Skip to main content

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.

Labels:

Comments

Post a Comment

Popular posts from this blog

Requirements for Registration of Incorporated Trustees (NGOs, Associations, Foundations, Clubs)

Unlike business name and company registrations, registration of Incorporated Trustees (IT) is in a class of its own. This is because Incorporated Trustees are non-profit organisations (NGOs) and often end with Associations, Clubs etc. Since the coming into place of the CAC’s Company’s Registration Portal (CRP), the procedure for registration has become really simplified and less time-wasting. ITs are often registered for religious, educational, literary, scientific, social, development, cultural, sporting or charitable purpose.  1 - Proposed Names As in business name and company registration, you must provide proposed names. But unlike the former, Incorporated Trustees now allows for 4 proposed names. This is because the cost of reserving a name for IT registration is ten times more than that for reserving a business name or company. Application for Reservation of name for registration of an IT is called an application for consent to register the association with the CA...
Post a Comment
Read more

Company Shares Terminologies

The Companies and Allied Matters Act, 2020 (CAMA) uses various terminologies to describe shares. This discussion briefly highlights and describes some of those terms. Issue of shares – ss. 141-148  This is the creation of new shares by the company. The shares may be freshly created through an increase in the company’s share capital; or by the re-issue of old shares which were either surrendered or forfeited by a former shareholder of the company. Offer of Shares – s. 142  This is the process whereby the company offers newly issued shares, either to existing shareholders of the company or to prospecting members. Allotment of Shares – ss. 149-157  This is the allocation of new or old shares to new or existing members of the company on terms and conditions prescribed by the company. Call on Shares – ss. 158-159 This is the demand for payment from shareholders who are yet to pay for their shares. It is simply “a call” on the members of the company to pay for unpai...
Post a Comment
Read more

Why You Should Register Your Business Now!

Why should I register my business?  That may seem like an obvious question to everyone who has registered his business, but it may be a nagging question at the back of the minds of those who have not registered their businesses or who feel that their businesses are not worth registering. In Nigeria, where a large number of business men and women are petty traders, that would be a good question to ask. But everyone who engages in any kind of business, including trading, and is serious about the growth of the business, should seriously consider the necessity of registering their businesses, as it may be one of the wisest decisions they ever took.  Although, this article focuses on business names, it also applies to companies and incorporated trustees (NGOs). An unregistered business name is illegal Some businessmen and women claim that they have business names and have been using it for years. In reality, to say that you have an “unregistered” business name is a cont...
Post a Comment
Read more