Its common knowledge that NGOs are primarily not created to generate profit. But it would interest you to know that NGOs in Nigeria are not totally exempted from paying taxes. Shocking right?
In this article, we examine to what extent NGOs in Nigeria are exempted from filing and paying taxes as well as under what circumstances they will be required to pay or remit taxes.
Meanwhile, if you own a business in Nigeria and you’ll like to know more about what taxes your business ought to pay, where to remit taxes when to pay/remit taxes as well as how to minimize your tax liabilities as a business owner, our ESSENTIAL TAX GUIDE is the right material for you. Simply click this link here to grab your copy.
Now back to what we were saying, taxes for NGOs in Nigeria…
WHAT KIND OF TAXES ARE NGOs EXEMPTED FROM PAYING
NGOs are exempted from paying/remitting taxes on income that is derived from the primary activities that qualify them as non-profit organizations in the first place. However, the fact that NGOs are exempted from paying income tax does not imply that they are exempted from filing tax returns.
What does filing tax returns mean?
Filing tax returns simply refers to completing relevant tax forms with relevant tax authorities. The idea behind filing tax returns is to report certain information to the tax authorities such as income, expenses, and other relevant tax information.
WHAT KIND OF TAXES ARE NGOs REQUIRED TO PAY
As seen above, NGOs are only exempted from remitting income tax. They are however not exempted from paying taxes in certain circumstances or transactions. Examples of taxes that NGOs are mandated to pay are;
1. Pay-as-you-earn (PAYE) – This applies in situations where the NGO has employees. PAYE is deducted from an employee’s salary and remitted by their employer to the relevant tax authority.
2. Withholding tax – NGOs are required to pay this type of tax in situations where individuals or independent contractors are paid by the organization for either goods or a service such as consulting, rent, etc.
3. Capital Gains Tax – In cases where NGOs sell their asset(s) at a profit.
4. Income Tax – Where NGOs earn passive income such as dividends, rent, royalties, etc
5. Local levies- Usually charged at the Local Government level such as; signage levy, waste disposal bill, etc.
REQUIREMENTS FOR FILING TAX RETURNS AS AN NGO
To file tax returns with the Federal Inland Revenue Service (FIRS), you are required to do the following;
1. Register with the FIRS to get your Tax Identification Number
2. Get registered on the new TaxPro Max Portal. This will enable members of your organization to be able to file tax returns and obtain a tax clearance certificate from anywhere in the world.
3. Provide audited financial statements of the organization. This can be prepared by your Chartered accountant or auditor.
To file your tax returns, it is advised that you seek the services of tax experts who can assist you with the process with ease.
The fact that you are aware that NGOs are liable to pay taxes under certain circumstances, shouldn’t discourage you from achieving your goals and vision of promoting a humanitarian or social cause through an NGO.
Your next step should be finding out how to make use of taxes in a way that benefits your non-profit organization, as there are many ways to do so.
If you’ll like to find out more about taxes as it concerns your NGO, feel free to book a tax strategy session for your non-profit by clicking the Whatsapp icon on the lower right part of this page, or reach out to us here, and we will attend to you.