Regville Associates – Page 4 – Regville Associates offers end-to-end legal, tax and secretarial service for companies.

SERVICES EXEMPTED FROM VALUE-ADDED TAX (VAT) IN NIGERIA

In our last article, we wrote about the Goods exempted from Value Added Tax (VAT), in this article we shall continue on the services exempted from VAT in Nigeria. VAT as earlier defined is a tax levied on the value added to goods and services in the process of production and distribution.

Here are some of the services that are VAT-exempt in Nigeria:

1. EDUCATIONAL SERVICES: Educational services provided by approved institutions, including primary and secondary schools, colleges, and universities, are exempt from VAT. This is to encourage the growth of education in Nigeria and reduce the cost of education for students.

2. HEALTH SERVICES: Health services provided by approved hospitals, clinics, and other health care providers are exempt from VAT. This is to ensure that essential health services are affordable and accessible to all Nigerians.

3. RELIGIOUS SERVICES: Religious services provided by approved religious organizations, including churches and mosques, are exempt from VAT. This is to support the activities of religious organizations and ensure that they can provide essential services to the public.

4. CHARITABLE SERVICES: Charitable services provided by approved non-profit organizations, including those that provide relief to the poor and the vulnerable, are exempt from VAT. This is to support the activities of charitable organizations and ensure that they can continue to provide essential services to the public.

5. EMERGENCY SERVICES: Emergency services, including firefighting and rescue services, are exempt from VAT. This is to ensure that essential services are accessible and affordable to all Nigerians in times of emergency.

6. TRANSPORTATION: Both transportation services and shared transport systems, such as Uber and Bolt, are exempt from VAT. Additionally, public transportation and commercial airlines are also free from VAT. This exemption helps to keep transportation costs low for the general public and makes essential services more accessible and affordable for all.

7. MICROFINANCE AND MORTGAGE SERVICES: Services rendered by unit microfinance banks and mortgage institutions are exempt from VAT. This is to support the growth of these essential financial services and to encourage their development in Nigeria.

8. EXPORTED SERVICES: All exported services are exempt from VAT. This is to encourage the growth of Nigeria’s export industry and to make Nigerian services more competitive in the international market.

9. AGRICULTURAL EQUIPMENT RENTAL AND LEASING: The rental or lease of tractors and other agricultural equipment for agricultural purposes is exempt from VAT. This is to support the growth of Nigeria’s agricultural sector and encourage investment in this industry.

In conclusion, Nigeria’s VAT-exempted services aim to reduce the tax burden on the general public and support essential services. The government recognizes the importance of these services in the daily lives of Nigerians and wants to ensure that they are accessible and affordable to all.

Regville Associates offers end-to-end legal, tax and secretarial service for companies. We assist Companies in becoming and staying regulatory compliant.

Feel free to contact us.

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

GOODS EXEMPTED FROM VALUE-ADDED TAX (VAT) IN NIGERIA

VALUE ADDED TAX (VAT) is a tax levied on the value added to goods and services in the process of production and distribution. In Nigeria, the Value Added Tax Act of 1993 (amended in 1996, 1999 and 2007) established the legal framework for the implementation of VAT. Other legal instruments that gave modifications to the VAT regime in Nigeria include the Finance Act 2020 and VAT Modification Order of 2020 The Act defines the goods and services that are subject to VAT and those that are exempt.

In Nigeria, VAT is currently charged at 7.5%, however, there are several goods and services that are exempt from VAT. These goods and services are considered essential and are exempt to reduce the burden of tax on the general public. Some of the VAT-exempted products in Nigeria are:

1. BASIC FOOD ITEMS: Basic food items such as bread, sugar, salt, and cooking oil are exempt from VAT. This is because the government recognizes the importance of these items in the daily lives of Nigerians and wants to ensure that they are affordable to everyone.

2. MEDICAL AND PHARMACEUTICAL PRODUCTS: Medical and pharmaceutical products, including drugs, are exempt from VAT. This is because the government recognizes the importance of health care and wants to ensure that life-saving drugs are affordable to all Nigerians.

3. AGRICULTURAL PRODUCTS: Agricultural products, fertilizers, locally produced agricultural chemicals, veterinary medicine, and agricultural types of machinery are exempt from VAT. This is because the government wants to support the agricultural sector and reduce the cost of food production.

4. BOOKS AND EDUCATIONAL MATERIALS: Books, educational materials, and equipment used for educational purposes are exempt from VAT. This is to encourage literacy and education in Nigeria.

