Tax Implications for Non-Profit Organizations: Insights from the Nigeria Finance Act 2019.


Non-profit organizations (NPOs) play a vital role in addressing societal needs and promoting social welfare. Recognizing the significance of these organizations, the Nigeria Finance Act 2019 introduced specific provisions that impact the tax landscape for NPOs. These provisions are designed to ensure transparency, accountability, and proper utilization of funds within the non-profit sector. In this article, we will delve into the key insights from the Finance Act 2019 regarding tax implications for non-profit organizations in Nigeria.

1. Definition of Non-Profit Organizations:

The Finance Act 2019 provides a clear definition of non-profit organizations to include entities established for religious, educational, charitable, scientific, literary, cultural, social, or philanthropic purposes. This definition helps distinguish between organizations with genuine non-profit objectives and those with commercial motives.

2. Tax Exemption for NPOs:

The Finance Act 2019 maintains the tax exemption status for genuine non-profit organizations. These organizations are exempt from paying income tax on their income, provided that the income is not derived from trade or business activities. However, NPOs engaged in income-generating activities not directly related to their non-profit objectives may be subject to tax on such income.

3. Mandatory Filing of Annual Returns:

To promote transparency and accountability, the Finance Act 2019 requires non-profit organizations to file annual returns with the relevant tax authorities. This reporting obligation ensures that NPOs maintain proper records of their activities and income, enabling authorities to monitor compliance with tax regulations and verify the organizations’ non-profit status.

4. Withholding Tax on Payments to NPOs:

The Act introduces withholding tax requirements for payments made to non-profit organizations. Certain payments to NPOs, including consultancy, professional, and technical services, are subject to withholding tax. This provision aims to enhance tax compliance and revenue collection while ensuring that payments to NPOs are appropriately accounted for.

5. Accountability and Governance:

The Finance Act 2019 emphasizes the importance of accountability and proper governance within non-profit organizations. Organizations are required to maintain accurate financial records, prepare annual financial statements, and make these records available for inspection by relevant authorities. This transparency fosters trust among stakeholders and ensures responsible management of resources.

6. Impact on Fundraising and Donations:

Non-profit organizations often rely on fundraising and donations to support their activities. The tax-exempt status of donations made to NPOs is preserved under the Finance Act 2019. Donors can continue to claim tax deductions for their contributions, incentivizing philanthropic efforts and supporting the financial sustainability of NPOs.


The Nigeria Finance Act 2019 introduces measures to ensure transparency, accountability, and responsible management within the non-profit sector. While non-profit organizations continue to benefit from tax exemptions, they must adhere to reporting obligations, maintain proper records, and uphold governance standards. The Act’s provisions are aligned with the government’s commitment to promoting social welfare and the responsible utilization of resources.

By upholding the Act’s requirements and promoting transparency, NPOs can maintain their tax-exempt status, build public trust, and continue to make a positive impact on Nigerian society. The changes introduced by the Finance Act 2019 contribute to a stronger non-profit sector that serves the nation’s diverse needs while adhering to responsible tax practices.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.