THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

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Over the years, the questions of how important Tax clearance Certificate is have been raised (TCC). Other related issues to Tax Clearance Certificate are tax due dates for filing returns, and the difference between accounting year and accounting period. This write-up will give answers to these questions.

As you can see, Tax Clearance Certificate is a subject worthy of our discussion. This is because many business men and employees don't seem to realize the importance of it in Nigeria.

THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

Therefore,in this discussion I will let you know what TCC is, how important it is and then let you know why you should apply for yours today.

Some Tax Filling Related Clauses

While filling tax returns and applying for tax clearance certificates, the understanding of some terms is important. eg.

  •  Accounting year
  •  Accounting period?
  • Tax due date?

 Accounting Year: – This is a twelve (12) month period over which an entity‘s (organisation) financial accounts are made-up. Say March 1st this year to February 28 or 29 of the coming year.

Accounting Period: – This simply means the period with reference to which financial accounts of an entity are prepared. This does not mean the same thing as accounting year, because for a new company that must comply to commencement rule in the tax procedure, the accounts prepared may be more or less than 12 months.
Tax due date:- This is the date prescribed by relevant tax law for filing of such tax returns and making of tax payments by taxpayers. All tax types have their different due dates as provided by the relevant tax laws.

THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

What is a tax clearance certificate?

In fact,Tax Clearance Certificate is a certificate that affirms that you as a tax payer has paid your correct , and adequate tax in the immediate three years before the current accounting year. That is to say,  for instance, that you have paid your tax in 2014, 2015, and 2016 before this present year of your business operation (2017). These three immediate past years must be assessed one after the other and so noted in the certificate as dully paid by the relevant tax authority. Now you understand why it is a clearance certificate. These three years must be cleared "paid".
The issue of correct and adequate tax payment is a subject matter for tax queries, and may be tax audit and tax appeal matters. They are subjects of another discussion. If you are our regular reader, you will soon benefit from the discussion on that  tax queries, tax audit and tax appeal procedures. Do not let your tax matter get to these levels, it won't be funny for you. contact a consultant today for better tax management. 

Is Tax Clearance Certificate necessary? 

Certainly,Tax clearance certificate (TCC) is a necessary document for various transactions of both individuals and corporate organizations in Nigeria.It is so necessary if you consider that the law requires that Ministries, Departments, Government Agencies and Commercial Banks must demand for tax clearance certificates covering the three immediate preceding years of application before carrying on any transaction with tax payers. Today one of the prerequisites for pre-qualification for government contract is this TCC.

How do I apply for tax clearance certificate?

Documents Needed For Application of Tax Clearance in Nigeria:

Obviously, get a consultant for this or you can do it by yourself. The consultant will get a copy of the certificate of incorporation from you which will show your RC No. ( company registration number with CAC) which will be used to get your TIN (tax identification number) from the tax office.  Your consultant will then go ahead to apply in your name for the TCC submitting the following documents to the tax office.
  1. A copy of Certificate of Incorporation of the company issued by the  corporate affairs commission (CAC)
  2. A copy of  Memorandum and Article of Association
  3. Name, and address of tax adviser - your tax consultant
  4. Name and address of directors; you can provide this with Form CAC 3, Notice of registered address
  5. Personal Tax Clearance Certificate of your MD or any Director in your company
  6. Necessary document(s) showing your correct business address
  7. Taxpayer registration input form (TRIF/2006/001 COYS)
  8. FIRS questionnaire dully filled and
  9. Letter of appointment of tax adviser and a letter of acceptance
    Completed application form (triplicate) and the questionnaire should be submitted with the original certificate of incorporation to the tax comptroller for perusal.
    The application for newly incorporated businesses that are not yet up to 6 months is as simple as I illustrated above. Again the only fee involved is the professional fee you pay to your consultant. The tax law stipulates that the TCC will be issued to you within 14 days of application otherwise the tax authority will give you reason for not doing so. That is what is called tax query.

    THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

    TAX CLEARANCE CERTIFICATE FOR COMPANIES OLDER THAN 6 MONTHS?

