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OPERATING A BUSINESS IN IMO

Useful Information

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+234 803 302 1192
info@investinimo.com

Imo Trade & Investment Center,
Pocket Layout, Port Harcourt Road, Owerri,
Imo State, Nigeria



OPERATING A BUSINESS IN IMO


On this Page

1.    Registration with ISIPA
2.    Company Taxation
3.    Labour
4.    Production Factor
5.    Land
6.    Legal Framework


1.   REGISTRATION WITH ISIPA - ONE STOP CENTRE

According to the Imo State Investment Promotion Agency Law Section 22 Act 1 2010, all foreign and local company are required to apply to the ISIPA for registration before commencing business.

The Imo State Investment Promotion Agency Law Section 9 Act (a) of 2010 established the Imo State Investment Promotion Agency to encourage, promote, and coordinate all investments in Imo. This act also regulates the participation of foreign businesses in the state.

The ISIPA Act provides for foreign nationals to own up to 100% equity and undertake any type of business in Imo except those related to the production of arms, ammunition, narcotics and related substances and any items indicated on the negative list as defined by section 2 of the Act.


Documentation for Business Registration with ISIPA

To process ISIPA Business Registration, the following documents are required:

•  Duly completed ISIPA Form I;
•  Memorandum & Articles of Association;
•  Evidence of Incorporation;
•  CAC Form 1.1 (or CAC Forms CO2 and CO7 for old companies);
•  Power of Attorney/ Letter of Authority (where applicable); and
•  Evidence of Payment of Processing fee (The payment for business registration is made via remita and non-refundable).
•  Processing Fee of N25,000.00 only

Click here to download ISIPA Form I


ISIPA One-Stop Centre (IOSC)

ISIPA One-Stop Centre (IOSC) brings together relevant government agencies to one location to provide fast-tracked services to investors. The Centre is coordinated by the ISIPA.

The objective of the Centre is to simplify business entry processes by removing administrative and regulatory bottlenecks pertaining to doing business in Imo.


Services at ISIPA One-Stop Centre (IOSC)

•  Granting of business entry approvals, licenses and authorizations within the shortest possible time;
•  Provision of general information on the Imo State economy, investment climate, legal and regulatory framework, as well as sector and industry-specific information to aid existing and prospective investors in making informed business decisions; and
•  Facilitation and follow-up services on behalf of investors in all government ministries, departments and agencies.



2.   COMPANY TAXATION

All businesses which operate in and derive income from Imo are liable to pay tax. The Imo State tax system operates a self-assessment regime which allows taxpayers to assess, pay and file tax returns as prescribed in the extant tax laws.

Taxation in Nigeria is based on the three tiers of government as follows:

The Federal Government through the Federal Inland Revenue Service (FIRS) has jurisdiction over Companies Income Tax, Tertiary Education Tax, Personal Income Tax for non-residents, Capital Gains Tax (on capital gains made by companies), Value Added Tax, Petroleum Profits Tax, Stamp Duties payable on transactions involving corporate bodies.

The States have responsibility for collecting taxes payable by individuals resident in their territories. These include Personal Income Tax, Capital Gains Tax and Stamp Duties on instruments executed by individuals.

The Local Governments are responsible for miscellaneous taxes, levies and rates, such as tenement rates.

For further Details see National Tax Policy and Federal Inland Revenue Service (FIRS)


Companies Income Tax (CIT)

This is a tax chargeable on all resident and non-resident companies (other than those engaged in petroleum operations) incorporated in Nigeria. Also known as corporate tax, the CIT rate is 30% of the profit earned in the year preceding assessment.

Resident companies are liable to CIT on their worldwide income (profits accruing in, derived from, brought into, or received in Nigeria) while non-residents are subject to CIT on the income derived from their Nigerian operations. A non-resident company with a fixed base in Nigeria is taxable on the profits attributable to that fixed based. Any WHT deducted at source from its Nigeria-source income is available as offset against the CIT liability.

For more information see Company Income Tax Act


Stamp Duties

Stamp Duties are basically taxes paid to the State Government on documents ( also known as instruments for the purpose of the Stamp Duties Act) such as Conveyances on Sale, Bills of Exchange, Promissory notes, Agreements, Contracts or even documents such as Letters and Certificates of Admission, Instruments of Apprenticeship, Insurance Policies etc. The payment of Stamp Duties is backed by legislation, the law being the Stamp Duties Act 1939 (as amended by numerous Acts and various resolutions and contained in Vol 22 Cap 411 LFN 1990). It also provides a list of documents in its Schedule and the duty payable on each of them.

For more information see Stamp Duties Act


Personal Income Tax (PIT)

The Personal Income Tax is charged on the income of individuals, employees, partnerships and incorporated trustees on the basis of residency and payable to the State Government. The Act requires an employer to deduct and remit its employee income tax under the Pay-As-You-Earn (PAYE) scheme. As such, the employer is required to register with the respective State Board of Internal Revenue (SBIR) to which each employee’s taxes are payable.

