Frequently asked questions on tax

Christian Faith Based Organizations are association of persons registered under Section 590 of the Companies & Allied Matters Act (CAMA) 1990

Christian Faith Based Organizations are association of persons registered under Section 590 of the Companies & Allied Matters Act (CAMA) 1990 for the development of any religious, educational, and charitable purpose engaged in ecclesiastical, charitable, benevolent or educational activities of a public character. They are non-profit making organizations.

Category: Tax Compliance

Yes. Christian Faith Based Charity Organizations are exempted from paying income tax.

  • Section 23(1) (c) of the Companies Income Tax Act (CITA) Cap C21 LFN 2004 (as amended) provides that the profit of any statutory, charitable, ecclesiastical, educational or other similar associations are exempted from companies income tax obligation provided such profits are not derived from any trade or business carried on by such an organization or association.
  •  Section 23(1)© of CITA and Section 19, Paragraph 13 of the Third Schedule to PITA, also states that profits of any company/institution engaged in ecclesiastical, charitable, benevolent or educational activities of a public character are exempt from income tax provided such profits are not derived from a trade or business carried on by the company.
Category: Tax Compliance

Yes. Where a CFBO engages in any trade or business, the profit derived will be subjected to income tax as provided for in the Act. Also, where they invests its assets in any institution, the income derived from such investment shall be subjected to tax (i. e. Withholding tax). This also includes Capital Gains Tax (CGT) where a CFBO makes a gain on disposal of assets.

Category: Tax Compliance

Yes. They are exempted from paying Value Added Tax (VAT) on humanitarian purchases. Goods purchased for use in humanitarian donor funded projects are zero rated under the Value Added Tax Act Cap V1 LFN 2004 (as amended). They are also exempted from Capital Gains Tax where no gain is made on disposal of assets.

Category: Tax Compliance

Yes. They are expected to deduct and remit the following taxes

  • Pay As You Earn (PAYE)
  • Withholding tax on goods and services
  • VAT on non-humanitarian purchases
  • Capital gains if assets are disposed at a profit
  • Personal income tax on passive income or benefit in kind
  • Income tax on passive income such as dividend, rent, royalties, interest, Investment income.
Category: Tax Compliance
  • Companies and Income Tax Act (CITA), 2007
  • Personal Income Tax Act No. 104, 1993, 201
  • Value Added Tax Act No. 102, 1993
  • Value Added Tax Act, 2007 (As amended)
  • Tax and Levies (Approved List for Collection) Decree No.21, 1998
  • Finance Act 2019
Category: Tax Compliance
  • Personnel salaries (PAYE)
  • Payments to church leaders and families (PIT)
  • Benefits in kind to church leaders and families (PIT)
  • Honorarium to ministers (PIT)
  • Business income (CIT)
  • Contracts with suppliers (VAT and WHT)
Category: Tax Compliance
  • PAYE – State Board of Internal Revenue
  • WHT – If individual, to SBIR
  • WHT – If company, to FIRS
  • VAT – FIRS
  • PIT – SBIR
  • CGT – FIRS
Category: Tax Compliance

The FIRS has determined that it is compulsory and obligatory for CFBO to register for the Tax Identification Number. This is also required in the processing of tax exemption certificate or tax clearance certificate.

The requirements are:

  • A copy of registration certificate issued by Corporate Affairs Commission (CAC)
  • Certified copy of Memorandum or Constitution, Rules and Regulations governing the NPO/NGO;
  • List and Profiles of the trustees/board members nominated;
  • Copy of the current Tax Clearance Certificate (TCC) of each of the Trustees; and
Category: Tax Compliance
Tag: TIN

Yes. It is mandatory for every CFBO to file its

  • Annual tax return every year and such return shall contain: The audited accounts, tax and capital allowances computations and a true and correct statement in writing containing the amounts of its profits from each and every source computed in accordance with the provisions of CITA.
  • They are also required to file other tax returns like PIT, PAYE, VAT, WHT on or before the due dates.
Category: Tax Compliance
  • PIT –On or before 31st March for filing of returns
  • PAYE – 10 days of the end of every month for remittance
  • CIT – 6 months from end of accounting year.
  • WHT – On or before the 21st Day of month following when deduction was made
  • VAT – On or before the 21st Day of month following the month of transaction
Category: Tax Compliance
  1. Register and Obtain the Tax Identification Number (TIN)
  2. File tax returns on or before the due dates
  3. Pay taxes as applicable on or before the due dates
  4. Keep accounting books and records of transactions

In the event that any of these is not done or that there is a delay in the filing or remittance, the CFBO will be said to have committed an offence.

Category: Tax Compliance

the consequences of non-compliance with the tax laws

In the event of non-compliance with the tax laws, the CFBO will be liable to various sanctions, fines, interest, penalties and sealing of premises as prescribed by law.

Vat

Non Registration | Non Remittance | Failure to Notify Change of Address –

  • A penalty of N50,000 for the first month in which failure occurs and N25,000 for every subsequent month. (As per Finance Act 2019)
  • A penalty equal to 5% p.a. of amount not remitted plus interest at commercial rate payable within 30 days of notification by tax authority.

WHT

Non Registration | Non Remittance | Failure to Notify Change of Address

  • A penalty of N50,000 for the first month in which failure occurs and N25,000 for every subsequent month. (As per Finance Act 2019)
  • A penalty equal to 10% p.a. of amount not remitted plus interest at commercial rate payable within 30 days of notification by tax authority.

PIT & Paye

  • A person who fails to file a return shall be liable to a fine of N5,000 and a further sum of N100 daily during which the failure continues or imprisonment of six (6) months or both
  • Any employer who fails to file a return, shall be liable to a penalty of N500,000 for body corporate and N50,000 in the case of individual
Category: Tax Compliance

VAT – 7.5% (Finance Act 2019)

WHT

Tyes of Payment WHT for companies(%) WHT for individuals(%)
Dividends, Interest, and rents 1010
Directors fees N/A10
Hire of equipment 1010
Royalties 105
Commission, Consultancy, technical, service feeas 105
Management fees 105
Construction/building (excluding survey, design, and deliveries) 55
Contracts other than sales in the ordinary course of business 55
  • VAT – 7.5% (Finance Act 2019)
  • CGT – 10% of Chargeable gains
  • PIT – Ranges between 7% – 24% depending on amount of chargeable income
  • PAYE – Ranges between 7% – 24% depending on amount of chargeable income
  • CIT – 30% of total profit of a company subject to the following categorization.
Categorisation Bases of Categorisation Tax Rate
Small Company Turnover of up to N25 million 0%
Medium Company Turnover > 25million < 100million 20%
large Company Turnover > 100million 30%
  • EDT – 2%
  • NPTF – 0.005%
Category: Tax Compliance

Yes and No. According to Section 25(3) of CITA, donation by a company to a CFBO is tax deductible provided the donation does not exceed 10 percent of the company’s total profit for the year, as calculated before the donation is made, and where it is not of a capital nature. However, individuals do not obtain tax deductions for their donations to CFBO

Category: Tax Compliance

No it does not. It only recognizes them as not for-profit organizations which are exempted from income tax. However when they engage in for-profit activities, they will be required to pay income tax on such profits like any other for profit entity

Category: Tax Compliance

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