STARTING A BUSINESS IN IMO
FINDING AN OFFICE LOCATION
Investors looking to acquire or lease a location should contact ISIPA One-Stop-Center for assistance. We have a list of options that will meet your criteria. In the interim, you may with our agreement use our address as your Nigerian address. ISIPA will also provide you with a temporary furnished office to operate from.
ISIPA OFFICE ADDRESS:
“Imo State Investment Promotion Agency – ISIPA, Ahiajoku Confernence Center, Pocket Layout, Port Harcourt Road, Owerri, Imo State, Nigeria”.
IMO BUSINESS STRUCTURES
There are a number of important considerations for investors when establishing a business in Imo. Investor will generally choose between establishing a new company and acquiring an existing company. If establishing a new business, a variety of business structures are available, each with their own regulations and tax considerations.
TYPES OF REGISTRABLE BUSINESS ORGANIZATIONS
• Business Name
• Private Limited Liability Company (LTD)
• Public Limited Liability Company (PLC)
• Unlimited Liability Company (ULTD)
• Company Limited by Guarantee (GTE)
• Incorporated Trustees
ISIPA consultancy department will advise investor on business structure that best suits their business needs. ISIPA “One-Stop-Stop” will also assist investor with all necessary registrations, licensing and permits.
DESCRIPTION OF REGISTRABLE BUSINESS ORGANIZATIONS
Business Name is registered as Sole Proprietorship or Partnership.
PRIVATE LIMITED LIABILITY COMPANY (LTD)
This is the most common form of business set up by investors and it requires a minimum share capital of NGN 100, 000 (One Hundred Thousand Naira). A private limited liability company is a legal entity in its own right, separate from those who own it. The company requires a minimum of two (2) and a maximum of fifty (50) shareholders and directors. Such a company is restricted from transferring its shares freely and prohibited from inviting the public to subscribe to its shares, debentures and/or deposit money for fixed periods or payable at call, whether or not bearing interest.
PUBLIC LIMITED LIABILITY COMPANY (PLC)
The minimum share capital for this type of company is NGN 500,000. A Public Limited Company required a Memorandum of Understanding of two (2) shareholders. There is no restriction on the maximum number of shareholders or their right to transfer their shares freely. The public may be invited to subscribe to its capital and the shares may be traded on any securities Exchange.
UNLIMITED LIABILITY COMPANY (ULTD)
This type of company has no limit on the liability of its members.
COMPANY LIMITED BY GUARANTEE (GTE)
Generally incorporated as a not-for-profit. This kind of company limits its members’ liability to the amount of their respective guarantees.
Usually formed for not-for-profit or charitable purposes.
REGISTRATION OF A BUSINESS ENTITY
Companies in Nigeria must be registered with the Corporate Affairs Commission (CAC). Investor interested in registering a company with CAC should consults ISIPA “One-Stop-Center” for assistance. CAC registration ranges from Name Search and Reservation, Business Name Registration to Business Incorporation.
NAME SEARCH AND RESERVATION
You can only use a name that is not identical to an existing company or business name. A name availability search must be conducted at the Corporate Affairs Commission registry to see if the name is available for use before reservation. Name Search and Reservation may be done on-line by visiting www.cac.gov.ng or investor consults ISIPA “one-Stop-Center” for assistance. Our consultancy department will assist you free of charge. Do let us know if you require this service.
BUSINESS NAME REGISTRATION AND INCORPORATION
Businesses can be registered online via the CAC Company Registration Portal www.cac.gov.ng. Through this site, company or individual can conduct name searches, complete the required forms, submit all relevant incorporation documents, and also pay associated fees online. ISIPA “One-Stop-Center” will also assist you with the incorporation free of charge. Please let us know if you require this service.
The online registration process is laid out below:
1. Create an account on the CAC portal. This can only be created by one of the company directors/shareholders or an accredited agent (a Lawyer, Chartered Accountant or a Chartered Secretary) https://services.cac.gov.ng/
2. Conduct name search and reserve a name.
3. Complete registration form (CAC 1.1. Application for Registration), providing details of the directors, shareholders and nature of business.
4. Pay CAC filing fees and stamp duty. The stamp will be electronically affixed once payment is made.
5. Download completed online form and Memorandum and Articles of Association, then append signatures accordingly.
6. Upload scanned documents for processing.
7. Present original copies of uploaded documents and collect certificate of incorporation/registration from the preferred location.
8. Once the certificate of incorporation is ready, a Tax Identification Number (TIN) will be generated by the Federal Inland Revenue Service and sent to registrant’s email. ISIPA “One-Stop-Center” will handle all these for you, please contact us.
