HOW TO SET UP A HOTEL BUSINESS IN LAGOS STATE

Hospitality business is a flourishing business globally. According to PwC, Nigeria is one of the fastest growing hospitality markets with about 20% increase in 2018 and a projection of 12% compound annual increase in the hotel market in five years after 2018. Lagos is the commercial capital of Nigeria with over 20 Million population with unending commercial transactions by locals and tourists from all parts of the world. Lagos is a preferred destination for investors seeking to go into hotel business in Nigeria. This article considers the requirements and procedures a person seeking to set up a hotel business in Lagos must fulfill or undergo to get the certification to operate in Lagos State.

Is there any mandatory share capital for a company seeking to engage in hotel business in Lagos?

Yes. Generally, the minimum share capital for private limited liability companies in Nigeria is N100,000.00 (Hundred Thousand Naira), while that of public limited liability companies is N2,000,000.00 (Two Million Naira) share capital. However, the minimum share capital of a company seeking to engage in hotel business is N10,000,000.00 (Ten Million Naira).

What are the requirements for incorporating a company seeking to engage in hotel business in Lagos?

Below are the requirements for incorporating a company seeking to engage in hotel business in Lagos:

• Two proposed names for the company: these names will be submitted to the CAC for name search, screening and approval. Upon approval, the promoters may thereafter proceed to register the company with the approved name.

• Proposed registered address, email address and phone number of the company.

• Details of the Shareholders, Director(s) and Company Secretary to include their names, Contract/Home address, Email address, Phone number, Date of birth, Occupation, National Identification Number (NIN), and electronic signature respectively. Please note that for foreigners, an international passport will be sufficient for means of identification.

• Object of company: The company must be registered as a company engaged in hotel business and related business activities.

You can learn more about the requirement for registering a company in Nigeria here.

What are the regulatory frameworks for companies engaged in hotel business in Lagos?

The principal body of laws guiding the operation of hotel businesses in Lagos are contained in the following legislations:

i. Nigerian Tourism Development Corporation Act, Cap 137, LFN, 2004.

ii. Companies and Allied Matters Act (CAMA) 2020,

iii Companies Income Tax Act Cap C21, LFN 2004,

iv. National Office for Technology Acquisition and Promotion Act Cap 17, LFN 2004,

v. Nigeria Investment Promotion Act, Cap 17, LFN 2004.

vi. Hotel Licensing (Amendment) Law 2010 (applicable in Lagos State)

vii. Lagos State Hotel Proprietors Law 1990.

What are the post-incorporation registration and approvals required for a company engaged in hotel business in Lagos?

Upon registration with CAC, the following are the 5 (five) post-incorporation registrations and approvals for setting up a company seeking to engage in hotel business in Lagos:

1. Registration with the Federal Inland Revenue Service (FIRS)

Although a Tax Identification Number (TIN) is allotted to a company upon incorporation by the CAC. However, a company is required to register with the Federal Inland Revenue Service (FIRS) for tax purposes.

The following are the requirements for registration with the FIRS:

• Application letter on the company’s letterhead paper;

• The company’s certificate of incorporation;

• Particulars of the company directors, and

• Utility bill of the registered address of the company.

2. Registration with the Nigerian Tourism Development Corporation (NTDC).

The NTDC is the apex regulatory body guiding the hospitality and tourism sector in Nigeria. The corporation is also conferred with the authority to perform advisory service and promote research in the field of tourism. Any company seeking to engage or engaged in the hospitality or tourism sector in Lagos is mandated to register with the corporation.

The following are the documents required to register with the NTDC:

• Completed application form;

• CAC certificate of incorporation;

• Applicant’s identification documents;

• Company’s Memorandum and Articles of Association;
• Personal Income Tax Clearance Certificate of at least two directors (past 3 years);

• Reference letter from bank;

• Corporate profile of the company;

• Curriculum Vitae of key personnel supported by Professional Licenses

• Passport size photographs of the Managing Director/Chief Executive Officer

• Remittance proof of PAYE tax for key staff (LLC)

• Development Levy of at least two Directors

• Proof/receipt of payment 

• Any other supporting documents as may be required

Please note that the cost of registration with NTDC will be based on assessment.

