Nigeria legal and accounting and tax considerations in 2023
- Both resident and non-resident corporations are subject to corporate tax of 30% on net profits;
- Registering a Nigeria LLC is liable to pay a VAT rate of 7.5% on goods unless incorporated within a free zone, in which case the VAT rate is reduced to 0% indefinitely. In accordance with the Nigerian Investment Promotional Act, every Nigerian company will be required to register for VAT. Healy Consultants will be happy to assist our Clients with VAT registration for a onetime fee of US$850;
- VAT returns must be filed on a monthly, by the 21st of the month following the reporting period
- Failure to file VAT returns can result in a fine of NGN5,000 per month. Failure to remit any VAT payable will incur a fine amounting to 5% of the liability, plus interest.
- Nigeria business setup boasts only 11 double taxation treaties, none of which materially reduce local withholding tax. The Nigeria-UK double tax agreement reduces the withholding rate to 5% on income repatriated to the UK;
- Nigeria is in the process of increasing its network of double taxation treaties, including new agreements with Sweden awaiting approval;
- Under Nigerian tax law, companies are liable to pay withholding tax on the following types of payment made to a non-resident: interest, royalties, contract and other service fees, lease rentals (for movable property), and technical fees. The rate of withholding is 10% of the gross payment;
- A Nigeria LLC can only enjoy tax exemption if incorporated within an Export Processing Zone. If in an EPZ, an export-oriented company is indefinitely exempted from all local, state and federal taxes;
- To support Nigeria business registration, Healy Consultants’ Compliance Department assists our Clients to efficiently and completely discharge the annual accounting and auditing obligations of their Nigeria company through the following: i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets, and sensitivity analysis to better manage financial obligations and ease the process of reporting to the Nigeria accounting authorities;
- For an active trading company, Healy Consultants’ fee to efficiently and effectively discharge our Client’s annual company accounting and tax obligations amounts to US$2,300. Following receipt of a set of draft accounting numbers from the Client’s company, Healy Consultants will more accurately advise accounting and tax fees. For a dormant company, Healy Consultants’ fees are only US$950;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
- According to the Companies Act, a Nigerian company must have at least two directors and two shareholders of any nationality;
- Before Nigeria business setup, obtaining a license to do business in an export processing zone requires a minimum of US$62,000 paid up share capital. These funds must be deposited in to a corporate bank account or spent on capital goods for the business prior to an EPZ license being granted;
- Each company must have a registered address in Nigeria after registering its business. Healy Consultants can provide this for an annual fee of US$2,950;
- Each Nigeria company must file annual return with the Corporate Affairs Commission and Annual Tax Return with the Federal Inland Revenue Service to meet the legal requirements of the Nigeria Companies Act following Nigeria business setup;
- Foreign ownership is restricted in the aviation, petroleum, shipping, real estate, and telecommunications industries;
- The Companies and Allied Matters Act, 1990 stipulates that only Nigerian registered companies can conduct business within the country. Therefore, it is recommended foreign investors register a local entity before invoicing customers or signing local contracts. A locally incorporated branch or subsidiary company must register with the Nigerian Investment Promotion Commission (NIPC) before commencing business within the country;
- In the bid to curb the influx of illegal foreign currency into the Nigerian banking system, the Central Bank of Nigeria (CNB) has directed all the banks to prohibit all foreign currency cash transactions from domiciliary accounts. Please note, all individuals/entities still wishing to conduct non-Naira denominated transactions will be permitted to do so via wire transfers;
- The minimum authorized share capital of all companies owned wholly or partially by foreign shareholders is N10 million (approximately US$26,000). 25% of this authorized share capital (approximately US$6,500) must be paid-up after incorporation;
- In accordance to the Central Bank of Nigeria’s Foreign Exchange Manual, a foreign-invested company must obtain a Certificate of Capital Importation (CCI) each time it receives foreign currency funds from overseas to invest in the country or fund the activities of the Nigerian entity. Failure to obtain a CCI for each capital injection will not enable the foreign company to repatriate funds back to the parent company or foreign shareholders;
- All foreign-owned companies must obtain a Business Permit from the Ministry of Interior before they are able to legally operate in Nigeria. Without a Business Permit foreign-owned companies cannot obtain an Expatriate Quota and secure work permits for foreign employees;
- In accordance with the requirements of the Company and Allied Matters Act (CAMA), it is mandatory for a non-resident foreign individual to secure a Nigerian work permit (CERPAC) before he/she is appointed as managing director of a Nigerian LLC. Read how Healy Consultants Group can assist our Clients secure Nigerian employment and residence visas.
Recruitment in Nigeria
- Recruitment of foreign labour requires the company to apply for an expatriate quota following Nigeria company registration. Applications require the company to give evidence that the skills and competencies required for the job are in short supply or not available locally. Companies granted an expatriate quota are expected to train Nigerians, with a transition to 100% Nigerian employees expected within 10 years;
- The minimum authorized share capital of a foreign-owned company is N10 million (approximately US$26,000) before it is eligible to secure an Expatriate Quota and hire foreign employees;
- EPZ companies are exempt from the expatriate quota requirements and may freely hire foreign workers;
- When employing local or foreign workers, employers must make sure to stay compliant with the 2013 Employment and Labour Law, which is the main law governing labour in Nigeria. The new labour laws have been made to come more in line with the English legal system, with greater attention paid to regulating employment termination;
- Employers in Nigeria are required to contribute towards their employees Retirement Savings Account, with the minimum rate being 7.5% of the employees compensation.
Licensing in Nigeria
- A license is required for all business activities. To support Nigeria business registration, Healy Consultants can assist our Client in determining what type of licenses are required for their company;
- Any business registered within an Export Processing Zone is exempt from all import and export licensing requirements, though an operating license is still required for many business activities.