Nigeria has seen a significant rise in philanthropic initiatives aimed at addressing various social challenges across the country. Setting up a foundation provides a structured approach to achieving charitable goals while ensuring legal compliance and operational sustainability.
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This comprehensive guide provides essential information about establishing a foundation in Nigeria, from understanding the legal framework to completing the registration process and fulfilling post-registration requirements.
NGO vs Foundation: What is the difference between an NGO and a foundation in Nigeria?
In Nigeria, the terms “foundation” and “Non-Governmental Organization (NGO)” are often used interchangeably, which can cause confusion about their distinct characteristics. While both operate within the not-for-profit sector, there are subtle differences worth noting.
A foundation in Nigeria is a non‐profit entity established to pursue charitable, educational, religious, scientific, social, or cultural objectives.
Typically, a foundation is set up as an Incorporated Trustees entity under the Companies and Allied Matters Act 2020 (CAMA 2020). This legal form allows the foundation to acquire a corporate identity, hold property in trust, enter contracts, and sue or be sued in the foundation’s name.
Alternatively, an NGO can incorporate as a Company Limited by Guarantee (no share capital) under CAMA.
In either case, the organization must be not-for-profit: its income and assets can only advance its stated purpose, and no part may inure to private shareholders or members.
Foundations are governed by a board of trustees or directors who oversee the mission and ensure compliance with Nigerian law.
Foundations typically focus on specific charitable purposes such as advancing religious, educational, literary, scientific, social, cultural, sporting, or other charitable initiatives.
These organizations are usually established with endowments or sustainable funding models to support their long-term objectives.
An NGO, similarly, is registered as an Incorporated Trustee under CAMA but may have a broader scope of activities beyond philanthropic work. NGOs often engage in advocacy, community development, and other intervention programs.
In legal registration terms, there is no distinction between foundations and NGOs in Nigeria, as both are registered through the same process with the Corporate Affairs Commission (CAC).
The key difference often lies in their funding models and operational approaches.
Foundations typically have a more structured endowment-based funding approach, while NGOs might rely more heavily on grants, donations, and project-based funding.
However, both entities are considered corporate bodies under CAMA and must comply with the same legal requirements for registration and operation.
According to the Nigerian Not-For-Profit Governance Code 2023, the sector—also referred to as the Benevolent Sector, the Third Sector, or the Civil Society Sector—plays a critical role in Nigeria’s economy and governance landscape.
The code emphasizes the importance of good governance practices, transparency, and accountability for all not-for-profit organizations. This is regardless of whether they identify as foundations or NGOs.
Do foundations pay tax in Nigeria?
The tax status of foundations in Nigeria reflects their not-for-profit nature, though with specific conditions and reporting obligations. Foundations in Nigeria enjoy certain tax privileges, but only if structured and operated correctly.
The Companies Income Tax Act (CITA) governs the taxation of corporate entities, including not-for-profits.
Historically, CITA §23(1)(c) exempted from income tax the profits of companies established for charitable, educational, religious, or public purposes, but only if those profits did not come from commercial trading.
Capital Gains Tax Act (CGTA) similarly exempted gains on the disposal of charity property.
Following the Finance Act 2020, FIRS issued guidance clarifying these rules.
Are donations taxable?
Corporate donors (and individuals) can deduct donations to the foundation only if the foundation is listed in the Fifth Schedule of CITA.
FIRS guidance makes clear that corporate donors get tax deductions for gifts to qualifying NGOs, but individuals do not.
Foundations should, if eligible, apply to be recognized by FIRS for public-purpose status, so donors can benefit.
Do foundations pay capital gains tax?
Under the Capital Gains Tax Act, gains on the disposal of assets used in charitable activities are typically exempt if the funds are used for the same purpose.
Are foundations VAT exempt?
Unlike some jurisdictions, Nigerian NGOs are not fully exempt from Value-Added Tax (VAT).
Generally, VAT applies to taxable goods and services supplied by or to a foundation at the standard rate.
However, goods used directly in humanitarian aid projects may be zero-rated. For example, medical supplies bought for a free clinic may enjoy zero-rating.
If a foundation purchases goods/services not directly for aid projects, it must pay VAT at 7.5%.
Likewise, if a foundation charges fees for taxable services, it must account for VAT to FIRS.
In all cases, foundations must register for VAT (if turnover is above the threshold) and file monthly VAT returns.
How to start a foundation in Nigeria
Starting a foundation in Nigeria involves several strategic steps beyond the basic registration requirements.
This comprehensive process ensures that your organization is not only legally compliant but also strategically positioned to achieve its charitable objectives.
1. Conceptualization and Planning
Before beginning the registration process, it’s important to:
- Define Your Mission and Vision:
Clearly articulate the specific social problems your foundation aims to address and how it intends to create impact.
- Develop a Strategic Plan:
Create a roadmap outlining your foundation’s goals, target beneficiaries, programs, and sustainability strategy.
