Generally, repatriation is a term referring to the return of people, assets, or cultural artifacts to their country of origin. In finance, repatriation involves the conversion of foreign-earned income into the home country’s currency. It would, therefore, represent the instance when a business or an individual is returning money back to the home country, which is an income from international investments or even incomes from subsidiaries set up in foreign countries. Thus, foreign investors in Nigeria need to be guaranteed that there will not be any hindrance to the repatriation of their funds. This guide helps with insights and useful steps for individuals intending to repatriate funds out of Nigeria.
Legal Framework for Repatriating Funds in Nigeria
- Foreign Exchange (Monitoring and Miscellaneous Provisions) Act: This is the Act regulating foreign exchange transactions in the country and ensuring that foreign investors are guaranteed to transfer both capital and profits outside the country’s economy, on condition that they comply with the relevant regulations.
- NIPC Act: It encourages and protects foreign investment, guaranteeing the right of investors to repatriate capital and profits. Thus, it is one pivotal factor that can build confidence for foreign investors.
- CBN Regulations: The CBN is the regulator of the foreign exchange market in Nigeria. In this regard, it has provided clear guidelines on repatriation of capital and dividends, which must be followed by banks in processing such applications in line with monetary policy and exchange control.
Procedures for Foreign Investors to Repatriate Funds from Nigeria
There are specific steps to be taken in the course of repatriating funds out of Nigeria by foreign investors. The process is guided under Nigerian law and entails a series of steps, as outlined below.
- Certificate of Capital Importation
This can be issued by any of the Nigerian commercial banks on behalf of the Central Bank of Nigeria, verifying that foreign capital was invested in Nigeria.
Requirements for a CCI:
– Capital Importation: This defines that capital should be imported in the form of cash, equity, loans, or other means such as raw materials or even equipment into Nigeria.
– Authorized Dealer: Normally issued by a Nigerian commercial bank. It describes that an authorized Nigerian commercial bank shall issue the CCI within 24 hours of receipt of the capital inflow.
– Documents Required: The investors shall provide an application letter, board resolution allowing the investment, certificate of incorporation, proof of capital importation (such as bank statements), and others.
This is information that has to be reported to the CBN within 48 hours by the bank. The recent introduction of electronic CCI has made this less cumbersome, as certificates are now digitized and the chances of the documents getting lost are nil.
Once a CCI has been obtained, the following would be the subsequent requirements:
– Tax Compliance: All due taxes, including withholding taxes on dividend payments, have to be paid. In some cases, tax clearance certificates are required to repatriate profits.
– Application for Repatriation: A formal request to the Authorized dealer, with CCI and other supporting documents.
– Currency of Repatriation: Assented funds can be repatriated in any convertible currency, as long as the investment is supported by a valid CCI.
What Can Be Repatriated:
– There is a free repatriation of dividends, rent, royalties, and profits (post-tax). Dividends attract a withholding tax of 10% or 7.5% in respect of certain treaty countries.
Interest on foreign loans and capital, upon presentation of tax clearance certificates may also be repatriated.
Proceeds from the sale or liquidation of an investment may also be repatriated upon payment of taxes due.
There is no limit as to the extent of profit that may be distributed as dividends, except the sufficient amount such that the company shall not be insolvent or likely to be unable to pay its liabilities after making such distribution.
- Through Technology Transfer Agreements (TTA)
Another avenue through which foreign investors can repatriate funds is under a Technology Transfer Agreement. This would involve the transfer of trademarks, patented technology, or technical expertise to a Nigerian company. In order to repatriate funds through a TTA, the agreement has to be registered with the National Office for Technology Acquisition and Promotion (NOTAP).
Requirements for Registering a TTA:
– The TTA must provide for the transfer of trademarks, technical expertise, engineering services, or machinery.
It should give rights to the Nigerian firm in the use of technology and possession of capacity-building arrangements;
Tax commitment and obligations on research activities shall be detailed in the agreement;
The TTA shall include methodology for the transfer of technology, development of local raw materials, and acquisition of skills.
Documents to be Submitted for Registration of TTA:
Application Form and Related Documents duly completed.
A draft TTA, company registration documents, tax clearance certificates, and a feasibility study, where applicable.
Profiles of the transferor/licensor.
The foreign investor, upon registration with NOTAP and all taxes paid will repatriate his profit and capital through the very bank that issued the CCI for the original investment.
The repatriation of funds from Nigeria should be appropriately done through a well-structured and legally permissible procedure, which includes the application for a CCI, followed by tax clearance, and may be considering technology transfer agreements. The enabling legal framework of Nigeria, through the Foreign Exchange Act and the NIPC Act, provides foreign investors with adequate protection and guarantees concerning the free transferability of their capital and profits outside Nigeria.
This article provides a general overview of the subject. Please contact us directly for any specific legal assistance required.