Source: https://www.cof.org/country-notes/nonprofit-law-nigeria
Timestamp: 2019-04-18 17:14:49+00:00

Document:
This section describes the legal framework of nonprofit organizations (also known as non-governmental organizations or NGOs) in Nigeria, along with translations of legislative provisions relevant for a foundation or advisor undertaking an equivalency determination of a foreign grantee under IRS Revenue Procedure 92-94.
Nigerian companies are taxed under the Companies Income Tax Act (CITA). CITA exempts from tax the profits of companies engaged in certain public benefit activities, so long as the profits are not derived from trade or a business undertaking. Profits of companies established to promote sporting activities are also exempt. Nigerian companies may make tax deductible donations to certain public benefit organizations that are listed in the Fifth Schedule to CITA. Donations made by individuals, on the other hand, are not tax deductible. Nigerian not-for-profit companies are subject to a value added tax (VAT).
Individuals not qualified to be appointed as trustees include infants, persons of unsound mind, those who have undischarged bankruptcies and persons convicted of any offence involving dishonesty within a period of five years of the proposed appointment. [CAMA §675] In addition, the Corporate Affairs Commission, which oversees the registration of incorporated trustees, requires that individuals applying for incorporation as trustees undergo a police background check.
The unincorporated charitable trust formed under traditional common law rules also exists in Nigeria. A trust may be formed by the settlor inter vivos or by testamentary will.
Because the charitable trust is a generic creature of the common law, rather than of specific Nigerian statutory law, it will not be discussed further in this Note.
The Constitution of the Federal Republic of Nigeria states that “Every person shall be entitled to assemble freely and associate with other persons, and in particular he may form or belong to ... "any association for the protection of his interests" [Constitution of the Federal Republic of Nigeria §40]. Thus, with certain derogations, (i.e., those contained in §45 of the Constitution of the Federal Republic of Nigeria), people may come together to form unincorporated associations. Such unincorporated associations are not eligible for tax benefits. Because the information relevant to making an equivalency determination will necessarily be contained in the governing documents of each unincorporated association, these types of associations will not be discussed further in this Note.
Nigeria does not grant a special public benefit status to organizations that engage in public benefit activities. However, the public benefit character of certain organizations that engage in public benefit activities is recognized through the grant of tax preferences (please refer to Section V(B)).
Disturbing or encouraging the disturbance of peace and order in any part of Nigeria.
An association with incorporated trustees may engage in economic activities. There is no statutory provision that prevents it from doing business directly or through a for-profit subsidiary. Income derived from economic activities is subject to tax at the regular rate. There are no tax rules that distinguish between commercial or economic activities related or unrelated to the core objects of the association.
A company limited by guarantee may not be incorporated with the object of carrying out business for the purpose of making profits for distribution to its members. [CAMA §26(4)] In addition, §26 (1) of CAMA, requires that a company limited by guarantee apply its income and property "solely towards the promotion of its objects," which must be the promotion of "commerce, art, science, religion, sport, culture, education, research, charity or other similar objects."
At the same time, the rights enumerated above are non-justiciable. Moreover, they apply only to state actors and do not apply to private or non-governmental entities.
In general, no restriction exists on the control of not-for-profit organizations by other organizations or persons. It is possible that a Nigerian not-for-profit may be controlled by a for-profit entity or by a foreign grantor.
§1 (1) - Employment Tax Relief (ETR): ETR entitles employers who employ recent graduates and satisfy other criteria to an income tax exemption of 5 percent of its assessable profits or the amount of the gross salaries paid to the qualifying employees (whichever is lesser).
§1(3) - Work Experience Acquisition Programme Relief (WEAPR): An employer with a minimum net employment of five new employees; who retains them for a minimum of two years is entitled to WEAPR. WEAPR affords such employer an income tax exemption of 5 percent of its assessable profits at the end of the second year of employment of the affected employees.
§3 (1) - Infrastructure Tax Relief (ITR): 30 percent of the cost incurred by Nigerian Companies in the provision of infrastructures or facilities of a public nature is now exempted from income tax.
Copy of the current Tax Clearance Certificate (TCC) of each of the Trustees. [Paragraph 5 of the Guidelines On The Tax Exemption Status Of Non-Governmental Organisations issued on August 27, 2010, pursuant to Section 8(1)(t) of the Federal Inland Revenue Service (Establishment) Act 2007].
The laws of Nigeria do not provide for the deductibility of donations made by individuals to Nigerian NPOs.
No double taxation treaty exists between the United States and Nigeria.
Personal Income Tax which is charged on the income of an individual, community, family, trusts, etc. (other than a company) is regulated by the Personal Income Tax Act 2004.