3. Registration with the Nigerian Investment Promotion Council (NIPC)

NIPC is responsible for promoting, encouraging and coordinating investment in Nigeria, and this investment also relates to investment made in the hospitality and tourism sector both by Nigerian and non-Nigerian investors.

The following are the document required to register with the NIPC:

• Duly completed NIPC Form I;

• Memorandum & Articles of Association;

• Certificate of Incorporation;

• CAC Form 1.1;

• Power of Attorney/letter of Authority (where applicable);

• Approved Remita payment receipt of N15,000.00 (non-refundable); and

• NIPC payment receipt

4. Registration with the National Office for Technology Acquisition and Promotion (NOTAP)

The NOTAP Act is a regulation under the Federal Ministry of Science and Technology, which established and saddled the National Office for Technology Acquisition Promotion the responsibility to carry out functions trelating to the transfer of foreign technology to Nigeria, including those used for hospitality and tourism activities. 

A hotel management agreement is for the management and running of hotels, which is required to be registered with NOTAP within 30 days of its execution. NOTAP usually grants a duration of 5 years in the first instance and is subject to renewal.

The following are the documents required to register with NOTAP:

• A copy of the duly completed application form;

• CAC certificate of incorporation;

• Memorandum and Articles of Association of company;

• Duly completed TAA pre-qualification form;

• Taxpayer Identification Number (TIN);

• A draft copy of the Technology Transfer Agreement to be registered;

• A copy of the duly completed NOTAP questionnaires for different sectors;

• A duly completed copy of Monitoring Form;

• Evidence of tax payment for the preceding three years;

• A copy of feasibility study report of the company;

• Profile of the technical partners;

• Hotel service agreement;

• Annual audited accounts for the preceding three years
• Performance bond for advanced payment;

• A comprehensive training program which must include the number of personnel, skill or knowledge to be acquired.

Please note that the following official fees must be made through NOTAP. 

• A presentation fee of N50,000.00 (Fifty Thousand Naira) or 

• A penalty fee of N100,000.00 (Hundred Thousand Naira) for a contract not submitted for registration within 30 days of the affected date. 

• For contracts involving payments, the fees payable ranges from N150,000.00 (One Hundred and Fifty Thousand Naira) to N20,000,000.00 (Twenty Million Naira), depending on the payment involved in the contract.

Please see OTHER TABLE OF COSTS FOR NOTAP REGISTRATIONS

5. Registration with the Lagos State Ministry of Tourism, Arts and Culture

The Ministry of Tourism, Arts and Culture of Lagos State is responsible for the regulation of the hospitality and tourism businesses in Lagos State. In accordance with the provision of the Section 4 of the Lagos State Hotel and Tourism Establishments Licensing Law 2003, the ministry has the authority to grant, renew, and revoke license for hotel operation in any part of Lagos State. A company seeking to engage in hotel business in Lagos State is required to apply to the ministry for grant of operational license.

What are the taxes payable by hotel owners in Lagos State?

The following are the taxes payable by a registered hotel operator in Lagos:

• Company Income Tax (CIT): These are taxes payable by an incorporated company under Nigerian law. A company incorporated to carry on hotel business in Lagos is required to comply with the provisions of the Companies Income Tax Act (CITA). 

The applicable rate for CIT for medium and large companies is 20% and 30% respectively.

• Value Added Tax (VAT): This is a consumption tax paid on purchased products and services rendered. The rate for VAT is 7.5%, and every hotel owner in Lagos is required to file their VAT monthly returns not later than 21 days following the month of transaction in line with Section 14(3) & (4) of the Value Added Tax Act Cap V1, LFN 2004 (amended).

• Hotel Occupancy and Restaurant Consumption Tax: This is an additional tax levied on hotels in Lagos State. Hotel owners within Lagos State are required to pay a sales/consumption tax of 5% on services provided in the hotels in line with Section 17 of the Hotel Occupancy and Restaurant Consumption Law of Lagos State, 2009. This tax is payable by consumers of goods and services in hotels, bars, restaurants and event centers in Lagos State, and hotel owners are mandated to remit the taxes to the Lagos State Inland Revenue Service (LIRS) on or before the 20^th day of every month.

6. What is the applicable cost for setting up a hotel business in Lagos?