Introduction
Federal Inland Revenue Service (FIRS) has released a new procedure, of less than 1 minute, for obtaining a tax clearance certificate (TCC). However, the new rule is subject to payment of outstanding taxes and will take effect from 1 January 2023. Before the announcement, the statutory time to approve or deny TCC was within two weeks.
What is a tax clearance certificate?
A tax clearance certificate (TCC) is a document issued by a revenue authority to show that a person has paid taxes in full or that no tax is due on such profits or income. In Nigeria, the FIRS and the relevant State Internal Revenue Service issue TCC to taxpayers annually. However, a taxable person needs to apply or initiate a request for TCC.
What are the contents of a TCC
A tax clearance certificate shows the taxpayer’s name, tax ID, name of employer for individuals, or nature of business for companies. FIRS TCC contains the following details for three years immediately before the current year of assessment;
- turnover
- assessable profit or loss
- total profit
- tax payable
- tax outstanding (if any)
On the other hand, TCC from the State IRS will show the total income and tax paid. It is worthwhile to note that a tax clearance certificate is the end product of a tax compliance process. First, a taxpayer registers for taxes with the Revenue Authority and obtains a taxpayer identification number (TIN) or taxpayer ID. Second, the taxpayer files monthly and annual tax returns. The last step is to apply for TCC at the beginning of a fiscal year, 1 January.
Benefits of a TCC
Ownership of a valid TCC is compulsory when a taxable person wants to carry out specific transactions in Nigeria. The transactions include an application for;
- business loan from the government
- firearms license
- foreign exchange permission to remit funds outside the country
- real estate title documents such as certificate of occupancy, approval of building plans, plot of land, transfer of real property
- the award of contracts by the Government or related agencies
- license such as agent, trade, business, pools, gaming, import or export license
- registration as a contractor or distributor
- stamping of guarantor form for Nigerian passport
- allocation of market stalls
- registration of motor vehicles, a limited liability company, or a business name
- stamping of the statement of loan capital, the nominal share capital of a new company, and the increase in share capital
In addition, multinationals, expatriates, and non-resident persons require TCC to show payment of Nigerian tax. The amount paid can reduce double taxation for treaty partners with Nigeria.
How to get tax clearance certificate from FIRS
1. Existing companies
2. New companies
Category 1 (Existing companies)
- Login to the E-Services portal for TCC at https://tcc.firs.gov.ng
- Click on generate TCC, and a copy of the document will be sent to the registered e-mail address.
- Save or Print
Congratulations! If an existing company is unable to generate TCC online after following the steps above, do not panic. It could be as a result of any of the reasons below.
The taxpayer:
- Has an outstanding tax payment, or
- Has a pending tax reconciliation.
Category 2 (New companies)
For the purpose of corporate TCC application in Nigeria, new companies are taxpayers that:
- are yet to register for tax with FIRS, or
- have registered for tax and yet to commence business, or
- have registered for tax, commenced business, and are in the first 3 years of operation, or
- are yet to file a corporate tax return for a minimum of 2 years of assessment.
The process of getting TCC for a new company is:
- Register for tax with FIRS (where applicable)
- Login to the E-Services portal for TCC at https://tcc.firs.gov.ng.
- Click on generate TCC. However, a copy of the document will NOT be sent to the registered e-mail address for new taxpayers. The taxpayer or authorised representative must apply manually from the tax office for completeness. The taxpayer may be required to provide additional information to support the company’s application.
- Upon a successful application, the taxpayer can download the electronic TCC from https://tcc.firs.gov.ng.
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Conclusion
FIRS usually issues tax clearance certificate when tax compliance is complete. A taxpayer may need to respond to several queries, reconcile tax position and settle unpaid taxes before the TCC is approved. The services of a tax expert help to ease the burden of the stress in tax compliance.
Updated: 26 February 2024