Obtaining a Tax Clearance Certificate in Nigeria

Tax Clearance Certificate is an official document that certifies that all income tax a specific period of time has been paid in full. A tax clearance certificate (TCC) is also called Tax Form Z. In Nigeria, the tax clearance certificate is issued by the Federal Inland Revenue Service (FIRS) for only companies and issued by the State Inland Revenue Services for individuals. According to Section 85 (1) of Personal Income Tax Act (PITA) “Whenever the relevant tax authority is of the opinion that tax assessed on the income of a person for the three years immediately preceding the current year of assessment has been fully paid or that no tax is due on the income or that the person is not liable to pay tax for any of those three years, it shall issue a tax clearance to the person within two weeks of demand for the certificate by that person or give reasons for the denial, however, that the payment of current year tax shall not be made a condition for the issuance of the certificate unless the applicant is leaving the country finally”.

A Tax Clearance Certificate is a confirmation that an individual’s taxes have been paid accordingly, as at the date of issuance.

Uses of Tax Clearance Certificate in Nigeria

Paying taxes is largely encouraged by the government to enable the provision of basic amenities and infrastructures for the society; such as electricity, good roads, water, etc. By law, an individual or company can be punished for defaulting on tax payment.

Besides these functions, the individual or company who obtains the tax clearance certificate can use the document for the following

– Application for trade license

– Obtaining a business loan

– Obtaining a certificate of occupancy

– Application for government contracts

– Obtaining an import/export license

– Obtaining an agent license

– Obtaining a gaming license

– Foreign exchange

– Appointment into public office

Without a tax clearance certificate, an individual or corporation will be unable to access these benefits. Having a TCC also makes your company to be seen as a good corporation in Nigeria and prevents you from issues with the FIRS that can affect the existence and growth of your organization.

Steps in Obtaining a Tax Clearance Certificate in Nigeria

In obtaining a tax clearance certificate in Nigeria, there are three steps involved in obtaining a TCC in Nigeria, they are; registration of tax identification number (TIN), VAT Registration, and application for a tax clearance certificate.

Obtaining Tax Identification Number (TIN)

The first step in obtaining a tax clearance certificate for companies in Nigeria is to first a Tax Identification Number (TIN). A tax identification number can be obtained at the nearest tax office in Nigeria. Nowadays the Federal Inland Revenue Service (FIRS) sends the TIN upon incorporation. However, the company needs to visit the nearest tax office to activate the TIN.

A couple of documents are required before you can apply for the tax identification number. These documents must be presented to the nearest Tax Office before they can receive a tax identification number.

1. A certificate of Incorporation bearing an RC Number- This is issued by the Corporate Affairs Commission (CAC)
2. Memorandum & Articles of Association
3. Certificate of Incorporation: CAC2, CAC7
4. Utility Bill
5. Company seal
6. An Application letter and TIN Application form

The original and two (2) photocopies of these documents need to be presented at the tax office. The original will be required for sighting, while the two copies will be stamped and signed by a FIRS official. One copy will be left at the Tax office while the other will be given to you as evidence of the TIN application.

Application for TIN is usually free, as the FIRS does not charge to issue it. Ideally, obtaining a tax identification should be given instantly or by the next day at most. However, when certain FIRS offices struggle with a backlog, it could take a week or two before it will be issued.

VAT Registration

The next step is the application for VAT registration. VAT is an acronym for Value Added Tax. It is a tax imposed under the Nigerian law on the supply of goods and services. It is currently charged at 7.5%

To apply for VAT registration, simply visit the nearest FIRS office with the following documents:

1. Memorandum & Articles of Association
2. Duly filled and officially stamped VAT form 001
3. Utility bill
4. Certificate of Incorporation: CAC2, CAC7
5. Application letter on company letter headed paper

Just like TIN registration, you will need to take both the original and two (2) copies of each document. The originals will be required for sighting while the photocopies will be signed and stamped. A copy will be kept by the FIRS, while the other will be issued to you as evidence of application. VAT registration is also free, as the FIRS does not charge for it. VAT registration can be completed immediately or by the next day, but it sometimes takes up to a week or two before completion.

Tax Clearance Certificate Application

After the previous steps have been completed, you can finally apply for your tax clearance certificate (TCC). The following documents are required at the FIRS office for the application of a tax clearance certificate.

1. Application for Tax Clearance form
2. Copy of memorandum and articles of association
3. Copy of the certificate of incorporation
4. Taxpayer registration input form (TRIF/2006/001 COYS)
5. Completed FIRS questionnaire for new tax payers- It has to be on the Company’s Letter Head and must be addressed to the Tax Controller
6. Letter of appointment of tax adviser and a letter of acceptance

These documents must be presented in triplicate copies, and the original certificate of incorporation must be presented for sighting. After all necessary documents have been provided as well as the receipt of the completed taxpayer registration input form, a tax reference number will be allocated. It is important to note that the Tax Clearance Certificate will only be issued after the necessary taxes are paid in full. The Tax clearance certificate issued to cover arrears of three taxable years. New companies can also obtain a tax Clearance certificate, however, the certificate will indicate “NIL” to imply that the new company does not owe taxes for the arrears. The Federal Inland Revenue Service (FIRS) issues the Tax Clearance Certificate for companies while the States Internal Revenue Service issues the TCC for individual tax payers in Nigeria.

Conclusion

A Tax Clearance Certificate is necessary for companies in Nigeria. It has numerous benefits including granting the ability to access certain licensees and opportunities as a business. Taxpaying is a civic responsibility that must be carried out by both individuals and corporations in Nigeria, and defaulters are punished by law. Before an application can be made for a tax clearance certificate you must first obtain the tax identification number (TIN) and register for Value Added Tax (VAT). We can help you in obtaining your Tax Clearance Certificate (TCC), and offer all the necessary tax consultancy to help your organization adhere to its civic responsibility and stay out of taxation issued from the IRS

Robert Inoma &Co is a law firm with accredited and professional lawyers that possess the necessary experience in trademark & patent registration, tax consultancy, corporate law, and others. Visit www.robertinomalaw.com to get started today.