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.
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