Introduction

A Non-Governmental Organization (NGO) is an association of individuals registered under Section 590 of the Companies and Allied Matters Act (CAMA) 2020. NGOs aim to advance religious, educational, literary, scientific, social, cultural, sporting, and charitable causes. While NGOs are typically not profit-making entities, any profit derived from their activities is subject to income tax under the Companies Income Tax Act (CITA) LFN 2004, as amended. This article aims to clarify the tax responsibilities of NGOs in Nigeria and educate the public about these requirements.

Tax Obligations of NGOs

To comply with Nigerian tax laws, NGOs must:

• Register and obtain a Taxpayer Identification Number (TIN).
• File tax returns on or before the due dates.
• Pay applicable taxes on or before the due dates.
• Maintain accurate accounting records.
• Cooperate with authorized officers of the Federal Inland Revenue Service (FIRS) during official business.

Registration with FIRS

NGOs must register with the FIRS to obtain a TIN free of charge from the Medium Tax Office (MTO) in Abuja or the nearest tax office after registration by the Corporate Affairs Commission (CAC). Registration requires:

• A copy of the registration certificate issued by CAC.
• Copy of the Memorandum and Articles of Association.
• Constitution, rules, and regulations governing the NGO.
• Duly completed FIRS Input Registration Data Form.
• List and profiles of the Trustees/Board Members.
• Current Tax Clearance Certificate (TCC) of each Trustee.

Filing of Tax Returns

NGOs must file annual tax returns to enable the FIRS to confirm compliance with their not-for-profit status or to assess any taxable activities. According to Section 55 of CITA, NGO tax returns must include:

• Audited accounts and a true and correct statement of income and expenditures.
• Required particulars for compliance with the Act.
• A declaration signed by a Director or Secretary affirming the accuracy of the returns.

Other Returns Expected of NGOs

Personal Income Tax (PIT) Returns

Promoters of NGOs must file PIT returns by the due dates specified.

Pay-As-You-Earn (PAYE) Returns

NGOs must:

• Deduct Personal Income Tax under PAYE from employee salaries and remit monthly to the appropriate tax authority.
• Maintain accurate employee records and file annual returns required of employers, including Form A, Form H1, and a schedule of tax deductions.

Value Added Tax (VAT) Returns

NGOs must:

• Pay VAT on consumed goods and services but are entitled to refunds on items purchased for humanitarian donor-funded projects.
• Act as taxable persons under the VAT Act, charging 5% VAT on transactions and remitting to FIRS using VAT Returns form 002 if engaging in profit-making activities.

Withholding Tax (WHT) Returns

NGOs must:

• Deduct WHT from payments to contractors, suppliers, or service providers and remit to the relevant tax authority.
• Accompany WHT remittance with a detailed schedule of deductions.
• Pay WHT through e-Taxpay or other provided channels and obtain remittance receipts and credit notes for beneficiaries.

Due Dates for Filing Tax Returns

• PIT: Filed and paid by self-employed individuals by March 31 each year.
• PAYE: Monthly tax deducted and schedule submitted within 10 days of month’s end. Annual returns for previous year’s deductions by January 31.
• CIT: For old companies, within 6 months from the accounting year’s end. For new companies, within 18 months of incorporation or 6 months after the accounting period, whichever is earlier.
• Education Tax: Filed with CIT returns and evidence of 2% tax on assessable profit paid.
• WHT: Filed and paid within 21 days from the deduction date.
• VAT: Filed and paid for the previous month by the 21st day of the following month.

Record Keeping

NGOs must keep accurate business records, summarizing all transactions, including financial information in transaction currencies. These records should be based on primary transaction documents and securely stored.

Other Statutory Obligations of NGOs

NGOs must verify the Tax Clearance Certificate (TCC) of potential contractors/vendors before awarding contracts. The FIRS centrally administers NGO tax matters at the Medium Taxpayer Office, Abuja.

Consequences of Non-Compliance with Tax Laws

Non-compliance with tax laws may result in fines, penalties, interest, and other sanctions. Offences include:

• Failure to register for tax purposes
• Failure to keep proper records
• Failure to file returns and pay taxes on time
• Failure to deduct and remit WHT, VAT, or PAYE
• Under remittance or understatement of taxes
• Failure to produce required records or information to the tax authority

Conclusion

Nigerian tax laws do not exempt NGOs from paying taxes but recognize them as not-for-profit entities, exempt from income tax unless they derive profits from activities. NGOs must also comply with VAT, PAYE, WHT, stamp duties, and capital gains tax requirements. Compliance ensures legal operation and supports the NGO’s mission of advancing societal good.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, or www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.