Tax clearance certificate: three years, transactions and how to obtain it

A general manager asks your firm to prepare his tax computation for two years and to get him a tax clearance certificate. A company wants to bid for a government contract. A businessman wants to send money abroad through Form A. All three are stopped at the same desk until a tax clearance certificate is produced.

The exam asks for the certificate in two forms: a list of transactions that need it, and the steps to get one.

This topic covers what a tax clearance certificate is, who issues it, the three years it covers, the time limit for issue, the transactions for which it must be produced, how to obtain it, and what happens if it is obtained by false information. The previous topic covered objections and tax appeals. The next covers tax offences, penalties and enforcement.

Key terms in plain English

Syllabus check

This topic is in syllabus area A, introduction to taxation, tax administration and ethics (20% of marks). It covers:

• the meaning and purpose of the tax clearance certificate;
• the transactions for which it must be produced;
• the conditions for getting one.

CAMA 2020 and tax clearance

The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.

The rules in more depth

What the certificate shows

A tax clearance certificate is evidence that a taxpayer has met his tax obligations. It covers the three years immediately preceding the current year of assessment. A certificate obtained in 2025 therefore covers 2022, 2023 and 2024. It shows total income, tax payable, tax paid and any balance outstanding. Clearance needs the principal tax and any penalty and interest for those years to be settled, so filing alone is not enough. It is usually valid for 12 months.

Under section 85(1) of the Personal Income Tax Act (old law), the authority issues the certificate within two weeks of an application where the tax for the three years has been fully paid, or no tax is due, or the person is not liable. Under section 85(2), federal ministries, departments and agencies, and commercial banks, must demand the certificate before the listed transactions and verify its genuineness with the issuing authority.

Transactions for which the certificate must be produced

• application for a government loan for industry or business;
• registration of a motor vehicle, and change of ownership of a vehicle by the vendor;
• application for a firearms licence;
• application for foreign exchange or exchange control permission to remit funds abroad;
• application for a certificate of occupancy, a plot of land, and the transfer of real property;
• award of contracts by government, its agencies and registered companies, and registration as a contractor;
• approval of building plans;
• application for a trade licence, an agent licence, a distributorship, a pools or gaming licence, and an import or export licence;
• confirmation of appointment by government as chairman or member of a public board, commission or company, and appointment or election into public office;
• stamping of a guarantor’s form for a Nigerian passport;
• registration of a limited liability company or a business name;
• allocation of market stalls;
• stamping of a statement of nominal share capital or of an increase, and of a statement of loan capital.

Obtaining a tax clearance certificate for an individual

1. Register with the State authority and get a TIN.
2. File returns for each of the three years, with the employer’s annual returns if the person is employed.
3. Receive the assessment for each year and pay all the tax due, with any penalty and interest.
4. Apply, with the computation, notice of assessment, payment receipts, passport photographs and the application form.
5. Collect the certificate. It can be verified by the bank or MDA with the issuing authority.

A company follows the same steps with the NRS: returns filed with audited accounts and computations, tax paid, and an application with its TIN and receipts.

Offences

A person who gives incorrect information to obtain a certificate commits an offence. A certificate may be denied where tax is due to another authority, even if the applicant has cleared his own liability under the Act.

Contents of the certificate

A tax clearance certificate is issued by the FIRS to companies, and by the State Board of Internal Revenue to individuals, to show that the applicant’s tax affairs are in order. It is issued only on application.

In issuing it, the authority must be satisfied that the tax assessed for the three years immediately preceding the current year of assessment has been fully paid, or that no tax is due, or that the applicant is not liable for any of those years. The certificate must be issued within two weeks of demand; otherwise the authority must give reasons for delay or refusal.

Payment of the current year’s tax is not made a condition, unless the applicant is leaving the country for good.

For each of the last three years of assessment the certificate discloses:

• the TCC number, tax office, date of issue, name of the company, RC number, date of incorporation, TIN and business address
• revenue or turnover
• assessable profit or loss
• total profit
• tax payable
• tax paid, with the receipt number and date
• tax outstanding, if any
• the source of income
• other comments
• the expiry date

Conditions for granting a certificate

1. taxes have been paid up to date;
2. penalties and interest raised have been paid;
3. returns have been filed up to date;
4. there are no outstanding tax queries, audit or investigation.

