Non-profit, Non-governmental Organisations Basic Regulations - Legal Alert

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Wednesday, 11 September 2019   / 04.18PM / By Oserogho & Associates / Header Image Credit: ngomanager.org


Introduction 

The continuing proliferation of Non-Profit ("NPO") and Non-Governmental Organisations ("NGO") with the controversies that have followed attempts to regulate these NPOs/NGOs to adopt best governance practices have unfortunately ignored existing statutory provisions which regulate the activities of NPOs/NGOs. Security concerns that some of the NPOs/NGOs are now being used as conduits for, and sponsors of money laundering, corruption and terrorism activities has heightened these concerns 

An examination of some of the existing Laws and Regulations, especially the ones that are not too well known but are highlighted below, should enable all NPO/NGO stakeholders improve on their statutory compliance obligations and mitigate any default risks that may arise from their charitable activities.

 

Incorporation Compliance 

To enjoy a distinct corporate personality, receive internal and external funding, and claim any tax or other exemptions or like benefits, most NPOs/NGOs usually apply for registration as Incorporated Trustees under Part C of the Companies and Allied Matters Act ("CAMA"). 

Like any other incorporated entity, the Trustees of all NPOs/NGOs must not later than the 31st of December of every calendar year file with the Corporate Affairs Commission ("CAC") an Annual Return disclosing among other information the corporate name of the NPO/NGO, the names, addresses and occupation of the principal officers of the NPO/NGO, any changes to the NPO/NGO constitution and the particulars of any real estate asset or property held by the NPO/NGO during the reporting period. There are nominal fines for any failure in filing these Annual Returns once every year.

 

National Planning Commission Compliance 

The National Planning Commission Act established the National Planning Commission ("NPC") to among other things determine and advise Government on policies which promote national unity, the integration of people and the sustainability of the nation. NPC also collates statistical data from both the public and the private sectors of the economy to enable NPC discharge its statutory functions.

In furtherance of the above NPC statutory responsibilities, NPOs/NGOs are required to register their corporate entity with NPC.

 

Money Laundering Compliances 

All Designated Non-Financial Institutions ("DNFI") of whom NPOs/NGOs are some, are required as part of the compliance requirements under the Money Laundering (Prohibition) Act 2011, to register with the Special Control Unit Against Money Laundering ("SCUML"). 

NPOs/NGOs are also required to conduct financial due diligence on third parties with whom they have any financial transaction by collecting and verifying such party's financial know your customer documentation. NPOs/NGOs are also required to report to SCUML, within one week of such transaction occurring, the receipt of any cash donation in excess of $1,000 (One Thousand US Dollars); and any financial transaction undertaken through any formal financial channel in excess of $10,000 (Ten Thousand US Dollars). There are also penalties for any default in filing these returns with SCUML.

 

Tax Compliances 

NPOs/NGOs that are registered with CAC and with the Federal Inland Revenue Service ("FIRS") enjoy tax exemption only from their charitable income which were not derived from any trade, business or commercial activity. 

The income and benefits earned by NPOs/NGOs personnel are however liable to Personal Income Tax deductions. NPOs/NGOs are also required by Law to deduct, holdback and remit the withheld tax in advance of making any payment, for any goods or services rendered to them by third party contractors, to the appropriate tax authority. 

Irrespective of its exemption from any tax obligations on its non-trading charitable income, every NPO/NGO is further required to file annual self-assessment Tax Returns with the Federal and State Tax Authorities. 

Charitable Humanitarian Projects undertaken by NPOs/NGOs, which must be not-for-profit and in the public interest are Value Added Tax ("VAT") zero-rated; meaning that they do not bear VAT nor pay VAT on such goods and services.

 

Conclusion 

Abuses of the Non-profit and Non-Governmental Organisations structures for fraudulent and terrorist activities will continue if some minimum compliance and enforcement of the existing Laws and Regulations are not undertaken by both the stakeholders and the Regulators. These lapses will continue to be to the determent of the laudable charitable work of genuine NPOs/NGOs.

  

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Disclaimer:

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