Practical Guide On How Business Owners Can Obtain Tax Clearance Certificate (TCC) With The F.I.R.S - CONCLUDING PART
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CONDITIONS UNDER WHICH TAX CLEARANCE CERTIFICATES (TCC) MAY BE ISSUED BY THE FEDERAL INLAND REVENUE SERVICE (F.I.R.S)

CASE STUDY #3

Assuming you incorporated & commenced business a few years back (let’s say year 2010) but you are just filing returns in 2015 – How do you obtain Tax Clearance Certificate under this scenario?

Immediately a company incorporates and commences a business, then such an entity is statutorily required to be filing in the relevant tax returns as and when due to the F.I.R.S. These includes monthly VAT remittance and other statutory taxes such as the Company Income Tax and Education Tax.

Now, when business owners default in this regard, what then is the way out?

At this juncture, your company’s external auditor will prepare an Audited Financial Statements to be submitted to the F.I.R.S for the relevant years you did not file in your returns (i.e. from 2010 – 2014).

You won’t compute Company Income Tax & Education Tax for year 2015 but you’ll continue to remit your VAT on monthly basis.

In this situation, you will be exposed to Late Returns Penalty (“LRP”) as it is popularly called for late filing for all the years you did not obtain a Tax Clearance Certificate. Like I wrote in the previous post, the computation of the Late Returns Penalty will be on cumulative method of calculation. This is exclusive of interest which is at the current bank rate (26%) as at the time of this post. So, by the time you add up the numbers that should give you a fair idea of what you’ll be coughing out in taxes.

Below is a table normally used by tax authorities for computation of Late Returns Penalty.

Sidenote: This is just an example and for educational purpose only.

Example of Computation of Late Returns Penalty for VAT

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From the table, you can see the length of VAT evasion of this particular Business Owner and this just for a year. When you now take to account the numbers of years he’s defaulted in remittance that should give you a fair idea of what he’s in for.
This is no kid’s play.

Nevertheless, a seasoned tax consultant who understands the dynamics of negotiation can always help out. The tax consultant when done with negotiations will advise accordingly the MD of the company concerned and cheque will be drawn for payment of tax liabilities into the respective accounts of F.I.R.S.

In the event the MD is not able to pay off at a go, the payment can be spread.

At the completion of the payment, the tax consultant will formally apply by filling an “Application For Tax Clearance Certificate Form”. Three copies of the same form will be filled and submitted and an acknowledged copy returned back to the tax consultant.

Now, the Tax consultant will keep checking (either by phone calls or personal visit) to the tax office for the Tax Clearance Certificate. Once it is ready and signed by the Tax Controller of that particular Tax Station, an officer vested with the responsibility to issue it out fills out a hard cover register and the recipient acknowledges having received it.

Thereafter, you buy KFC for the boys or they it buy it themselves.

But then, you can escape the penalties and interest due you TODAY if only you can take advantage of the window currently offered by the Voluntary Assets and Income Declaration Scheme (VAIDS) of the Federal Government.



I hope this helps.



Chidera ANELE
Accounting| Tax Solutions| ERP Consultant| Real Estate

Quick question: a registered business name since August 2017 with TIN and a business account running since September 2017. What are the processes to obtain a TCC please?

Tintas:
Quick question: a registered business name since August 2017 with TIN and a business account running since September 2017. What are the processes to obtain a TCC please?

Yes OP pls answer this. In my case I registered a business name in March 2017, registered with FIRS and got my TIN. However, as I type this my business has not commenced operations till January 2019. Pls at what point can I begin to talk of getting TCC because I intend to pursue some govt contracts next year.