5. RELIGIOUS AND CHARITABLE ORGANIZATIONS: Religious organizations, charitable organizations, and non-profit organizations are exempt from VAT. This is to support the activities of these organizations, which provide essential services to the public.

6. BABY PRODUCTS: Baby products such as diapers, baby food, and other essential items for infants and children are exempt from VAT. This is to reduce the burden of tax on parents and ensure that essential items for children are affordable.

8. MACHINERY AND EQUIPMENT: Machinery and equipment purchased for utilization of gas in downstream petroleum operations, commercial aircraft, commercial aircraft engines, and commercial aircraft spare parts are exempt from VAT. This is to support the growth of the petroleum and aviation industries in Nigeria and to encourage investment in these sectors.

9. PETROLEUM PRODUCTS: Petroleum products are exempt from VAT. This is to ensure that the cost of fuel remains affordable for the general public and to support the growth of the petroleum industry in Nigeria.

10. SANITARY PRODUCTS: Locally manufactured sanitary towels, pads, and tampons are exempt from VAT. This is to ensure that these essential products are affordable to everyone and to support the growth of the local manufacturing industry.

11. RENEWABLE ENERGY EQUIPMENT: Renewable energy equipment is exempt from VAT. This is to encourage the development of alternative energy sources in Nigeria and to support the growth of the renewable energy sector.

12. RAW MATERIALS FOR ESSENTIAL PRODUCTS: Raw materials for producing baby diapers, sanitary towels, and pharmaceutical products are exempt from VAT. This is to support the growth of these essential industries and to reduce the cost of production.

13. MILITARY HARDWARE AND EQUIPMENT: Military hardware, arms, ammunition and locally manufactured uniforms used by the armed forces, paramilitary, and other security agencies are exempt from VAT. This is to support security agencies’ activities and ensure that they can carry out their duties effectively.

14. ENERGY SUPPLIES: Gas supplied by gas-producing companies to Electricity Generating Companies (GENCOs), electricity generated by GENCOs and supplied to the National Grid or Nigeria Bulk Electricity Company, and electricity transmitted by Transmission Company of Nigeria to Electricity Distribution Companies are exempt from VAT. This is to ensure that energy supplies are accessible and affordable to everyone.

In conclusion, the VAT-exempted products in Nigeria are aimed at reducing the burden of tax on the general public and supporting essential services. The government recognizes the importance of these products and services in the daily lives of Nigerians and wants to ensure that they are accessible and affordable to all.

Regville Associates offers end-to-end legal, tax and secretarial service for companies. We assist Companies in becoming and staying regulatory compliant.

Feel free to contact us.

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

FIVE (5) REASONS WHY NIGERIAN BUSINESS OWNERS NEED TO HAVE COMPLIANCE CERTIFICATES

Compliance certificates are documents that show that a business is operating in accordance with the laws, regulations and standards set by the relevant authorities. In Nigeria, businesses are required to obtain a number of compliance certificates to demonstrate their compliance with the country’s laws and regulations this includes, a Tax Clearance Certificate (TCC) issued by the Federal Inland Revenue Service (FIRS), ITF Certificate issued by the Industrial Training Fund, NSITF Compliance Certificate issued by The Nigeria Social Insurance Trust Fund, PENCOM Certificate issued by The Pension Commission and Acknowledgement copies of payment of Annual Returns.

Here are five reasons why business owners need to have compliance certificates:

1. LEGAL COMPLIANCE: By obtaining compliance certificates, businesses demonstrate that they are operating within the law and that they are adhering to the standards and regulations set by the relevant authorities. This helps to reduce the risk of legal penalties and fines that may arise from non-compliance.

2. IMPROVED REPUTATION: Having compliance certificates can also help to enhance the reputation of a business. Customers and other stakeholders are more likely to trust a business that is in compliance with the law, which can translate into increased sales and a better bottom line.

3. ENHANCED COMPETITIVENESS: Obtaining compliance certificates can also give businesses a competitive edge over their competitors. By demonstrating their commitment to operating within the law and adhering to industry standards, businesses can differentiate themselves from those who are not in compliance.

4. ACCESS TO OPPORTUNITIES: Many businesses are required to have compliance certificates to participate in certain tenders or to enter into partnerships with other organizations. This means that by obtaining compliance certificates, businesses can gain access to new opportunities and markets that may not be available to those who are not in compliance.

5. PEACE OF MIND: Finally, having compliance certificates can provide peace of mind to business owners, as they know that they are operating within the law and that they are meeting the standards and regulations set by the relevant authorities. This can help to reduce the stress and anxiety that can arise from uncertainty and help business owners to focus on growing their businesses.