Foreign exchange to non-residents

A tax clearance certificate is also needed for foreign exchange permission to remit funds to a non-resident in respect of income such as rent, dividend, interest, royalty or fees. It shows that tax has been paid on the funds in respect of which the application is made, or that no tax is payable.

Procedure for a company

A new company first registers with the FIRS for a TIN. It writes a formal application letter in the prescribed format with the certificate of incorporation, the memorandum and articles, and Forms CAC 2 and CAC 7. The letter gives the company’s name, registered office, business address, precise nature of business, date of commencement, bankers and major shareholders.

It registers for VAT at the same time with a completed VAT Form 001 and the certificate of incorporation. Registration can now be done online through the FIRS e-service. The company then validates its TIN at its local FIRS office so that it can transact with the FIRS electronically, and after that applies for the certificate on the FIRS web portal.

The FIRS approves it within two weeks, sends an email confirmation, and the company downloads the certificate.

An existing company first pays its income tax and files its returns, both electronically and in hard copy, within six months of its year end. It uploads and submits copies of the returns and evidence of payment, then applies on the portal. The FIRS approves within two weeks, confirms by email, and the company downloads the certificate.

Penalties

A person who gives incorrect information in relation to any matter affecting his tax liability for the purpose of obtaining a certificate, or who counterfeits or falsifies a document needed for business under the Act or any law in its First Schedule, commits an offence. Section 43 of the FIRS Establishment Act 2007 provides a fine not exceeding ₦200,000, or imprisonment for not more than three years, or both.

Problems of obtaining the certificate

• Although the certificate rests on compliance for the preceding years, authorities sometimes require payment to the date of application. This lets the revenue issue additional assessments and demand payment before it issues the certificate.
• The certificate often takes long to issue, despite the two-week limit. A taxpayer may lose a major contract or be unable to clear imported goods.
• Authenticity is an issue, because certificates are sometimes issued under questionable circumstances or forged. Security features should be improved and the process computerised as far as possible, so that issue is prompt and human contact is reduced.

Abolition of the pre-operational levy

Section 40 of CITA, as amended, abolished the pre-operational levy. A company that has not yet started business no longer has to pay it before a certificate is issued.

A checklist for the consultant

1. Confirm the taxpayer has a TIN and, for a company, that it is validated.
2. List the three years the certificate must cover.
3. Check that each year has a filed return, an assessment, and a paid receipt, with penalties and interest included.
4. Check for open queries, audits or investigations.
5. Assemble the application, the receipts and the computations.
6. Apply, and note the two-week deadline.
7. Check the certificate, its years and its expiry date, and keep a copy.

The position from 2026

The Nigeria Tax Administration Act 2025 took effect on 1 January 2026, and section 72 deals with the tax clearance certificate. The core requirement is unchanged in substance: proof that the taxpayer has filed returns and paid the tax due, issued by the relevant authority, which is now the Nigeria Revenue Service for federal taxes.

Use section 85 of the Personal Income Tax Act and the years named above for questions on periods before 2026, and section 72 of the Nigeria Tax Administration Act 2025 for periods from 2026.

Worked examples

1. The current year of assessment is 2026.
2. The three preceding years are 2023, 2024 and 2025.
3. The returns and payments for those years must be complete.

1. (a) The NRS (formerly FIRS), because company income tax is a federal tax.
2. (b) The State Internal Revenue Service of his place of residence for personal income tax.

1. Clearance requires the tax, penalty and interest to be settled.
2. The authority will not issue the certificate until ₦400,000 is paid.

How to score full marks

• State the three years and the two weeks in the first line.
• List the transactions, as the examiners give a mark for each, up to the limit stated.
• Name the issuing authority for the taxpayer: company or individual.
• Mention verification by banks and MDAs.

Common mistakes in the exam

• Counting the current year among the three years.
• Naming the FIRS or NRS as issuer for an individual employee.
• Treating filing as enough, without payment.
• Giving too few transactions when ten are asked for.

Quick revision

• Three preceding years. Issued within two weeks.
• Individuals: State authority. Companies: NRS.
• Banks and MDAs demand and verify.
• False information is an offence.

Practice questions

Questions 1 to 10 are multiple choice. Questions 11 to 13 are written. Try each before opening the answer.

Model answers

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