INFORMATION CIRCULAR ON THE DEMAND FOR TAX CLEARANCE CERTIFICATE (TCC) AND VERIFICATION OF GENUINENESS BY MINISTRIES DEPARTMENTS AND AGENCIES (MDAs), SECRETARIAT DEPARTMENTS AND AGENCIES OF FCTA (SDAs) AND COMMERCIAL BANKS

This circular is issued for the information and guidance of the Ministries, Departments & Agencies (MDAs) of Government and Commercial Banks as well as FCTA’s Secretariats, Departments, Agencies, Area Councils, Corporate Bodies and Statutory Authoritiesin accordance with the provisions of the relevant tax laws.

1. Introduction

The purpose of this circular is to provide insight regarding the demand and verification of a Tax Clearance Certificate (TCC) by MDAs, SDAs and Commercial Banks from individuals and business names who have dealings with respect to any transaction and to verify the genuineness of the TCC before rendering services.

Thecircular enumerates transactions that requires the demand and verification of a TCC before service are to be rendered and the penalties for defaulting.

For the purpose of this guidance, a transaction is any form of dealings, contractual engagement, communication, business, trade, connection or relationship between an MDA, SDAs, a Commercial Bank and an individual or business name.

• Background

A TCC is a document issued by the relevant Tax Authority to a Taxpayer who has fully complied with his/her tax obligations for the three preceding years of an assessment. The relevant Tax Authority is the States Internal Revenue Services (SIRS), which is the Federal Capital Territory Internal Revenue Service (FCT-IRS)in case ofFCT residents and the Federal Inland Revenue Service (FIRS) accordingly.

The TCC is issued when the relevant Tax Authority substantiates that the tax assessed on the total income of an individual or business name is fully paid and that no tax is due on the global income or that the individual is not liable to tax for any of the three preceding years of assessment.

The features of a TCC include the chargeable income, tax payable, tax paid, tax outstanding and Taxpayer Identification Number (TIN).

• Legal Framework

Section 85 (2),(4),(5),(6)&(9) of the Personal Income Tax Act (PITA), 2011 (as amended) provides that the Federal Government MDAsand Commercial Banksshall demand for a TCC covering the immediate three yearspreceding the current year of assessment and shall verify its genuineness by referring same to the issuing Tax Authority.

Section 85 (2) provides that “A Ministry, Department or an Agency of Government or a commercial bank with whom a person has any dealing with respect to any of the transactions mentioned in subsection (4) of this section, shall demand from the person a tax clearance certificate for the three years immediately preceding the current year of assessment and shall verify the genuineness by referring same to the issuing tax authority”.

Section 31(5) of the FCT-IRS Act, 2015 provides that the FCTA’s SDAsor officials of the FCTA,Area Council officials, any Corporate Body, Statutory Authority are to demand from an individual or business name, a tax clearance certificate for the immediate three years preceding the current year of assessment and shall verify the genuineness by referring same to the issuing tax authority.

Section 31 (5) provides that “A department, agency or official of the FCTA, any Area Council official, any corporate body, statutory authority or person empowered in that regard by this Act or any other law shall demand a tax clearance certificate for the three years immediately preceding the current year of assessment as a pre-condition to transacting any business”.

• Affected Transactions

This circular specifically focuses on the transactions listed below for the purpose of monitoring and compliance: –

1. application for Government loan for industry or business;
2. registration of motor vehicle;
3. application for foreign exchange or exchange control permission to remit funds outside Nigeria;
4. application for certificate of occupancy;
5. application for award of contracts by Government, its agencies and registered companies;
6. application for approval of building plans;
7. application for trade licence;
8. application for transfer of real property;
9. application for agent licence;
10. application for pools or gaming licence;
11. application for registration as a contractor;
12. application for distributorship;
13. confirmation of appointment by Government as chairman or member of a public board, institution, commission, company or to any other similar position made by the Government;
14. stamping of guarantor’s form for a Nigerian passport;
15. application for registration of a limited liability company or of a business name;
16. application for allocation of market stalls;
17. appointment or election into public office;
18. application for change of ownership of vehicle by the vendor;
19. application for plot of land;
20. application for FCTA loan for housing, business or any other purpose;
21. application for allocation of market stalls;
22. any other transaction as may be determined from time to time.