Personal income tax rate is applied on a graduated scale on taxable annual income. A Consolidated Relief Allowance shall be granted at a flat rate of N200,000 plus 20% of gross income subject to a minimum tax of 1% of gross income whichever is higher.

For more information see Personal income Tax Act


Petroleum Profit Tax

Petroleum Profit Tax is levied on the income of companies engaged in upstream petroleum operations in lieu of CIT. The rates vary as follows:

  ●  50% for petroleum operations under Production Sharing Contracts (PSC) with the Nigerian National Petroleum Corporation (NNPC).
  ●  65.75% for non-PSC operations, including joint ventures (JVs), in the first five years during which the company has not fully amortised all pre-production capitalised expenditure.
  ●  85% for non-PSC operations after the first five years.

Relevant document Petroleum Profit Tax Act


Tertiary Education Tax

All resident companies are required to contribute 2% of their assessable profits to the Tertiary Education Fund. This tax is usually filed alongside the relevant tax return (PPT or CIT).For companies subject to Petroleum Profit Tax,Tertiary Education Tax is treated as an allowable deduction.

Non-resident companies and unincorporated entities are exempt from Tertiary Education Tax.

Relevant document TETFund Act


Value-Added Tax

VAT is a consumption tax charged at 5% on the supply of taxable goods and services. All taxable persons are expected to obtain a VAT registration certificate, and display their Tax Identification (TIN) on all invoices. Oil and gas companies and government agencies are required to remit VAT on their purchases directly to the FIRS rather than pay it over to their vendors. A non-resident company carrying on business in Nigeria only needs to register for VAT using the address of its local counter-party and include the tax on its invoice. A Nigerian company is expected to remit the VAT directly to the FIRS rather than pay it over to a non-resident company.

Relevant document Value Added Tax


Capital Gains Act

Capital Gains Act This is a 10% tax imposed on capital gains arising from a sale, exchange or other disposal of properties known as chargeable assets. Payable by corporate entities (including pioneer companies) and individuals, this tax is jointly administered by the FIRS and State Internal Revenue Services.

Relevant document Capital Gains Act


Withholding Tax

This is an advance payment of income tax which is made on account of the ultimate income tax liability of the taxpayers (individuals and companies). Withholding tax accruing from payments to companies is remitted to FIRS while payments from individuals should be remitted to SBIRs. The under-listed WHT rates are applicable to all resident and non-resident companies and individuals.


Tax Registration Process

The first step to paying taxes for businesses in Nigeria is the registration of such a business. A free Taxpayer Identification Number (TIN) is automatically generated after registering the business, and this enables the business to start paying taxes.

  ●  The TIN is been generated for all registered companies and enterprises. For new business owners, the TIN is generated automatically after incorporating the business.
  ●  Registered businesses that have not obtained or have forgotten their TIN may visit the FIRS TIN Verification System to search for their TIN using their CAC Registration Number or Registered Phone Number. The corresponding business name and the assigned TIN and Tax Office will be displayed.
  ●  Register to file and remit Value Added Tax (VAT) and Withholding Tax (WHT) at the nearest FIRS office. (See the list of FIRS offices in the link below). Note that VAT and WHT returns must be filed not later than the 21st day of the month following the month of transactions.
  ●  File your Companies Income Tax (CIT) returns not later than six months after the end of the accounting year or 18 months after the commencement of business, whichever comes first.
  ●  Register as a corporate entity with the Corporate Affairs Commission (CAC) See Getting Started.


Tax Clearance Certificate

A Tax Clearance Certificate (TCC) is a document that certifies that a company or individual has settled the income taxes due for the three preceding years of assessment. A TCC is a prerequisite for official transactions conducted by a company in the public sector, such as when tendering for government contracts, when remitting foreign exchange through the banks, etc.

Company TCCs are issued by the FIRS; while individual TCCs are issued by the relevant State Board Internal Revenue (SBIR). FIRS and Lagos SBIR issues TCC online (See link below).

Companies need to apply to the relevant FIRS tax office to obtain a TCC.


Pioneer Status

Under Industrial Development (Income Tax) Relieve Act (IDITRA), companies engaged in industries/products approved as ‘pioneer industries/products’ shall be

(a) granted income tax relief for a period of three years, which can be extended for a period of one year and thereafter another one year, or for one period of two years (Section 10(2)(a)(b) IDITRA);
(b) exempted from paying tax on dividends paid by the pioneer company during the pioneer period to the extent that they are paid out of income exempted from tax (Section 17(3) IDITRA); and
(c) any loss incurred during the tax relief period also deemed to be incurred on the first day following the expiration of the tax relief period and can be carried forward to offset profits after the tax-exempt period.