These laws provide frameworks, guidelines to uphold order, safeguard rights, establish standards, and settle conflicts.
Every entrepreneur or business owner should have knowledge of these laws. You may not be a legal professional, but it’s necessary to have little knowledge of these laws so you don’t get yourself and business into a mess that your attorney can’t get you out of.
Here we have compiled seven laws that affect businesses in Nigeria, which every business owner must know.
Laws Governing Businesses in Nigeria
- Companies and Allied Matters Act (CAMA)
- Nigerian Investment Promotion Commission ( NIPC) Act
- Value Added Tax (VAT) Act
- Companies Income Tax (CIT) Act
- Competition Promotion and Consumer Protection Act (CPCPA)
- Fair Labour Standards Act (FLSA)
- Nigerian Startup Act
Companies and Allied Matters Act (CAMA)
The Companies and Allied Matters Act (CAMA) is one of the laws that improve and support Micro, Small, and Medium Scale Enterprises (MSMEs). The Act offers a legal foundation for how businesses operate in Nigeria starting from formation of the businesses, their operations and winding up. CAMA provides legislative framework for regulatory quality and effectiveness, thereby enabling effective ease of doing business in Nigerian especially for MSMEs
Every intending business must register with Corporate Affairs Commission (CAC) before carrying out any business operations, and certificate of incorporation or business name registration is a necessary document required to undertaker official business transactions.
Read also: How to Register Your Business with CAC within 24 Hours
Nigerian Investment Promotion Commission (NIPC) Act
The Nigerian Investment Promotion Commission Act is a legislation aimed at promoting and encouraging investment in the Nigerian economy, and dealing with related issues. Companies with foreign equity is mandated to register with NIPC before commencement of business operations in Nigeria. The promoters or directors of the business present certificate of incorporation obtained at registration with the Corporate Affairs Commission to NIPC for registration.
A foreign investor that registers with the NIPC is also entitled to a number of benefits, including the ability to remit all proceeds in the case of a transfer or liquidation, and the ability to repatriate profits to his originating country. It’s necessary for you to have knowledge of this act, if you have or intend to have foreign investors in your business.
Value Added Tax (VAT) Act
VAT is a tax charged on the delivery of goods and services. It is payable by the customers and not the business owner, the business collects such tax on behalf of the government and remit same to the government. The tax is calculated at a rate of 7.5% of the value of the taxable products and services in Nigeria. VAT governs all kinds of businesses in Nigeria, although it’s not charged on all products. You need to also know the items that are exempted from VAT.
Companies Income Tax (CIT) Act
The Companies Income Tax Act (CITA) is the primary law governing how businesses are taxed in Nigeria. Nigeria’s tax system is a multi-level one, which simply means that the three levels of government are in charge of collecting taxes. Your “taxable business income” is multiplied by the predetermined “tax rate” to determine your company tax.
The tax rate is 30% of a company’s whole profit. Some revenues, such as those from cooperative societies, are free from CIT if they are not a result of the business activity. Every business is required to pay provisional tax, which is equal to the tax paid in the preceding year of evaluation, no later than three (3) months after the start of each year of evaluation. CIT governs registered businesses in Nigeria which earn legitimate revenue.
Competition Promotion and Consumer Protection Act (CPCPA)
Competition Promotion and Consumer Protection Act is a law that governs and protects the rights of consumers in Nigeria.
The Fair Labour Standards Act (FLSA) specifies guidelines for minimum wage, overtime compensation, documentation, and employment rates that are applicable to workers. This law ensures that there is fair treatment of workers. This act governs businesses with employees. So, if you have employees for your business, this law protects their rights.
It is essential to know these laws as a business owner in Nigeria. That way, you will know how to regulate your business. Violation of these laws will incur penalties that may negatively affect your business. Finally, knowledge of these laws is crucial to the successful running of a business. If you don’t understand these laws, you may not know your rights as a business owner.
Nigeria Startup Act
The Startup Act 2022 which came into effect from October 19, 2022, is intended to provide legal framework, Nigerian startup investment, tax breaks for startup and tighter regulations.
The Act provides for establishment of Nigerian Startup Bill Secretariat, which shall issue startup certificate to businesses. For a business to be regarded as a “startup”, such business will need to obtain startup certificate from the Nigerian Startup Bill Secretariat. Read other provisions and importance of Nigerian Startup Act
Read also: Fintech Regulatory Laws in Nigeria