- Conduct a Needs Assessment:
Research to ensure your foundation addresses genuine needs without duplicating existing efforts.
- Design Your Governance Structure:
Determine how decisions will be made, establish roles and responsibilities, and develop policies for accountability.
2. Name Selection and Reservation
Select at least two potential names for your foundation in order of preference. The names should reflect your mission while being distinctive from existing organizations.
Visit the Corporate Affairs Commission website to check if your preferred names are available for registration.
Once availability is confirmed, proceed to reserve the name through the CAC portal.
3. Appointment of Trustees
Identify individuals who are passionate about your cause, have relevant expertise, and meet legal requirements (must be 18 years or older).
Hold a documented meeting where trustees are formally appointed, with proper minutes showing the voting pattern and list of attendees.
Collect two passport photographs and copies of valid identification documents from each trustee.
4. Drafting Constitutional Documents
Create a document that outlines:
- Name, objectives, and registered address
- Membership criteria and rights (if applicable)
- Powers and duties of trustees
- Meeting procedures and decision-making processes
- Financial management policies
- Amendment procedures
- Dissolution clause
Convene a meeting to adopt the constitution, ensuring minutes are properly documented and signed by the chairman and secretary.
5. Public Notification
After name approval, publish notices in two national newspapers and one local newspaper widely circulated in the area where your foundation will be based.
The notice should include:
- Foundation name
- Names of trustees
- Aims and objectives
- Invitation for public objections within 28 days
6. Submission of Registration Documents
Prepare a formal application package including:
- Formal letter of application
- Completed application form with trustees’ signatures
- Original newspaper publications
- Two copies of the constitution
- Minutes of relevant meetings
- Passport photographs and identification documents of trustees
- Common seal impression on the designated page of the form
Note that only agents accredited by the CAC can complete the registration process on your behalf.
File the complete application package with the Corporate Affairs Commission.
7. Post-Registration Actions
Using your registration certificate, open a bank account in the name of the foundation.
Create detailed policies for:
- Financial management and controls
- Human resources
- Program implementation
- Monitoring and evaluation
Set up a physical office or virtual presence to begin operations.
Submit necessary documentation to relevant tax authorities to formalize your tax-exempt status.
Depending on your focus area, you may need to register with sector-specific regulatory bodies.
8. Compliance and Governance
Follow the Nigerian Not-For-Profit Governance Code 2023, which emphasizes transparency, accountability, and trustworthiness.
Maintain active involvement of trustees through regular, well-documented meetings.
File required annual returns with the CAC and other relevant regulatory bodies.
Keep comprehensive records of all financial transactions and prepare annual financial statements.
What are the requirements to register a foundation in Nigeria?
Registering a foundation in Nigeria involves several requirements that must be strictly adhered to for successful incorporation.
The process is overseen by the Corporate Affairs Commission and follows specific guidelines outlined in the Companies and Allied Matters Act.
Legal Requirements
Under CAMA 2020, most charitable foundations register as Incorporated Trustees. Sections 823–830 of CAMA detail this process.
To qualify, two or more individuals (trustees) must be appointed by a community or association with lawful charitable objectives.
The application for incorporation must:
- State the foundation’s full name, which must include “Incorporated Trustees of…” and its aims/objects, all lawful.
- Provide the names, addresses and occupations of all trustees—and secretary, if any.
- Include two printed copies of the proposed constitution or trust instrument. The constitution must specify the foundation’s name, purpose, membership (if any), trustee appointment/tenure procedures, meeting rules, seal, financial rules, and how contributions and accounts are managed.
- Attach certified minutes of the meeting appointing the trustees and authorizing the application.
- If the foundation will have a common seal, include a drawing of the seal.
Where a foundation instead incorporates as a Company Limited by Guarantee, it follows Part B of CAMA 2020. A CLG has no share capital, and members’ liability is limited to a small guaranteed sum of at least ₦100,000. CLGs cannot distribute profits to members.
Under CAMA, forming a CLG requires special approval by the Attorney-General of the Federation, who must clear the constitution within 30 days.
Many NGOs prefer the simpler Incorporated Trustees route, which does not require Attorney-General approval and has more flexible membership rules.
Documentation Requirements
To register a foundation in Nigeria, you need to prepare and submit the following documents:
- Formal Letter of Application
- Completed Application Form
- Constitution of the Foundation
- Minutes of Meetings:
- Newspaper Publications
- Means of Identification
- Proof of Residence
All documents must be in English.
If any document is in another language, it must be translated into English and authenticated by a Notary Public licensed in Nigeria or elsewhere in the world.
Conclusion
Setting up a foundation in Nigeria requires careful planning, thorough documentation, and strict adherence to legal requirements.
While the process may seem complex, each step ensures that your organization operates within a framework that promotes accountability, transparency, and effective governance.
By following the outlined procedures and maintaining compliance with relevant regulations, your foundation can establish a solid legal foundation for its charitable work.
This not only protects the organization and its trustees but also builds confidence among donors, beneficiaries, and other stakeholders.
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