    Once a company is more than 6 months from the date of incorporation, it is required of it now to show that it has not done any business withing the time. For such companies to get their TCC they have to apply as in above but will need to present three more items.
    - Statement of Affairs - a form of financial statement which must be prepared by an auditor and dully signed.
    - Bank statement which will show that it has done no business since incorporation
    - It must pay a pre-operational levy of not more than N25,000.00 

    I was in the tax office few weeks ago and a young man entered and demanded  to process their company TCC. but with some question put across to him, it was found out that his company was older than 6 years and because of that he would not be able to do it all by himself. He approached me immediately and the process began.  Few days later his company TCC was in his hands.

    TAX CLEARANCE FOR GOING-CONCERNS?

    Going concerns are companies in continues operations. These types of companies must have passed the two stages discussed above. I know you have one. Now you have to remember that you should  have an auditor already doing your things.  For such companies, all the documents narrated in the two scenarios above must be with the auditor who will use them from time to time to attend to whatever queries or normal filings with the tax authority. The consultant's duty here will be to:

    1. Audit your account, produce your financial statements - with every of its components,
    2. Make your tax computations, to be attached to  company income tax return form 001
    3. Make your tax payments through any of the designated banks
    4. Compile and submit to FIRS all other required incorporation documents
    5. Make formal application for your TCC
    6. Your TCC will be ready within  14 days of request.

    THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

    APPLICATION FOR TCC CAN BE QUERIED


    Why should an application for TCC be rejected after two weeks and still be under processing?
    The real clause  to use in this question is “query” and not “rejection”
    The application for TCC can be queried on the following grounds:
          
    i.       Where taxes have not been paid.
    ii.      Where penalties or interest is still outstanding.
    iii.     Where outstanding returns have not been filed.
    iv.  Where there are outstanding issues arising from tax queries, audit or investigation.    
    v.      Where the case is with the Tax Appeal Tribunal for hearing and part of the tax has not been paid as required.

    TCC application once queried cannot be said to be still under processing, but it is kept
    on hold until outstanding issues have been resolved or sorted out by the
    taxpayer with the relevant tax office.

    I know you are happy with this simplified processes of getting your TCC.  The formal classroom lectures will not be as simple as this. Always visit this blog for such simplified business information. Send us questions through which we can address your business challenges; make comments through our comment platform that will help us know how you feel and how to serve you better. Click any of the social media buttons above to register for regular postings. Our news letter platform will do the same for you. Just keep in touch.

    THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA

    Let me conclude by listing the various benefits you will have if you are in possession of your TCC.


    Personal Income Tax Clearance Certificate in Nigeria

    The uses or benefits as contained in the Nigerian tax laws are that it will enable only tax payers qualify for the following: 
    • Application for Government loan for industry or business;
    •  Registration of motor vehicle;
    •  Application for firearms licence:
    •  Application for foreign exchange or 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 property;
    •  Application for import or export licence;
    •  Application for agent licence;
    •  Application for gaming licence;
    •  Application for registration as a contractor;
    •  Application for distributorship;
    •  Confirmation of appointment by Government as Chairman or member of a 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 market stalls.
    •  Appointment or election into public offices
    •  Applicant for foreign exchange control permission, to remit funds to a non-resident recipient in respect of income accruing from rent, dividend, royalty, fees or other similar income.

      THE BENEFITS OF TAX CLEARANCE CERTIFICATE IN NIGERIA


    With respect to this article, the Nigeria relevant tax laws are:
    1. Companies Income Tax Act, Capt.C21,LFN 2004
    2. Petroleum Tax Act, Cap.P13, LFN 2004.
    3. Education Tax Act, Cap.E4, LFN 2004
    4. Personal Income Tax Act, Cap.P8, LFN 2004
    5. Value Added Tax Act, Cap.P13, LFN 2004
    6. Stamp Duties Act, Cap.S8, LFN 2004
    7. Capital Gains Tax Act, Cap.C1, LFN 2004
    8. Customs and Excise Duties Management Act, Cap.C45, LFN 2004

    I have seriously highlighted in certain areas of this discussion above that for you to be doing good business with TCC you will require the services of a tax consultant.Contact a consultant today.

    In times of economic down turn like this, you need not to be careless over your tax management procedures. Do something, get a tax manager/consultant.
    Thanks for reading through.

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