How to obtain a Company Income Tax (CIT) clearance certificate in Nigeria

Tax planning strategies for small businesses

How to obtain a Company Income Tax (CIT) clearance certificate in Nigeria

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HOW TO OBTAIN A COMPANY INCOME TAX (CIT) CLEARANCE CERTIFICATE IN NIGERIA

All businesses whether small or large is liable to pay tax on the income generated. The payment of tax is dependent on the form of business and it is respective to their taxable income. Company income tax is only payable to the federal government annually. Whenever a business is registered, the next step to take by the business owner is to acquire a Company Income tax clearance certificate. The tax clearance certificate is valid for 12 months. In order to obtain a company income tax clearance certificate as a business owner, you will need to adhere to the following procedures:

  • Register your company

This is the first step you have to take, you have to register your company with the FIRS in order to acquire a Tax Identification Number (TIN). There are FIRS offices located in almost every local government area. Your Tax Identification Number (TIN) will be used to pay any tax related transaction.

  • Incorporate your company

The next step for you to take is to incorporate your company. This has to do with registering your company with the Corporate Affairs Commission in Nigeria. A company can register its business name without commencing or starting business.

  • Provide audited books of accounts

If your business or company has commenced business for a period of time, you will be required to provide an audited financial statement or a statement of affairs. The financial statement shows the performance of your business for a particular period. It will also include other books of accounts such as the balance sheet and the profit and loss account

  • Include an estimated computation of your tax payable statement
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After the financial statement is prepared and signed, you will also need to include your estimated tax payable. Your estimated tax payable is the amount of tax that you are liable to pay to the Federal Inland Revenue Service (FIRS). Although, the estimated computation of your tax payable may not be accepted by the authorities as they are likely to make their own computation. You must still ensure that you prepare yours and tax is not evaded.

  • Fill the Tax clearance forms

After making the estimated computation of your tax payable statement, the next step is to fill the tax clearance forms. When filling the forms, it is important that you thoroughly read through the form because most of the information in it are confidential and should not be disclosed to a third party. You will also be required to provide the following:

  1. A letter head of your business or companies. This will be used for correspondence with the tax authority which will also be submitted with your application for a tax clearance certificate
  2. Certificate of Incorporation
  3. Article of association
  4. Memorandum of association
  5. A copy of your personal tax clearance certificate of the managing director or any director. Your personal tax clearance certificate will be obtained from the state inland revenue service where your business or company is located
  • Submit all the necessary documents

All the relevant document mentioned will be submitted to the Federal Inland Revenue Service (FIRS). The services of a consultant is recommended for all the process and guidelines, the consultant will aid in getting all the necessary form and documents as well as submission to the FIRS. The role of the consultant is very important because they usually determine if the tax officials will accept your figures and dispatch your certificate to you

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In a scenario where the account prepared by you is not acceptable by FIRS, they will proceed by law through using the Best of Judgement (BOJ) decision to compute the amount of tax you should pay. Most times when the Best of Judgement (BOJ) decision is carried out, it is not favourable for the tax payer.

  • Payment for the certificate

You will be given a Tax Clearance Certificate that will be signed by an inspector of taxes. The tax clearance certificate is usually for the 3 years preceding your application.

REQUIRED INFORMATION FOR ACQUIRING A COMPANY INCOME TAX CLEARANCE TAX CERTIFICATE

  1. Full name and other relevant details of the registered company
  2. Tax Identification Number (TIN)
  3. Period of submission of returns
  4. Amount of taxable income
  5. Amount of tax income to be registered

TRANSACTIONS/NEEDS FOR WHICH A COMPANY INCOME TAX CLEARANCE CERTIFICATE MUST BE PRESENTED.

  • Application for Government loan for industry or business
  • Registration of Motor Vehicle
  • Application for firearms licence
  • Application for foreign exchange control permission to remit funds outside Nigeria
  • Application for certificate of occupancy
  • Application for award of contracts by Government, its agencies and registered companies
  • Application for approval of building plans
  • Application for trade licence
  • Application for transfer of real properties
  • Application for import and export licence
  • Application for agent license
  • Application for pools or gaming license
  • Application for registration as a contractor
  • Application for distributorship
  • Confirmation for appointment by Government as Chairman or member of public board, institution, commission, company or to any other similar position made by the Government
  • Stamping of guarantor’s form for a Nigerian Passport
  • Application for registration of a limited liability company or of a business name
  • Application for allocation of markets stall
  • Appointment or election into public office
  • For change of ownership of vehicle by the vendor
  • Application for a plot of land
  • Any other transaction as may be determined from time to time
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CONCLUSION

Obtaining a company income tax clearance certificate is Nigeria is very easy if you have all the relevant details prior to the collection and if you follow the above steps. For more information on the acquiring a company income tax clearance certificate in Nigeria, you can contact Qeeva Advisory Limited on  08023200801, 08075765799, Email: info@qeeva.com

About the author

Onamakinde Dare Daniel is a highly motivated accountant with knowledge in Accounting, Taxation, Management, Audit, Costing and Research. He is keen on tax matters due to its ever dynamic nature.

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