Establishing a Business in Nigeria: Expert Advice

Business Entities in Nigeria:

1. Foreign Owned Entities: Foreign entrepreneurs can wholly own a Limited Liability Company (LLC) with a minimum of 2 shareholders and 2 directors of any nationality. The minimum share capital is US$1. Foreign corporations cannot establish branch or representative offices in Nigeria. All foreign businesses must establish a company in Nigeria. Nigerian nationals are not required as shareholders or resident directors.
2. Private Limited Company (LLC): Commonly used for company setup in Nigeria, it is legally separate from its owners, shareholders, and directors.

Nigeria Company Registration Procedures:

1. Reserve a Unique Company Name: Reserve a unique name online through the Corporate Affairs Commission (CAC) at http://services.cac.gov.ng/.
2. Prepare Requisite Incorporation Documents and Pay Stamp Duty: Complete statutory forms, prepare and print the memorandum and articles of association, and have them stamped by the Federal Inland Revenue Service (FIRS) or online. The stamp duty on share capital is 0.75%, and NGN 500 for each additional copy of documents.
3. Sign the Declaration of Compliance: Have the declaration of compliance sworn before a Commissioner for Oaths or a Notary Public, or use the services of a CAC-appointed lawyer.
4. Register the Company: Apply for company incorporation using form CAC 1.1 online. Submit required documents, including the stamped consolidated form, memorandum and articles of association, identification of directors and shareholders, identification of the company secretary, and name reservation.
5. Make a Company Seal: Section 74 of the Companies and Allied Matters Act (CAMA) requires every company to have a common seal.
6. Register for Personal Income Tax PAYE: Register with the relevant state tax authority for income tax withholding, providing necessary documents.
7. Register Business Premises with Lagos State Government: Pay the business premises levy at a nationalized commercial bank, following registration of the company premises.

Accounting & Tax:

• Corporate tax of 30% applies to both resident and non-resident corporations on net profits.
• VAT is 7.5% on goods for registered businesses, but it’s 0% indefinitely for companies incorporated within a free zone.
• VAT returns must be filed monthly.
• Withholding tax applies to interest, royalties, contract and service fees, lease rentals, and technical fees at a rate of 10% on gross payments.
• A Nigeria LLC can enjoy tax exemption if incorporated within an Export Processing Zone (EPZ).

Compliance:

• Nigerian companies must have at least two directors and two shareholders of any nationality.
• An EPZ license requires a minimum of US$62,000 paid-up share capital.
• Each company must have a registered address in Nigeria.
• Companies must file annual returns with the Corporate Affairs Commission and annual tax returns with the Federal Inland Revenue Service.
• Foreign ownership is restricted in certain industries.
• Foreign-owned companies must obtain a Business Permit from the Ministry of Interior before operating in Nigeria.
• A non-resident foreign individual must secure a Nigerian work permit (CERPAC) before being appointed as a managing director of a Nigerian LLC.

Employment:

• Recruitment of foreign labor requires an expatriate quota application, showing the skills are in short supply or not available locally.
• Minimum authorized share capital for foreign-owned companies is N10 million (approximately US$26,000) before securing an Expatriate Quota.
• EPZ companies are exempt from expatriate quota requirements.
• Employers contribute to their employees’ Retirement Savings Account, with a minimum rate of 7.5% of employee compensation.

Licenses:

• A license is required for all business activities.
• Businesses within an Export Processing Zone are exempt from import and export licensing requirements, but an operating license may still be necessary for certain activities.