Repatriation is the act of returning individuals, financial assets, or cultural artifacts to their country of origin. In the business and financial world, repatriation is the process of converting foreign earnings or assets into the currency of an individual’s or company’s home country.
Multinational corporations, investors, and expatriates often repatriate funds from overseas investments, salaries, or profits. This process is influenced by exchange rates, tax regulations, and government policies, which can either facilitate or hinder the movement of capital across borders. After paying the required taxes, foreign investors can only send their money back to their home country if they originally brought the investment through a Certificate of Capital Importation (CCI).
Recently, it has become harder to move money out of Nigeria because the Central Bank of Nigeria (CBN) is trying to protect the local currency. As a result, many businesses, importers, and investors face challenges in repatriating profits, paying for international transactions, or funding overseas operations. This article highlights the procedure for repatriating profits in Nigeria.
Regulatory Framework for Profit Repatriation in Nigeria
Several laws and regulations govern the repatriation of profits in Nigeria, and they include the following:
1. Central Bank of Nigeria (CBN)
The Central Bank of Nigeria (CBN) is responsible for overseeing the country’s foreign exchange market and regulating how money is moved in and out of Nigeria. One of its key roles is to manage the repatriation of funds, ensuring that businesses and investors follow the proper procedures when sending profits, dividends, or capital returns abroad.
To achieve this, the CBN has implemented strict guidelines that commercial banks and other financial institutions must follow when processing requests for capital outflows. These guidelines are designed to ensure compliance with Nigeria’s monetary policies, foreign exchange controls, and economic stability goals. Banks are required to verify that all transactions meet legal and regulatory requirements, including obtaining necessary approvals, ensuring tax compliance, and adhering to forex documentation processes.
2. Nigerian Investment Promotion Commission (NIPC)
The Nigerian Investment Promotion Commission (NIPC) Act is designed to promote and protect foreign investments in Nigeria, a key driver of the country’s economy. It guarantees that foreign investors can fully repatriate their profits and dividends after meeting tax and regulatory requirements. Beyond profit repatriation, the NIPC also offers various incentives, including tax holidays and waivers, to enhance investment returns.
3. Federal Inland Revenue Service (FIRS)
FIRS is Nigeria’s main tax authority. It ensures that companies pay their taxes before they can transfer profits abroad. This includes corporate income tax, withholding tax, and other applicable charges. We assist you in handling tax matters, obtaining tax clearance certificates, and ensuring all taxes are paid quickly to avoid delays in moving your profits.
4. Investment and Securities Act
The Investments and Securities Act (ISA) governs investment activities and securities transactions in Nigeria, including the repatriation of profits earned from such investments. It establishes a framework to protect investors and outlines the procedures for handling both local and foreign investors.
Under this Act, foreign investors conducting business in Nigeria have the right to transfer their profits, dividends, and capital gains abroad without restrictions, as long as they comply with Nigeria’s foreign exchange regulations.
5. Companies and Allied Matters Act 2020
The Companies and Allied Matters Act (CAMA) governs the formation, registration, and operations of businesses in Nigeria. This key legislation requires all companies to be incorporated with the Corporate Affairs Commission (CAC) and to maintain proper financial records.
CAMA also outlines the process for declaring and distributing dividends to shareholders, which is a necessary step before any retained earnings can be repatriated.
6. Foreign Exchange (Monitoring and Miscellaneous) Act
This law governs how foreign exchange transactions work in Nigeria. It protects foreign investments and allows investors to send their profits and dividends abroad in any freely convertible currency. The Act ensures that foreign investors can legally transfer their earnings without restrictions, as long as they follow the proper procedures.
Eligibility to Repatriate Profits in Nigeria
1. Business Registration with the Corporate Affairs Commission (CAC)
To legally operate a business in Nigeria, it must be registered with the Corporate Affairs Commission (CAC). This registration confirms that the company exists and ensures compliance with Nigerian laws. The process can be complex and time-consuming, so engage a corporate and commercial lawyer to guide you on the required documents and ensure your business structure is properly set up.
2. Tax Identification Number (TIN)
A Tax Identification Number (TIN) is mandatory for individuals and businesses engaging in commercial activities in Nigeria. It is issued by the Federal Inland Revenue Service (FIRS), to track tax compliance and remittances. Before repatriating profits, a business must have a valid TIN as proof of tax compliance.
3. Obtain Capital Importation Certificate (CCI) from CBN
Foreign investors must obtain a Certificate of Capital Importation (CCI) from the CBN to legally bring capital into the country. This certificate serves as proof that the capital was properly brought in and is essential for repatriating profits, dividends, loan repayments, and proceeds from investments.
By meeting these key requirements, businesses can legally and efficiently transfer their profits abroad without complications. Again it is advisable to engage a lawyer to ensure that every step is handled meticulously and to prevent unnecessary delays and risks.
