Thread by @ChideraDe

G.O.T of Taxes.

HOW NIGERIAN BUSINESS OWNERS OBTAIN TAX CLEARANCE CERTIFICATE WITH THE F.I.R.S
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CASE STUDY #2

Assuming you registered your business in 1995 or later but did not commence business operations immediately until let’s say 2013 - What do you do?...

We helped a client who had this unique challenge.

A particular client of ours (name withheld) who deals in automobiles on the Island, though on a relative medium scale level was approached by a bank (name withheld) to supply a number of vehicles to the bank.

As a condition...

he needed to register with the bank as a contractor in order for him to be considered for the contract and one of the documents required of him to submit was a Tax Clearance Certificate.

Now, the unique thing about this client of ours was that he incorporated his business on...

the 17th of March, 1995 when he left off paid employment to start his personal business, but as fate would have it, one thing led to another thing and so he abandoned his business & traveled out of the country.

Unfortunately, he never sought the advice of an Accountant to...

guide him on what he needed to do since he’ll be off running his business.

Just the same way we have quite a couple of business owners register their businesses with the CAC & don’t do anything about it let alone seeking advice from accountants on what to do thereon.

So, in...

a bid not to lose the contract, he called on us to assist him process a Tax Clearance Certificate.

This is someone who registered a business in 1995 and in 2014, he’s asking us to help him process a Tax Clearance Certificate to be presented to the bank for a contract...

So, what did we do?

Did we tell him it was not possible? No!

This is what we did.

The steps listed below are the applicable steps to follow in the event you have a similar challenge and don’t know what to do.

Step 1: The first thing we did was to identify the particular...

F.I.R.S office that was in charge of our client’s company just so we can familiarize and introduce ourselves as his representatives.

(Sidenote: The “Tax Guys” first concern is COMPLIANCE

So, if you like speak the best of English, if your documents & your tax liability..

i.e. amount owed & expected to be paid is falling short, you will only be wasting your time discussing any other thing.

In this wise, you need a skilled Tax Consultant who understand the dynamics to speak their language)

There are a couple of F.I.R.S offices scattered all...

over Victoria Island, Lagos.

Not knowing the particular F.I.R.S office in charge of our client's file, we had to move from one ITO to the other in order to establish it, and that we did after spending some hours on the road moving from one place to the other....

Step 2: A financial report called “Statement of Affairs” will be prepared.

A statement of affairs basically is a financial report that shows all the assets owned and liabilities owed by the business entity.

An audit firm normally will prepare the statement of affairs for...

the relevant years i.e. the years of not filing the returns for the company to be submitted to F.I.R.S.

The audit firm will also affix a stamp & seal on the Statement of Affairs prepared. This is to authenticate the report to be submitted to the F.I.R.S...

(Sidenote: A Pre-operation levy of N25,000 will be paid by companies that have incorporated their businesses with the CAC but are yet to commence business operations should they request for a Tax Clearance Certificate after six months of incorporation)...

(Also note, that the sum of N20,000 will be payable for subsequent years should the company decide it is not yet time to start off business operations. This payment will continue until it files in a notice of commencement of business)

Just so you know...

The business was incorporated in 1995 with the Corporate Affairs Commission with an authorised share capital of 100,000 naira.

What this means is that our client’s business had a face value N100,000.

The Statement of Affairs was prepared taking that into consideration for...

the years of inactivity and submitted thus to the F.I.R.S.

Mark this down: It is imperative that you file in your returns on a yearly basis by preparing a Statement of Affairs whenever you are yet to effectively commence your business.

Why?

F.I.R.S as an institution...

needs to be communicated on the state of affairs of your business.

Moreso, that is the only evidence F.I.R.S can lay hold on to that of a truth you are yet to start-off business operations. Words of mouth or stories will not help...

Step 3: We prepared the Statement of Affairs and sent it to the F.I.R.S for consideration on behalf of our client.

After much haggling, going back & forth, we finally reached an agreement on what to pay to the F.I.R.S which we did and in a month's time, our client collected...

his Tax Clearance Certificate and thereon submitted it to the bank.

Mind you, prior to the execution of the contract, he had shown the bank proofs that he was processing his TCC and also made photocopies of payments to the F.I.R.S he had made pending the issuance of the...

certificate which initially the banks didn’t accept but after so much pleading, he was giving the benefit of the doubt and so, when the original TCC finally came out, he gave a copy to the bank for record purpose.

Was he able to execute the contract? YES! He did...

Processing of Tax Clearance Certificate is a practical thing.

Having a deep understanding of the dynamics and a whole lot of local wisdom helps out.

Another scenario where a Statement of Affairs will be prepared and submitted to the F.I.R.S for the processing of TCC is...

when the business has not spent more than 18months in commencement.

For example - assuming you commenced your business in January 2014.

You have between January 1, 2014 to June 30, 2015 to submit your company’s Statement of Affairs. Submitting it July 1, 2015 means it is...

late by one month.

If you fail to file in for tax within this time frame, you’ll be liable to pay a penalty of N25,000 for the first month of default and N5,000 for subsequent months in the event the default continues.

The Federal Government needs money to fund her budget...

and so they are doing everything in their power to generate as much funds as they can and Tax is one of the major revenue drivers.

I hope this helps.

Chidera
0802 318 9838, 07057179585
[e-mail]
Accounting |Tax Solutions| Real Estate |ERP Consultant