The Personal Income Tax (Amendment) Act was assented to by the President of the Federal Republic of Nigeria on June 14, 2011 and publicized on December 12, 2011.
The Special Control Unit against Money Laundering (SCUML) of the Economic and Financial Crimes Commission (EFCC) is now charged with monitoring, supervising and regulating the activities of Designated Non-Financial Institutions (DNFIs) in line with the Money Laundering (Prohibition) Act ML(P) Act 2011 and the Prevention of Terrorism Act (PTA) 2011.
Section 25 of the ML(P) Act defines DNFIs as dealers in jewelry, cars and luxury goods, chartered accountants, audit firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, supermarkets, or such other businesses as the Federal Ministry of Trade and Investment or appropriate regulatory authorities may from time to time designate.
In line with Section 25 above, NPOs are now required to register and cooperate with SCUML guided by the following: Registration is free but compulsory; and NPOs are to report their financial transactions in excess of the statutory threshold of $1,000 cash transaction.
Rates in markets where state finances are involved.
Legal challenges on the taxing powers of the various tiers of government, especially with respect to which tier of the government has the authority to charge and collect value added tax (VAT), lottery, and gaming fees licenses, etc., are pending in some courts of law.
Of note, Section 8(q) of the Federal Inland Revenue Service (Establishment) Act 2007 enjoins the FIRS to issue a unique taxpayer identification number (TIN) to every company, enterprise, and individual. A Federal Government order contained in the government notice on the Value Added Tax Act 1993 dated May 25, 2007 also ordered all current existing bank account holders to have a TIN. The use of TIN became mandatory February 1, 8 for all taxpayers dealing with FIRS and for the payment of taxes to all Collecting Banks.
 For purposes of the CITA, the term ‘company’ means any company or corporation (other than a "corporation sole") established by or under any law in force in Nigeria or elsewhere. Therefore, it appears that only not-for-profit organizations established as companies limited by guarantee or associations with incorporated trustees (the trustees of which are a body corporate) will be entitled to tax exemption under CITA §23(1) (c) and (d) or §23(2). Because the tax exemption is only available to companies, not-for-profit organizations such as charitable trusts formed under the common law and unincorporated associations are not eligible to receive tax exemption.
 The recently launched National Tax Policy makes tax waivers/incentives broad-based rather than for selected organizations as was the case prior to the amendment of the schedule.
 The Value Added Tax Act 1993 set Nigeria’s VAT rate at 5 percent. The VAT Amendment Act 2007 removed the fixed rate of 5 percent and gave the Minister of Finance the power to determine the VAT rate. The Minister of Finance exercised the authority granted and raised the VAT rate to 10 percent. The Minister of Finance later rescinded his decision, and the rate reverted to 5 percent.
 Personal relief granted in the Principal Act under the old §.33 has been abrogated, while a consolidated relief allowance (CRA) in lieu of it has now been introduced under the new §.33.
A taxable person is now entitled to the higher of a consolidated relief allowance of N200,000 or 1 percent of gross income plus 20 percent of the gross income, with the balance taxable in accordance with the revised graduated income tax rates.
This is an improvement on the provisions in the principal Act of personal allowance of N5,000 plus 20 percent of earned income, with earned income having a definition of gross income in the main Act and basic salary under the subsidiary PAYE regulations.
 The PIT (Amendment) Act has now brought temporary employees or contract staff otherwise known as ”casual staff” into the Personal Income Tax net, effectively eliminating the argument that had persisted under the principal Act on the applicability of the PITA/PAYE to temporary or contract staff who do not hold employment letters issued by their employers.
Companies which make use of the services of casual workers; which employees are not on their payroll, may not be able to escape the PAYE tax net any longer with this amendment.
Limiting the recognition of the tax paid by the non-resident only to taxes paid in countries that have double taxation treaties with Nigeria.
 The Principal Act made provision for fines of N5,000 for corporate bodies and N500 for individuals.
Under the (Amendment) Act this has been increased to N500,000 for corporate entities and N50,000 for individuals.
It is worthy of note that the infringements mentioned in these sections clearly give rise to criminal liabilities, as they specify that the fines and penalties are to be imposed on conviction of the offenders.
 Under the Principal Act, employers had no formal tax filing obligation, thus making compliance monitoring difficult. The provision under §.41 of PITA, strictly speaking, put the obligation on private individuals to file their Personal Income Tax Returns on or before March 30 of every year.
This has now changed as the PIT (Amendment) Act has now made it a legal requirement for every employer of labor to file PAYE returns not later than January 31 of every year; showing all the emoluments paid to its staff in the preceding year.
 The PIT (Amendment) Act now provides for new tax rates as follows.
Above N3,200,000 at 24 percent.

References: §675
 §40
 §45
 §26
 §26

§1

§1

§3
 §23
 §23