In conclusion, compliance certificates are an important part of doing business in Nigeria and can provide a number of benefits to business owners. By demonstrating their commitment to operating within the law and adhering to industry standards, businesses can reduce the risk of legal penalties, improve their reputation, enhance their competitiveness, gain access to new opportunities, and provide peace of mind to their owners.

Regville Associates offers end-to-end legal, tax and secretarial service for companies. We assist Companies in becoming and staying compliant.

We will be happy to hear from you.

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

ESSENTIAL COMPLIANCE CERTIFICATES AND REQUIREMENTS FOR BIDDING ON CONTRACTS IN NIGERIA

In the competitive world of business, securing contracts is crucial for growth and success. In Nigeria, there are several compliance certificates and requirements that companies must fulfill in order to be eligible to bid on contracts. From tax clearance and pension compliance to BPP registration and audited financial statements, these requirements help to demonstrate a company’s financial stability, credibility, and commitment to following regulations. In this article, we will explore the essential compliance certificates and requirements for bidding on contracts in Nigeria.

1. TAX CLEARANCE CERTIFICATE: This certificate confirms that a business is up-to-date with its tax obligations and is in good standing with the Federal Inland Revenue Service (FIRS).

2. PENSION COMPLIANCE CERTIFICATE: This certificate confirms that a business is compliant with the Nigerian Pension Reform Act and is making the required pension contributions for its employees.

3. NIGERIAN SOCIAL INSURANCE TRUST FUND (NSITF) COMPLIANCE CERTIFICATE: This certificate confirms that a business is compliant with the NSITF Act and is making the required social insurance contributions for its employees.

4. INDUSTRIAL TRAINING FUND (ITF) COMPLIANCE CERTIFICATE: This certificate confirms that a business is compliant with the ITF Act and is making the required training contributions for its employees.

5. BPP (BUREAU OF PUBLIC PROCUREMENT) CERTIFICATE: This certificate confirms that a business is registered with the Bureau of Public Procurement and is in compliance with the procurement laws and regulations in Nigeria.

In addition to the above-mentioned compliance certificates, it is also important for business owners in Nigeria to file their CAC Annual Returns and have an audited financial statement.

CAC Annual Returns are a requirement of the Corporate Affairs Commission (CAC) and are necessary to keep a company’s registration up-to-date and in good standing. Failure to file annual returns may result in penalties or the eventual striking off of the company’s name from the CAC register.

An audited financial statement is an independently reviewed and verified financial report that provides assurance to stakeholders about the accuracy and reliability of a company’s financial information. This is particularly important for businesses bidding for contracts, as it demonstrates their financial stability and capacity to fulfill their obligations. An audited financial statement can also help to attract investment and improve a company’s credibility.

Regville Associates offers end-to-end legal, tax and secretarial service for companies. We assist Companies in obtaining relevant compliance documents needed to bid for any tenders and contracts in Nigeria.

We will be happy to hear from you.

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

HOW TO OBTAIN A PENCOM COMPLIANCE CERTIFICATE IN NIGERIA

The National Pension Commission (PenCom) is the regulatory body overseeing Nigeria’s pension administration. To ensure that companies operating in the country adhere to best practices in pension management, PenCom requires all employers to apply for and obtain a Compliance Certificate. This article will discuss the steps companies can follow to apply for a PenCom Compliance Certificate.

1. REGISTER WITH PENCOM: The first step in the process is to register with PenCom by filling out the Employer Registration Form (ERF) and submitting it to the nearest PenCom office. The form can be obtained from the PenCom website or any of its offices.

2. OPEN A PENSION FUND ADMINISTRATOR (PFA) ACCOUNT: After registering with PenCom, the next step is to open a Pension Fund Administrator (PFA) account. PFAs are organizations that manage pension funds on behalf of employers. A list of registered PFAs can be found on the PenCom website.

3. SUBMIT EMPLOYEE INFORMATION: Companies are required to submit employee information, including names, addresses, and contribution history, to their PFA. This information is necessary for the PFA to compute each employee’s pension contributions and benefits.

4. REMIT CONTRIBUTIONS: Companies are required to remit employee contributions to their PFA on a monthly basis (minimum of 10% by employer and minimum of 8% by the employee).

(a) for the last three fiscal years for organizations that were in existence for that period and have five (5) or more staff

(b) for organizations that have not been in existence for the last three fiscal years, from the date of Incorporation/registration/licensing to the last fiscal year.

5. GROUP LIFE INSURANCE: Evidence of valid Group Life Insurance Policy for employees which should include amongst others, a certificate of group life, policy document and evidence of payment.