Procedure for the Repatriation of Profits in Nigeria
Foreign investors looking to transfer capital and profits out of Nigeria must follow specific legal and regulatory procedures to ensure compliance with Nigerian laws. Below is a structured guide to the process:
1. Obtain a Certificate of Capital Importation (CCI)
A Certificate of Capital Importation (CCI) is a crucial document issued by an authorized dealer (a commercial bank in Nigeria) on behalf of the Central Bank of Nigeria (CBN). It serves as proof that foreign capital has been legally brought into Nigeria for investment purposes.
Requirements for Obtaining a CCI
- Capital Inflow: The investment must be in the form of cash, debt, equity, or goods, such as loans, equipment purchases, or raw materials.
- Authorized Dealer: A Nigerian commercial bank must issue the CCI within 24 hours of receiving the capital inflow.
- Documentation Required:
- Application Letter: A formal request for the issuance of the CCI.
- Board Resolution: A company resolution authorizing the investment.
- Certificate of Incorporation: Proof of business registration in Nigeria.
- Evidence of Capital Importation: This may include bank statements, telegraphic transfer receipts, or other financial records.
- Filing with CBN: The authorized dealer must submit the CCI details to the CBN within 48 hours of issuance.
- Electronic Certificate of Capital Importation (e-CCI): To enhance efficiency, the CBN has introduced electronic CCIs (e-CCI), managed through an online platform. This system minimizes the risks of document loss and speeds up the repatriation process.
2. Start Repatriating Funds
Once the CCI is obtained, the investor can proceed with the repatriation of funds by following these steps:
- Ensure that all relevant taxes, including withholding tax on dividends, have been paid.
- A Tax Clearance Certificate (TCC) from the Federal Inland Revenue Service (FIRS) may be required before profits can be remitted.
- Submit a formal request to the authorized dealer (bank) for the transfer of funds.
- Provide the CCI and any other required documents.
- The repatriation of profits involves converting Nigerian Naira (NGN) into foreign currency like, USD, EUR, and GBP through the official foreign exchange market. The funds are then transferred through the approved channels to the investor’s designated foreign bank account.
3. Eligible Funds for Repatriation
The following can be transferred abroad without restrictions, subject to tax compliance:
- Dividends, Rent, Royalties, and Profits (net of taxes) attributable to the investment. Note that Dividend payments are subject to a 10% withholding tax (reduced to 7.5% for investors from treaty countries).
- Payment of interest and capital on foreign loans, provided a Tax Clearance Certificate is obtained.
- Proceeds from the sale or liquidation of an investment, net of applicable taxes.
There is no limit on the amount of profit that can be distributed as dividends, as long as the distribution is made from actual profits, not capital. Also, the company remains financially solvent after dividend payments.
Repatriation of Profits through Technology Transfer Agreements (TTA)
Foreign investors may also repatriate funds through Technology Transfer Agreements (TTA), which involve transferring technology, trademarks, or technical expertise to Nigerian businesses.
However, to use a TTA for fund repatriation, the agreement must be registered with the National Office for Technology Acquisition and Promotion (NOTAP).
Requirements for Registering a TTA
- The Technology Transfer Agreement (TTA) must involve the application of intellectual property, such as trademarks or patented inventions, or the provision of technical expertise in areas like engineering services, machinery supply, or plant operations. It must also include the development of Nigerian employees through managerial or staff training programs.
- The agreement should clearly outline the services to be provided, the expected deliverables, and compliance with local tax regulations, including applicable deductions. It must also address plans for technology domestication, local skills acquisition, and capacity-building initiatives for Nigerian workers.
Documents Required for NOTAP Registration
- Completed Application Form, NOTAP Questionnaire, and Pre-Qualification Form
- Draft Copy of the TTA
- Company’s Memorandum and Articles of Association
- Certificate of Incorporation
- Annual Financial Reports
- Tax Clearance Certificate and Tax Identification Number (TIN)
- Feasibility Study or Engineering Drawings (if applicable)
- Approvals/Licenses from Regulatory Authorities
- Transferor/Licensor Profile
Once the TTA is registered with NOTAP and all applicable taxes are paid, the foreign investor can repatriate funds through the authorized dealer (bank) that originally issued the Certificate of Capital Importation (CCI). The CCI serves as proof of capital inflow, ensuring that profit and capital transfers remain legally compliant.
Conclusion
Repatriation of profits can help to protect investors and the Nigerian economy. By following the due process highlighted above, foreign investors can successfully repatriate their profits from Nigeria to their country of origin.
However, this process can be challenging due to delays in approvals, documentation issues, and tax compliance problems. The Central Bank of Nigeria’s approval process can be slow, usually due to bureaucratic bottlenecks or incomplete applications. So engaging experts and submitting applications in advance can help prevent unnecessary delays.
Proper documentation, including tax clearance and proof of capital importation, is essential, as any errors can lead to rejections. Therefore, seek the professional guidance of Resolution Law Firm to help you streamline the process and reduce risks.