DOCUMENTS REQUIRED BY CAC FOR BUSINESS INCORPORATION
• Form CAC 1.1. Application for Registration
• Memorandum and Articles of Association
• Proficiency certificate (where applicable)
• Recognized form of identification (passport bio-data page, drivers’ licence or National Identity Card) for Director(s)/Shareholder(s) and Secretary
• Foreign Certificate of Incorporation and Board resolution for subscription to Nigerian company (where applicable)
• Residence permit of resident foreigners (where applicable)
• Stamp duty evidence of payment
• Evidence of payment to CAC (the fees to be paid for incorporation is dependent on the volume of shares to be registered). Read More on http://new.cac.gov.ng
PREPARATION AND FILLING OF INCORPORATION DEEDS
Companies must have a Memorandum and Articles of Association, file a copy of same at the Corporate Affairs Commission registry, effect payment of stamp duties and conclude registration of the company as a legal entity. ISIPA consultancy department will assist you complete this process.
EXEMPTION FROM INCORPORATION
Foreign companies intending to do business in Imo - Nigeria may apply for exemption from the standard registration requirements if they are:
• Invited by any tier of government for specific individual projects
• Executing specific individual loan projects on behalf of a donor country or international organization
• Foreign government-owned companies engaged solely in export promotion activities and
• Engineering consultants or technical experts engaged in specialist projects with any tier of government.
Such applications for exemption shall be forwarded to the office of the Director General ISIPA.
REGISTERING A TRADEMARK
Companies entering Imo will want to protect their rights and prevent others from using their name by registering a trade mark. ISIPA “One-Stop-Center” will assist you.
LISTING ON THE NIGERIA STOCK EXCHANGE (NSE)
Nigeria has a modern and active stock market, allowing access to long-term capital. To obtain and maintain an NSE listing, companies need to meet the prescribed requirements set out in the stock exchange listing rules. This includes company disclosure and reporting requirements.
REGISTERING WITH THE TAX AUTHORITIES
ISIPA consultancy department is on standby to assist you.
The Federal Inland Revenue Service (FIRS) and State Board Internal Revenue are responsible for the collection of corporate and personnel taxes, respectively.
Every company, business name or incorporated trustee must be registered with the Federal Inland Revenue Service (FIRS) and make to CAC an Annual Return in prescribed Forms within stipulated time. Filling of financial return must be done within 18months of incorporation/registration and must be completed and filed within 42 days after the organization's Annual General Meeting. A financial year can in principle start on any given date.
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.
THREE TIERS OF GOVERNMENT TAX
Taxation in Nigeria is based on the three tiers of government as follows:
THE FEDERAL GOVERNMENT TAX
The Federal Government through the Federal Inland Revenue Service (FIRS) has jurisdiction over:
1. Companies Income Tax
2. Tertiary Education Tax
3. Personal Income Tax for non-residents
4. Capital Gains Tax (on capital gains made by companies)
5. Value Added Tax
6. Petroleum Profits Tax
7. Stamp Duties payable on transactions involving corporate bodies.
THE STATES GOVERNMENT TAX
The States have responsibility for collecting taxes payable by individuals resident in their territories these include:
1. Personal Income Tax
2. Capital Gains Tax
3. Stamp Duties on instruments executed by individuals.
THE LOCAL GOVERNMENTS TAX
The Local Governments are responsible for miscellaneous taxes:
• Levies and Rates such as tenement rates.
For further Details see National Tax Policy http://www.investinimo.com/NATIONAL%20TAX%20POLICY.pdf OR And Federal Inland Revenue Service (FIRS) http://www.investinimo.com/FIRS_Tax_Law_Compendium.pdf
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 http://www.investinimo.com/Company%20Income%20Tax%20Act.pdf
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 http://www.investinimo.com/Personal_Income_Tax_Act-2004.pdf
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 amortized all pre-production capitalized expenditure.
• 85% for non-PSC operations after the first five years. Download document Petroleum Profit Tax Act http://www.investinimo.com/PPTA%20(1).pdf
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 http://www.investinimo.com/TETFund%20Act.pdf
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 http://www.investinimo.com/VAT.pdf
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 http://www.investinimo.com/Capital%20Gains%20Tax%20Act.pdf
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.
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 http://www.investinimo.com/Stamp%20Duty%20Act.pdf
TAX REGISTRATION PROCESS
ISIPA consultancy department will assist you complete this process.
However 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 issues TCC online. Companies need to apply to the relevant FIRS tax office to obtain a TCC.
Under Industrial Development (Income Tax) Relieve Act (IDITRA), companies engaged in industries/products approved as ‘pioneer industries/products’ shall be
• 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)
• 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
• 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.