6. APPLY FOR A COMPLIANCE CERTIFICATE: Upon successful submission of all required reports and documentation, companies will be issued a PenCom Compliance Certificate. This certificate is valid for one year and must be renewed annually.

Applicants are to note that it takes 15 working days from the date of receipt for an application to be processed. Certificates or rejections can be picked up at the offices where the applications were submitted.

In conclusion, PENCOM mandates that pension remittance should be made not later than seven (7) days after payment of salaries. PENCOM has begun the introduction of penalties payable by the employer to the employee RSA if remittance is not made within seven (7) days after payment of salaries. The PENCOM has also engaged Consulting Firms (majorly audit & accounting firms) to carry out audit exercises to check compliances.

For further assistance in obtaining PENCOM Certificate, feel free to contact us

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

FIVE (5) CATEGORIES OF PERSONS THAT CAN’T ACT AS A DIRECTOR IN NIGERIA

In Nigeria, there are certain individuals who are prohibited from serving as a director of a company. The Companies and Allied Matters Act (CAMA) outlines these disqualifications and restrictions.

1. INSOLVENT INDIVIDUALS: An individual who is declared bankrupt or is under a debt management plan is disqualified from being a director.

2. CONVICTED FELONS: Convicted felons: Individuals who have been convicted of an offense involving dishonesty or fraud are not eligible to serve as a director.

3. MINORS: Individuals who are below the age of 18 years are not eligible to serve as a director.

4. UNFIT INDIVIDUALS: Individuals who have been found to be of unsound mind or who are under a legal disability are prohibited from being a director.

5. DISQUALIFIED DIRECTORS: Individuals who have been disqualified from serving as a director by a court order or regulatory authority are not eligible to serve in this capacity.

It is important to note that the disqualifications outlined above apply to both executive and non-executive directors. Additionally, if a director is found to have acted in contravention of these restrictions, they may be held liable for their actions and face sanctions, including fines and imprisonment.

In conclusion, being a director of a company in Nigeria comes with its own set of responsibilities and obligations. It is important for individuals to ensure that they are eligible and qualified to serve in this capacity before accepting a directorship appointment.

For Company Formation and Restructuring, feel free to contact us

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

GROUNDS FOR THE REMOVAL OF DIRECTOR(S) IN NIGERIA

The Corporate Affairs Commission (CAC) is the regulatory agency responsible for registering and regulating companies in Nigeria. The removal of directors in Nigeria is governed by the Companies and Allied Matters Act (CAMA) which provides the legal framework for the appointment and removal of directors in Nigerian companies.

According to CAMA, directors can be removed by:

1. RESIGNATION: A director may resign from their position at any time by giving notice in writing to the company.

2. RETIREMENT: Directors are required to retire at the annual general meeting of the company and may be re-elected if they wish to continue serving on the board.

3. TERMINATION BY THE COMPANY: The company may remove a director by passing a resolution to that effect at a general meeting of the shareholders.

4. TERMINATION BY THE CAC: The CAC may remove a director if they are found to have acted in a manner that is prejudicial to the interests of the company or if they have been declared bankrupt.

It is important to note that the removal of directors must be done in accordance with the provisions of CAMA and any relevant regulations. The CAC may investigate and enforce compliance with these provisions to ensure the proper removal of directors.

For corporate restructuring process and filing, feel free to contact us

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

PARTNERSHIP FIRM IN NIGERIA: THE TYPES AND FEATURES

INTRODUCTION: In Nigeria, partnerships are governed by the Companies and Allied Matters Act (CAMA) 2020. Partnerships in Nigeria can be classified into three types: general partnerships, limited partnerships, and limited liability partnerships.

GENERAL PARTNERSHIPS (GPs), are formed by two or more individuals who share the profits and liabilities of the partnership. The partners are jointly and severally liable for all the debts and obligations of the partnership, and each partner has the right to take part in the management and administration of the partnership.

LIMITED PARTNERSHIPS (LPs), on the other hand, consist of one or more general partners and one or more limited partners. The general partners are liable for all the debts and obligations of the partnership. In contrast, the liability of the limited partners is limited to the amount of capital they have contributed to the partnership. Limited partners do not have the right to participate in the partnership’s management and administration.

LIMITED LIABILITY PARTNERSHIPS (LLPs) are similar to limited partnerships, but the liability of all partners is limited to their capital contributions. This type of partnership is suitable for professional firms such as law firms, accounting firms, and consulting firms. An LLP may acquire, own, hold and dispose of property, as well as bring and defend actions in its own name. A partner in an LLP could be a Company. Each LLP must have a minimum of two authorized partners, at least one of whom must be a Nigerian national. LLPs are managed by a membership agreement or a partnership agreement and do not have any share capital.