• Demand and Verification Process

The importance of demanding and verifying a TCC before rendering the above services cannot be over-emphasized. In line with the provision of the tax laws, the transactions mentioned in 4.0 are practically income driven where tax is derived. Hence, demanding for a TCC before rendering such services would further strengthen the legal obligations of FCT residents in terms of taxation and thereby lead to increase in Internally Generated Revenue (IGR) as well as socio-infrastructure development of FCT.

• Demand for TCC:Demand for TCC by MDAs and other FCTA Secretariat & Agencies

The Federal Government of Nigeria and the FCT Administration are responsible for regulations as well as enabling the ease of doing business. Its MDAs deal with granting of several approvals in which a TCC is a mandatory document required before a service is rendered.

Such services may include, but are not limited to, Government grants approvals for loans to business owners, motor vehicle registration/renewals, Certificate of Occupancy (CoO) to Land ownersawards contracts, building plans/change of use, transfer of property, confirmation of appointments, change of ownership of vehicles etc.

These transactions and other related engagements by the Federal MDAs and FCTA SDAs as the case may be should be rendered after a TCC is presented showing that the tax obligations are fully complied with.

• Demand by Commercial Banks and other Financial Institutions

The Commercial Banks and other Money Deposit Banks (MDBs) such as Micro-Finance Banks, Mortgage Banks, Pension Funds Administrators and other financial institutions are required to demand for Tax Clearance Certificate (TCC) as part of documentation while applying for foreign exchange or exchange control permission to remit funds outside Nigeria.

Section 85 (5) of Personal Income Tax Act (PITA), 2011 (as amended) states clearly that “An applicant for control permission to remit funds to a non-resident recipient in respect of income accruing from rent, dividend, interest, royalty, fees or any other similar income shall be required to produce a tax clearance certificate to the effect that tax has been paid on the fund in respect of which the application is sought or that no tax is payable, whichever is the case”.

• Verification Process

ATCC issued by the FCT-Internal Revenue Service is verifiable through the followings channels: –

1. Refer the TCC presented to the FCT-IRS in writing, with the subject ‘Request for Verification of TCC’and address same to

The Executive Chairman,

FCT-Internal Revenue Service

No. 3, Abriba Close, Area 7, Garki – Abuja

• The TCC can also be verifiedvia the Quick Response(QR) code using an Android or IOS devices by scanning the QR Code at the bottom right corner of the TCC.

The scan result redirects the verifier to a Uniform Resource Locator (URL), which opens the TCC for instant verification. The verifier can copy, search for or share the TCC where necessary.

• Penalty for Defaulting MDAs, SDAs and Commercial Banks

Section 85 (9) of the Personal Income Tax Act, 2011 (As amended) state that,

“A person be it a government organisation or corporate entity to whom section 85(2) applies who fails to comply with same is guilty of an offence and is liable on conviction to a fine of N5,000,000.00 or to imprisonment for 3 years or both fine and imprisonment”.

The aforementioned section of the law implies that any MDAs, SDAs, officials of the FCTA, Area Council officials, any corporate body, statutoryAuthorityor Commercial Banks who violates the above provision will be periodically reported for sanctioning on case by case basis.

• Monitoring and Periodic Enforcement for Compliance

In line with Section 37 (2) of FCT-IRS Act, 2015 the FCT-IRS shall under-go a comprehensive monitoring and enforcement exercisemonthly, quarterly or annually to ascertain the level of compliance by the MDAs, SDAs, Commercial Banks and other related bodies that are responsible for demanding and verifying of TCCs before a service is rendered.

During the periodic Monitoring & Enforcement exercise,copies of TCCs provided by any individuals or business name and verified by the MDAs, SDAs, Commercial Banks and other related bodies will be investigated to ascertain the violation of any tax law, whether or not such violation has been reported to the Service.

• Amendment or Revision of the Circular

The FCT-IRS may from time to time review this circular for the purpose of amendment or at any time withdraw or replace the circular and publish an updated or amended version.

• Enquiries

For further clarifications or enquiries regarding this Circular, please contact the following:

The Executive Chairman,

FCT-Internal Revenue Service

No. 3, Abriba Close, Area 7, Garki– Abuja

Or

Director, Tax Operations

FCT-Internal Revenue Service

No. 3, Abriba Close, Area 7, Garki– Abuja

Or

Visit our website: www.fctirs.gov.ng Email: @fctirs.gov.ng