A Tax Clearance Certificate is a written confirmation from the Inland Revenue that a person's or company tax affairs are in order at the date of issue of the Certificate. You will agree with me that Tax Clearance Certificate is an important document necessary for various corporate transactions by both individuals and corporate organizations in Nigeria. However, anyone who carries out a taxable transaction is eligible to register for Tax clearance certificate and an incorporated organization is typically considered to apply for tax clearance certificate once it has a bank account that shows inflow and outflow of money. i.e. to say commencement date.
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WHAT TAX CLEARANCE CERTIFICATE MEANS
Tax Clearance Certificate shows the tax position of the taxpayer to whom it is issued. The certificate is issued only upon application by the taxpayer. In issuing the certificate, the relevant tax authority would have satisfied itself that, the tax assessed on the income of the applicant for the three years immediately preceding the current year of assessment, has been fully paid or that no tax is due on such income or that the applicant is not liable to tax for any of the three years. Tax Clearance certificate must be issued two weeks after filling of application. Otherwise, the tax authority must give the reason for denial.
A Tax Clearance Certificate shall disclose in respect of the last three years of assessment:
1. Name, address and taxpayer’s Identification Number (TIN) of the company;
2. Chargeable income;
3. Tax payable;
4. Tax paid;
5. Nature of business;
6. Type of Assessment (BOJ, Self Assessment and so on); and
7. Expiry date.
Required Documents in Applying for Tax Clearance Certificate- Application for Tax Clearance Form - In Triplicate
- A copy of Certificate of Incorporation of the company issued by the corporate affairs commission (CAC)
- Memorandum and Article of Association
- Letter of appointment of tax adviser and a letter of acceptance
- Name and address of directors (you can provide this using Form CAC 3)
- Notice of registered business address
- Personal Tax Clearance Certificate of your Managing Director or any Director in the company
- Necessary document(s) showing your correct business address
- Taxpayer registration input form (TRIF/2006/001 COYS)
- Completed FIRS questionnaire for new taxpayers on the
- Company’s Letter Head addressed to the Tax Controller
CHALLENGES IN THE ISSUANCE OF TAX CLEARANCE CERTIFICATE
Compliance with Tax Payments: Tax Clearance Certificate is issued based on tax compliance for the preceding year, the tax authorities sometimes require that taxpayers comply with tax payments to date of application for the certificate. This often poses a challenge, as the Revenue could use the opportunity to issue additional assessments and demand payment before issuing the certificate.
Time Constraint: The certificate often takes a long period to be issued, notwithstanding the two week limit stated in the tax legislation. A taxpayer could, therefore, lose an opportunity to win a major contract or be unable to clear imported goods, where such taxpayer is unable to obtain a Tax Clearance Certificate on time.
Authenticity Of The Certificate: Authenticity of Tax Clearance Certificates, as evidence of tax compliance. The certificates are sometimes issued under questionable circumstances or may be forged in extreme cases. The security features of Tax Clearance Certificates should be enhanced to avoid forgery. Also, the process should be computerized as much as possible, to facilitate the prompt issuance and reduce human intervention with the attendant implications.
Please note that filing an application for the tax clearance certificate does not indicate that it will be issued automatically.
Contact onaaramichael@gmail.com if you need a guide or personal involvement in filling an application for your tax matters.
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