Are you a foreigner intending to invest or do business in Nigeria? This article profers keynote guide on things you must note and do.
Your company is considered as a “foreign company” or “non-resident company” when it is established under any law in force in any territory or country outside Nigeria.
A foreign company is required to register with the Corporate Affairs Commission before it can do business in Nigeria. However, there are exemptions to this and even at that, those exemptions cover for a temporary period. That a company is exempted from the need to register with the Corporate Affairs Commission does not automatically vest exemption on the company from remitting tax. Although, depending on the product/services and industry, a foreign company may apply for tax exemption or reduction as the case may be.
There are bilateral treaties and agreements that guide against double taxation and helps State parties to avoid situations of tax evasion. These agreements have a way of coming into play when dealing as a foreign company and for instance, the U.N. Double Taxation Convention is applicable in Nigeria and some of the taxes subject to it are personal income tax, companies’ income tax, capital gains tax and petroleum profit tax.
A foreign company does not require a physical presence in Nigeria to do business. However, taxes apply to its investment returns like dividends, rents, etc. These are payable as withholding tax to the government. Where a foreign company does business in Nigeria without being registered in the country, the law mandates the company to register for value added tax (VAT) with the Federal Inland Revenue Service using the address of the resident company which it transacted with. This is to ensure ease of communication. The way to go about this is to include VAT charges in the Foreign company’s invoice to the Nigerian company. Interestingly, that company is empowered to serve as the collection agent for that purpose and remit the VAT on behalf of the foreign company.
Where a foreign company actively ventures into doing business in Nigeria, it has to apply for tax identification number (TIN) prepare audited reports and file regular tax returns.
A foreign company doing business in Nigeria is liable to pay tax on profits attributable to the business that it does in Nigeria (this is unlike a Nigerian company which is liable to pay tax on its worldwide income)
Recently, the FIRS established a one-stop centre for foreign companies to handle their tax affairs and also keep their records. The office is referred to as “Non- Resident Persons’ Tax Office” and it is situated at Ikoyi, Lagos. The office would officially open for business as from 1st January 2020. With this development, your company can comply more easily and also track records without having to juggle across Nigeria.
If you have the need to inquire further about any detail regarding doing business in Nigeria, feel free to contact us at Law Accent.