (Hospital, Consultancy, Schools, Media & Advertising, etc), the directors may need to provide an evidence of professional proficiency. E.g. Certificate of a professional body/trade association, Academic Certificate, or both.

7. Valid Identification. Although I have stated this requirement earlier. It is worthy of mention here again. A photocopy of Identification of all the directors is required. (e.g. National ID card, Data Page of your National Passport, Voter’s Card or Driver’s License).

8. The Company’s Share Capital and Allotment. In simple terms, the share capital of a company (usually in monetary terms), is the amount of capital the subscribers have to carry on the business. The minimum share capital of a private company must not be less than N10,000. However, for economic reasons, it is advisable that an average Nigerian company incorporate a N1,000,000 share capital company. A company’s share capital is also industy-dependent. For example, advertising agencies must have at least N10 million as share capital. The law also stipulates a minimum of N10 million share capital for a Nigerian company with foreign ownership. Your regulator or adviser should advice you appropriately. A minimum of 25% of the authorized sharecapital must be subscribed and paid for.

Once the issue of share capital have been decided on, then the subscribers must also decide on alloting the shares. If there are 2 persons that formed the company, they could share it 50% each.

9. Draft the Memorandum of Understanding and Articles of Association (MEMART). This is a legal document that spells out the business objectives and the framework on which the company intends to run its business within the acceptance of the law. This legal document also shows the particulars of the shareholders and their shares allotment.

10. Payment of Stamp Duty and Statutory Filling Fees. The total fees payable to the Stamp Duty office and the Corporate Affairs Commission is dependent on the company’s share capital.

These are the basic requirements for incorporating a private limited liability company in Nigeria. However, EXPATRIATES are subjected to additional requirements and laws – Nigerian Investments Promotion Act, Immigration Act, Investment and Security Act, and Foreign Exchange and Monitoring Act.

Duration of Incorporation at the Corporate Affairs Commission

As at the time of writing this blog post, the average turnaround time to receive a Certificate of Incorporation and Certified True Copies of your documents at the CAC is 3 weeks.

Although, Nigeria deserves a better business environment, Africa’s most populous nations is a thriving business destination for many investors.