Frequently Asked Questions (FAQS): Running a Business in Nigeria – Withholding Tax

by MMC
0 comment

To print this article, simply be registered or log in to Mondaq.com.

Starting a business in Nigeria can be a promising venture, considering the country’s large population, economic growth and various business opportunities. However, like any other country, Nigeria has its own set of regulations and hurdles that entrepreneurs must overcome.
Operating a business in Nigeria involves several steps, such as registering the business with the Corporate Affairs Commission (CAC), tax registration with the Federal Inland Revenue Service (FIRS), obtaining necessary permits and licenses, among others.
To help aspiring entrepreneurs navigate the environment, in this article we have summarized a list of frequently asked questions (FAQs) that entrepreneurs often need answered before they start doing business in Nigeria.

1. What are the relevant business structures for operating in Nigeria?

In Nigeria, the law requires that any person or entity intending to engage in business activities in Nigeria must register with the Corporate Affairs Commission (CAC). The Companies and Allied Matters Act (CAMA) 2020 is the main Nigerian legislation governing the formation and operation of companies. Under CAMA, companies can adopt various legal structures such as:

  • Limited Liability Company: This is the most common structure for small and medium-sized businesses. The company must have at least two shareholders (one shareholder in the case of a small business) and two directors.

  • Limited company: This structure is suitable for large companies and allows for the public sale of shares. There must be at least two shareholders and two directors.

  • Limited Liability Company (LLP): This is a newer option provided by CAMA. It combines the features of partnerships and joint stock companies in such a way that all partners participate in the management of the company and also benefit from limited liability protection.

  • Limited partnership: It is made up of at least two people, a limited partner and a general partner in which the liabilities of the limited partner are limited to the amount of his investment in the company while the liabilities of the general partner are unlimited. It is suitable when one of the partners wishes to be a mere sponsor and will not participate in the day-to-day management of the affairs of the partnership.

  • Business Name: This structure is ideal for sole proprietors/entrepreneurs. It does not offer limited liability protection and the owner is personally liable for the business’s obligations.

2. Who are the main business regulators in Nigeria?

There are several regulatory bodies in Nigeria and whether or not a business falls under their jurisdiction may depend on the nature of the business. Some of the main regulatory bodies include:

  • The Corporate Affairs Commission (CAC): responsible for regulating all corporate matters.

  • The Federal Competition and Consumer Protection Commission (FCCPC): Responsible for ensuring that the interests of Nigerian consumers of goods and services are protected.

  • The Central Bank of Nigeria (CBN): responsible for regulating financial services in Nigeria.

  • The Federal Inland Revenue Service (FIRS): responsible for enforcing business tax regulations.

3. What are the tax implications for practicing in Nigeria?

Nigeria has a tax system that includes federal, state and local taxes. Businesses in Nigeria are subject to a number of taxes, including Corporate Income Tax (CIT), Value Added Tax (VAT), Withholding Tax (WHT) and Income Tax. personal income (PIT) for employees. It should be noted that upon incorporation with the CAC, companies now automatically receive a tax identification number which appears on the certificate of incorporation.

4. Can foreigners own a business in Nigeria?

Yes, foreigners can fully own and operate businesses in Nigeria, except in specific sectors such as oil and gas, aviation, domestic coastal transportation, etc., which require local majority ownership and control.

5. Are there any immigration requirements for owners and employees of foreign businesses?

Yes there is. For foreign business owners and employees, Nigeria has specific immigration requirements. One of the most essential immigration requirements is the Combined Expatriate Residence Permit and Foreigner Card (“CERPAC”) which employers of foreign employees must obtain on their behalf to enable them to work and reside legally in Nigeria.

6. How long does it take to register a business in Nigeria?

The time frame for registering a business may vary depending on the nature of the business and the relevant regulations applicable to the business. However, on average, it usually takes around 5-10 business days to register a business with the CAC.

Conclusion

In conclusion, starting a business in Nigeria offers significant opportunities, but also requires careful planning to ensure compliance with existing regulatory frameworks. By answering these FAQs and seeking professional advice, entrepreneurs can embark on a successful business venture in this dynamic and profitable market.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your specific situation.

POPULAR ARTICLES ON: Nigeria Tax

More interest deductions?

ENSafrique

Currently, a taxpayer is entitled to deduct interest calculated in accordance with section 24J(2) of the Income Tax Act, 1962 (“Act”) if the taxpayer…

You may also like

Leave a Comment

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign