INTRODUCTION
The word restaurant is derived from the French verb "restaurer", which means to restore or refresh, and thus by usage means an establishment that offers food and drink for sale. The restaurateur is the person in charge of the restaurant.1
It is no doubt that food production is one of the most lucrative businesses in Nigeria today as it thrives even when other commodities experience poor sales. This is because eating is a necessity. It is indeed the number one need of man.
Apart from the fact that there must be sufficient financial, human, and other resources for the operation of a restaurant business in Nigeria, compliance with the regulatory requirements is paramount as well. Considering the growing demand for restaurants in Nigeria due to the expansion of the mid-income group, growing urbanization, and busy lifestyle of Nigerians, individuals who operate restaurant businesses in Nigeria must be well guided by the regulatory laws set concerning registration and licensing.
Considered in the light of the above, therefore, this article seeks to highlight the regulatory requirements for the operation of a restaurant business in Nigeria.
REGISTRATION AT CORPORATE AFFAIRS COMMISSION (CAC)
As a first vital step, the Companies and Allied Matters Act, 2020 (CAMA) requires any entity seeking to do business in Nigeria to be registered by Corporate Affairs Commission (CAC). An individual seeking to operate a restaurant in Nigeria has the option of registering either as a sole proprietorship2, a limited partnership3, a limited liability partnership4 or a private limited liability company.5 The individual is required to make an application to the Corporate Affairs Commission (CAC) in the prescribed form accompanied with the necessary documents provided by the Companies and Allied Matters Act, 2020 (CAMA).
REGISTRATION AT NIGERIAN TOURISM DEVELOPMENT CORPORATION (NTDC)
The Minister of Culture and Tourism in the exercise of his powers to make regulations requiring the classification or grading of hotels, restaurants, and nightclubs and prescribing standards for their upkeep6 provided the Regulation of Hospitality and Tourism Establishments (Registration, Grading, and Classification) Regulations 1995.
By the provisions of the regulations, all Hospitality and Tourism Enterprises must be registered.7 This registration forms the basis for the classification and grading scheme to be undertaken by NTDC. Restaurants fall under the categories of registrable enterprises under the regulations. The regulations state as follows:
For purposes of these Regulations, Hospitality or Tourism Establishments may be graded as follows-
(b) food service establishments – restaurants, fast food, food canteen, cafe, cafeteria, coffee shop, snack bar, and bukataria.8
The regulation on the registration of Hospitality and Tourism enterprises provides that the Proprietor or operator of every Hospitality and Tourism Establishment is to ensure that within sixty days from the commencement of operations, applies to the Corporation in the prescribed form for the registration on payment of such fee as may be prescribed by the Corporation from time to time.9 The Corporation in turn issues a certificate of registration to the applicant upon fulfillment of necessary conditions. It should be noted that no person shall operate a Hospitality or Tourism Establishment unless he has obtained and has a current certificate of registration from the Corporation.10
PENALTY FOR NON-COMPLIANCE
The regulation stipulates that any restauranteur who fails to comply with the rules shall be liable to a fine of ₦2,000.00 (Two Thousand Naira Only) for failure to make an application for registration within the specified time and an additional sum of ₦1,000.00 (One Thousand Naira Only) for every week the violation continues.11
TAXATION
A restaurant operator is required to comply with the various tax laws applicable to the state where his/her business is situated. Federal and State tax regulatory bodies like the Federal Inland Revenue Service and the Ministry of Internal Revenue of different States regulate the taxation of restaurants in Nigeria. Some of the Taxes applicable are as follows:
1. Companies Income Tax (CIT)
For a company incorporated to carry on the business of a restaurant, it is mandated that it complies with the provisions of the Companies Income Tax Act (CITA) if the company is such that has more than N100 Million Naira turnover or a turnover between N25 Million and N100 Million. The payable tax is paid via Tax Identification Number.12
2. PITA
The Personal Income Tax is imposed on individuals who are either in employment or who are running their small businesses, under a business name or partnership.13 This, therefore, means restaurant operators are captured in this definition.