To register a partnership in Nigeria, the appropriate forms and fees must be submitted to the Corporate Affairs Commission (CAC). Additionally, the partnership must have at least two partners and must be registered with the CAC.

It is strongly recommended that partners enter into a partnership agreement to govern the relationship between themselves and the partnership. It is also worth noting that Partnership is not taxed as an entity, but the partners are taxed on their own income.

In conclusion, understanding the nuances of the different types of partnerships and the registration process is crucial in ensuring the smooth running of the partnership business in Nigeria. It is advisable to seek legal advice before entering into a partnership agreement or registering a partnership with the CAC.

For more guidance and registration of Partnership in Nigeria, feel free to contact us

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

LEGAL & TAX: FIVE (5) COMMON MISTAKES MADE BY STARTUPS

Starting a new business is an exciting and challenging endeavor, but it can also be risky. Legal and tax mistakes are common among startups and can lead to significant financial losses and legal trouble. In this article, we will discuss five common legal and tax mistakes made by startups and how to avoid them.

1. NOT INCORPORATING: One common mistake made by startups is failing to incorporate their business, which can lead to personal liability for the company’s debts and legal issues.

2. NOT PROTECTING INTELLECTUAL PROPERTY: Startups often overlook the importance of protecting their intellectual property, such as trademarks and patents, which can lead to legal disputes and financial losses.

3. NOT KEEPING ACCURATE FINANCIAL RECORDS: Many startups fail to keep accurate financial records, which can lead to legal issues and difficulty in obtaining funding.

4. NO UNDERSTANDING TAX LAWS AND DUE DATES: Startups often make the mistake of not understanding the tax laws and regulations that apply to their business, which can lead to penalties and fines.

5. NOT HAVING A CLEAR EQUITY SPLIT AMONG FOUNDERS: Startups often make the mistake of not having a clear equity split among the founders, which can lead to disagreements and legal issues. It is important to have a clear agreement in place from the beginning.

To avoid or remedy these pitfalls, contact us today

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667

CONVERTIBLE NOTES: A FORM OF DEBT FINANCING FOR STARTUPS

A convertible note is a type of debt financing that allows investors to loan money to a company in exchange for the option to convert their loan into equity at a later date. This type of funding is often used by early-stage companies that have not yet reached a point where they can issue traditional equity.

Here are five features of convertible notes:

1. Convertible notes have a maturity date: The notes are typically issued with a maturity date of one to three years from the date of issuance. At the maturity date, the company will either have to pay back the loan or convert the notes into equity.

2. Convertible notes have a conversion price: The conversion price is the price at which the notes will convert into equity. This price is typically set at a discount to the price of future equity rounds.

3. Convertible notes accrue interest: The notes accrue interest at a rate that is typically lower than the rate for a traditional loan.

4. Convertible notes have a cap: A cap is the maximum valuation at which the notes can convert into equity. This cap is typically set at a higher valuation than the current valuation of the company.

5. Convertible notes are typically used by early-stage companies: Convertible notes are often used by companies that are in their early stages of development and have not yet reached a point where they can issue traditional equity.

It’s worth noting that the terms of convertible notes may vary depending on the company’s situation, the stage of the company, and the investors.

A hypothetical scenario where a convertible note is used.

A startup company, called “ABC Inc.” is looking for $500,000 in funding to help them develop their product and expand their team. They decide to issue a convertible note to a group of angel investors.

The maturity date of the note is set at 18 months from the date of issuance.

The conversion price is set at a 20% discount to the price of the next equity round.

The interest rate on the note is set at 5% per year.

The cap is set at $5 million, which is higher than the current valuation of the company.

The angel investors loan $500,000 to ABC Inc. in exchange for the convertible notes. The company uses the money to develop their product and expand their team.

After 18 months, the company has made significant progress and is ready to raise more funding. They hold a Series A round and are able to secure a valuation of $10 million. At this point, the angel investors have the option to convert their notes into equity at a 20% discount to the Series A price. So, the conversion price would be $8 million (10 million * 0.8). Since the cap is set at $5 million, the angel investors can convert their notes into equity at $5 million.

It’s important to note that this is a simplified example and in reality the terms of convertible notes can be more complex depending on the company’s situation, the stage of the company, and the investors.

For assistance on StartUp Financing, feel free to contact us

Tolulope Oguntade 
Regville Associates 
info@regville.com 
08065111667