Tax Clearance Certificate in Nigeria

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What is a Tax Clearance Certificate?

A Tax Clearance Certificate in Nigeria is also known as Tax Form Z. It is a crucial official document issued by the relevant tax authority to a taxpayer. A Tax Clearance Certificate certifies that, the tax assessed on the income (gathered from all sources) of a particular taxpayer for the three years just immediately before the current year of assessment has been fully paid.

Obtaining a Tax Clearance Certificate is provided for in the Nigerian constitution by Section 85 of Personal Income Tax Act (PITA). According to Section 85, the relevant tax authority can issue a tax clearance to a person who has demanded the tax certificate whenever the tax authority has properly evaluated the tax assessed on the income of that person and considered the taxpayer not defaulting. The income is to be evaluated based on the past three years immediately preceding the current year of assessment. If the tax is considered fully paid or seen that the taxpayer is not liable to pay tax for any of those three years, then the tax authority can issue a tax clearance within two weeks of demand. The tax Authority is also well within their rights to deny a demand for a Tax Clearance Certificate as long as there are reasons for the denial. According to the constitution, payment of current year tax shall not be made a condition for the issuance of a Tax Clearance Certificate, unless the applicant is leaving the country finally.

Tax Clearance Certificate in Nigeria

Importance of a Tax Clearance Certificate

A Tax Clearance Certificate is very important, especially for business owners. In fact, according to Section 85 (2) of the Personal Income Tax Act (PITA) of the Nigerian constitution, an agency, ministry or department of Government or a commercial bank who wants to make business dealings related to some business transactions must demand for the personal Tax Clearance Certificate for the three years just before the current year of assessment. The agency is also required to verify the genuineness of the Tax Clearance Certificate by referring to the relevant tax authority.

Content of a Tax Clearance Certificate

Chargeable income

Tax payable

Tax paid

Tax outstanding or any other statement to the effect that no tax is due

Taxpayer Identification Number (TIN)

Transactions for which a Tax Clearance Certificate is required

Below are Transactions for which a Tax Clearance Certificate must be presented in Nigeria

Application for a Government loan for industry or business

Registration of Motor Vehicle

Application for a firearms license

Application for foreign exchange control permission to remit funds outside Nigeria

Application for certificate of occupancy

Application for the award of contracts by Government through any of its agencies and registered companies

Application for approval of building plans

Application for trade license

Application for transfer of real properties

Application for import and export license

Application for agent license

Application for pools or gaming license

Application for registration as a contractor

Application for distributorship

Confirmation for appointment by Government to a Public office such as Chairman or member of public board or commission

Stamping of guarantor’s form for a Nigerian Passport

Application for registration for a business name or for a limited liability company

Application for allocation of markets stall

Appointment or election into public office

For change of ownership of a vehicle

Application for a plot of land

Conditions to be met Before an Individual or Business can be issued a tax clearance certificate

Before Tax Clearance Certificate is issued to a taxpayer, the following documents must be in the personal file of the applicant. They are:

Tax Form A (Self-Assessment Tax Form)

Proof of Service

Tax Form 40 (Interview Sheet)

Income Tax Working Sheet

Tax Form L1 (Notice of Assessment)

E-Payment Receipt

Bank Teller

Receipts of Payment for the relevant years

Application for Tax Clearance Certificate

Tax form 34 (Employees Annual Assessment File)

Evidence of Tax Identification Number Registration.

A copy of the application form for Tax Clearance Certificate by the tax payer

Before Tax Clearance Certificate is issued to a taxpayer, the following documents must be in the Control file of the Establishment. They are:

Record of relevant returns for the past three years preceding the as the current year of assessment

Evidence of remittance of taxes paid to the relevant tax authority

Tax Form H2 also known as Certificate of Payment and Tax which must be duly filled, signed and stamped by the employer

Evidence of Tax Identification Number

Detailed brief on the Taxpayers

Two passport photographs

Condition under which Tax Clearance Certificate may be denied

As mentioned earlier, the constitutions makes provisions under which the relevant Tax Authority, which in this case is the Federal Inland Revenue Service can deny an application for a Tax Clearance Certificate. When a tax payer who has deducted any tax pursuant to the provisions of the law fails to pay the tax so deducted (PAYE, WHT)

OFFENCES AND PENALTIES

There are penalties and sanctions for offences related to the Tax Clearance Certificate. The offences are:

When a person provides incorrect information for the purpose of obtaining a Tax Clearance Certificate in relation to any matter or thing affecting his liability to tax

When a person obtains a Tax Clearance Certificate through misrepresentation, forgery or falsification

Anyone found guilty of the offences above shall be given a fine of N50, 000.00 in addition to twice the tax payable by him or to imprisonment for 3 years. In some cases, he or she is liable to both such fine and imprisonment.

The New Online Tax Clearance Certificate (TCC) Application Portal

The Federal Inland Revenue Service (FIRS) commissioned a new online Tax Clearance Certificate (TCC) application portal in 2020.

Most taxpayers were issued restricted six-month tax clearance certificates earlier in the year, and which expired 30th of June 2020. After this, taxpayers were required to update their information with the FIRS so their details could be moved to the new portal.

All taxpayers under the old platform and those making new TCC applications under the new application portal are required to reapply or apply by submitting a taxpayer data update form. This form is required to obtain a Tax Clearance Certificate. The form can be obtained on the FIRS website.

COMPANY DETAILS

Name of Company

RC Number

Tax Payer Identification Number

Business Sector/Line of Business

Company Address

Company Phone number

Company Email Number

Date of Commencement

Accounting Year-End

E-SERVICES

Name of Authorized Persons

Email Address

Phone number

Designation

DETAILS OF TAX REPRESENTATIVES

Name

Email Address

Phone Number

Designation

 

 



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