Essential Compliance Requirements for Businesses in Nigeria

Regulatory compliance is the foundation of any successful business, ensuring smooth operations, legal standing, and long-term sustainability. For companies in Nigeria, the compliance journey begins with incorporation through the Corporate Affairs Commission (CAC), followed by adherence to industry-specific regulations where applicable.

However, business registration is just the first step. To remain compliant and avoid penalties, businesses must meet ongoing regulatory requirements.

This article outlines key compliance obligations for businesses operating in Nigeria, covering corporate filings, tax obligations, data protection, and employment-related contributions.

1. Corporate Affairs Commission (CAC) Compliance

All registered businesses in Nigeria must file annual returns with the CAC. These returns confirm that the company is still active and must be submitted within 18 months of incorporation and then annually. Required documents include the company’s audited financial statements for the relevant financial year.

• Deadline: Within 14 days after the company’s annual general meeting, but no later than June 30 each year.
• Penalty for Late Filing: Accrued fines for each year of non-compliance.

2. Nigeria Data Protection Compliance

If your company collects or processes personal data of more than 1,000 Nigerians in six months or 2,000 Nigerians in a year, you must submit an Annual Compliance Audit Report (CAR) to the Nigeria Data Protection Commission (NDPC). This is done through a Data Protection Compliance Organization (DPCO), which evaluates your data security practices and makes recommendations.

• Deadline: March 15 of the following year.
• Penalty for Non-Compliance: 50% of the filing fee.

3. Tax Compliance Requirements

Businesses in Nigeria must adhere to various tax obligations under the Federal Inland Revenue Service (FIRS) and relevant State Revenue Services. Key tax obligations include:

a. Companies Income Tax (CIT)

• First annual return due within 18 months of incorporation.
• Subsequent filings must be made within six months after the financial year-end (usually by June 30 each year).
• Penalties: ₦25,000 for the first month of default, then ₦5,000 for each additional month. Late payments also attract 10% penalty plus interest at prevailing bank rates.

b. Withholding Tax (WHT)

• An advance tax deducted from payments at rates between 2% and 10%, depending on the transaction type.
• Filing deadline: 21st of the month following the deduction.
• Penalty: 10% of the unremitted tax.

c. Value Added Tax (VAT)

• A 7.5% tax on goods and services (except exempt items like medical products and exported goods).
• Filing deadline: 21st of the following month.
• Penalty: ₦50,000 for the first month of default and ₦25,000 for each subsequent month.

d. Personal Income Tax (PAYE)

• Companies must deduct Pay As You Earn (PAYE) tax from employees’ salaries and remit it to the State Internal Revenue Service.
• Filing deadline: 10th of the following month.
• Annual returns must be submitted by January 31st each year.

4. Labour and Employment Compliance

Businesses must also fulfill legal obligations related to employee welfare, pensions, and training. Key requirements include:

a. Industrial Training Fund (ITF)

• Companies with five or more employees or an annual turnover above ₦50 million must contribute 1% of total payroll to ITF for workforce training.
• Deadline: April 1 each year.
• Penalty: 5% monthly interest on outstanding contributions.

b. Nigeria Social Insurance Trust Fund (NSITF)

• Employers must contribute 1% of total payroll to NSITF, providing insurance for employees against workplace injuries and occupational hazards.
• Deadline: Last day of each payroll month.
• Penalty: 5% monthly interest on unpaid contributions.

c. Pension Compliance (PENCOM)

• Companies with 15 or more employees must enroll in a contributory pension scheme.
• Employers contribute 10% of employees’ monthly salary, while employees contribute 8%.
• Deadline: Within seven days after salary payment.
• Penalty: At least 2% of outstanding pension contributions in addition to unpaid amounts.

Conclusion

Regulatory compliance is crucial for businesses in Nigeria, helping them maintain legal standing, avoid sanctions, and build customer trust. However, compliance requirements may vary based on industry and specific operations. To ensure full compliance, businesses should engage legal and financial experts to create a custom compliance checklist suited to their needs.

By staying ahead of regulatory obligations, companies can focus on growth without the risk of unexpected fines or legal hurdles.

Note: This article is for informational purposes only and should not be considered legal advice. Businesses should consult with specialists for tailored compliance guidance.