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Tax Obligations of NGOs in Nigeria

Introduction 

NGOs, Not-for-Profits, Associations, Foundations, Clubs, Friendly Societies, Charitable Organisations, Religious Organisations – whatever you chose to call them, are all registered as Incorporated Trustees. 

As not-for-profits, the general notion is that NGOs are exempt from taxes. However, NGOs do pay taxes to the government when they make profits on certain transactions. In this article, we will discuss the various taxes that NGOs are liable to pay, and when they are liable to pay them. Like business names, NGOs also have basically 5 taxes they should concern themselves with:

1. Capital Gains Tax (CGT)
2. Personal Income Tax (PIT)
3. Withholding Tax (WHT)
4. Stamp Duties (STD)
5. Value Added Tax (VAT)

Capital Gains Tax (CGT)

NGOs will be liable for CGT if they sell certain of their assets. Chargeable assets under CGT include shares, non-Nigerian currencies and real estate. The rate of CGT is 10% of the profits made from the sale. NGOs that make profits by selling any asset must file returns to the FIRS latest 30th June or 31st December of the year of the sale. 

Personal Income Tax (PIT)

Although a personal tax, NGOs will be liable for PIT if they have employees. So, NGOs with employees must deduct and remit their employees’ PAYE to the IRS of the State where they operate within the first 10 days of the next month. An NGO will not remit PAYE for an employee who earns the minimum wage (N30,000) or less. Default attracts 10% penalty plus interest at CBN’s lending rate. Late filing attracts N500,000 penalty.

Withholding Tax (WHT)

NGOs will be liable for WHT if they contract out jobs to professionals, construction companies, etc. Depending on the transaction involved, WHT rates are 2.5, 5, or 10 percent, and must be remitted to the FIRS within 21 days of the transaction. Penalty for default is 10% of the tax and interest at CBN’s lending rate. 

Stamp Duty (STD)

NGOs will be liable to pay STD on physical and electronic documents of transactions. Such transactions include sale agreement for land. The rates are fixed or in proportion to the value (i.e. ad valorem). Where the rate is fixed, the NGO must pay for stamp duty before the document is executed; but where it is ad valorem, within 30 days after it is executed. Penalty for default is 10% per annum of the unpaid duty.

Value Added Tax (VAT)

NGOs will be liable to pay VAT if, for any reason, they sell goods or render services that gives them profits. VAT is charged at 7.5% of the value of the goods or services. After registration with the CAC, NGOs must register for VAT with the FIRS. Where an NGO makes profit from any goods sold or services rendered, it must remit VAT to the FIRS within 21 days of the following month after the transaction. 

Conclusion

Contrary to popular belief, NGOs are liable to pay certain taxes. Although, generally regarded as not-for-profits, they sometime engage in economic activities that give them profits, for which, depending on the type of transaction, they must remit VAT, CGT or WHT. If they have employees who earn above the minimum wage, then they must remit the PAYE of the employee to the State IRS where they operate. And if they purchase land or real estate, they would need to do stamp duty on the contract of sale or deed of assignment. It is important for NGOs to be aware of these tax obligations. 

Articles on this site are meant for general knowledge only, and not as professional advice. If you need personal advice on matters contained in this article, you are advised to contact a professional.

We are a firm of legal practitioners and CAC certified agents. We help business owners, entrepreneurs and associations register their businesses, companies, and associations. If you need our help with any of the matters contained in this article, feel free to send us a mail at niyiama@yahoo.com or reach us on WhatsApp @ +234-08126194751.

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