CAC: Paying Tax Does Not Replace Annual Returns, Four Things Nigerian Businesses Must Know

The Corporate Affairs Commission (CAC) has reminded business owners that paying tax does not satisfy their annual return obligation. The commission said the two are separate requirements, and completing one does not automatically cover the other.

In a video titled "Annual returns are not tax, know the difference!" posted on its X handle, the CAC explained that annual returns provide updated information about registered entities and help confirm their continued status on the CAC register.

Tax and annual returns are different obligations

Taxes relate to obligations arising from a business's activities, income and other taxable transactions. Annual returns are regulatory filings submitted to the CAC to keep information about a registered entity up to date.

A company may have paid its taxes but could still be non-compliant with the CAC if it fails to file annual returns when required. The filing obligation generally applies even if the business was inactive during the relevant period.

It is not only for limited liability companies

The requirement extends beyond limited liability companies. Registered entities such as business names and incorporated trustees are also covered. Incorporated trustees can include non-governmental organisations, churches, mosques, cultural associations and other registered organisations.

Business owners should therefore not assume that annual returns are required only from large companies or businesses generating significant revenue.

Penalties and deregistration risk

Failure to file annual returns can attract penalties and create compliance problems for a registered entity. Prolonged failure could affect the organisation's standing on the CAC register and may ultimately expose it to deregistration in line with applicable rules.

Businesses can submit their annual returns through the CAC's online platform. Depending on the type of entity and applicable requirements, they may need to update their details, provide information such as turnover and net assets, select the appropriate financial year and submit supporting documents. Financial statements or audited accounts may also be required in applicable cases.

The reminder comes after Legit.ng reported that thousands of Nigerian businesses are racing to update official documents ahead of an August 1 enforcement deadline set by the CAC, with smaller firms expected to bear the steepest compliance burden. The commission issued a public notice on Wednesday confirming it would activate full enforcement of Sections 304(1), 304(2) and 729(1)(c) of the Companies and Allied Matters Act (CAMA) 2020.

For entrepreneurs, SMEs and other registered organisations, keeping annual returns up to date can help prevent penalties, maintain regulatory compliance and protect the entity's status on the CAC register. Meeting the tax obligation alone will not do that.