Personal Income tax levied on restaurant operators is classed as direct assessment which is an assessment raised directly on self-employed persons (eg. Professionals, Contractors, Traders, Landlords, etc). The self-employed person is required to without notice or demand, file a return of income earned in the preceding year using Tax Form A.14
3. Value Added Tax
Value Added Tax (VAT) is a consumption tax paid on purchased products or services rendered.15 Usually, the standard rate for VAT is 7.5%.16 it should be noted that all taxable persons are mandated to immediately register for the tax upon the commencement of business as defined in Section 46 of the VAT Act.17 The penalty for failure to register is a fine of N10,000 to N50,000 for the first month of default, and a fine from N5,000 to N25,000 for Subsequent months in which failure continues. [18] Every taxable business owner is expected to file for their VAT monthly returns not later than the 21st day following the month of transaction.19
4. Hotel occupancy and Restaurant Consumption Tax
The Hotel occupancy and Restaurant Consumption Tax is an additional tax levied on restaurants in states such as Lagos State which imposes a sales/consumption tax of 5% on services provided in restaurants within the state.20 This tax is imposed on goods and services consumed in hotels, bars, restaurants, and event centers within Lagos State. It is payable by the consumers who purchase these goods and services. The hotels, bars, restaurants, and event centers serve as collecting agents for the Lagos Inland Revenue Service (LIRS). Restaurant owners/ operators are required to remit the tax to the LIRS on or before the 20th day of each calendar month in a format prescribed by section 6 of the Law. 21
LICENSES/PERMITS
To operate in the food industry, every entity must be duly licensed having performed the requirements and obtained the license/permit. Worthy of note is the fact that the type of license to be obtained varies by location and type of restaurant in operation. These are discussed below:
1. Food Permit
Persons carrying on restaurant business in Nigeria are required to apply for a food permit and licenses within the Local Government of the state where the restaurant is located before the commencement of operations.
The National Agency for Food and Drug Administrator and Control (NAFDAC), a federal government agency created under the National Agency for Food and Drug Administration and Control Act of 1993 which is the regulatory body for the production and manufacturing of food and drugs also requires that those who sell food in commercial quantity obtain a Good Hygiene Practice (GHP) License from NAFDAC before commencing business operations.22 A GHP license is issued upon satisfaction that the equipment of the food processor meets certain standards and that the food handlers possess the required certification. 23
2. Alcohol License
An alcohol/liquor license is required to be obtained by any organizational entity, producer, or manufacturer that wants to produce or sell alcohol in Nigeria. The Liquor (Licensing) Regulation of various States regulates the procedure for obtaining an alcohol license in Nigeria. In Lagos state, the sale of alcoholic drinks is regulated by the Liquor (Licensing) Law of Lagos State.24 Where alcohol will be sold in a restaurant, the owner is required to obtain a license from the licensing tribunal of the Local Government Area.
It should be noted that in the Northern part of Nigeria where Sharia Law is applicable, it is illegal to sell or drink alcohol in those parts of the States. Therefore, a restaurant operator is to study and understand the law guiding the location of the area before venturing into selling alcohol in those places to avoid being penalized.
3. Signage Permit
Signage is an important part of brand building. In the operation of a restaurant, it is normal to place signage outside the premises for advertisement purposes. Some State laws require businesses to obtain signage permits with the relevant authority. Lagos State for example has the Lagos State Signage and Advertisement Agency established by the Lagos State Structures for Signage and Advertisement Agency Law, 2006.25 The Agency is responsible for regulating and controlling outdoor advertising and signage displays in Lagos State. A restaurant operator is required to obtain a signage permit with the Lagos State Signage and Advertisement Agency.26
CONCLUSION
It is silhouetted against the foregoing that any person seeking to operate a restaurant business in Nigeria must firstly register with the relevant agencies, obtain the required permit and license (s), pay the necessary tax, and comply with the rules and regulations laid down. Failure to meet these requirements will lead to sanctions/penalty by the various agencies.
Footnotes
1. Olufemi Abifarin, The Law and Practice of Hospitality and Tourism in Nigeria, Achievers Wisdom Publication Ilorin 2000
2. Part E of the Companies and Allied Matters Act, 2020
3. Part D of the Companies and Allied Matters Act, 2020
4. Part C of the Companies and Allied Matters Act, 2020
5. Part B of the Companies and Allied Matters Act, 2020
6. Section 20 of the Nigerian Tourism Development Corporation Act, CAP N137, LFN, 2004
7. Regulation of Hospitality and Tourism Establishments (Registration, Grading, and Classification) Regulations 1995
8. Regulation 9 of the Hospitality and Tourism Establishments (Registration, Grading, and Classification) Regulations 1995
9. Regulation 1 of the Hospitality and Tourism Establishments (Registration, Grading, and Classification) Regulations 1995
10. Ibid
11. Regulation 3 of the Hospitality and Tourism Establishments (Registration, Grading, and Classification) Regulations 1995
12.Section 10 of the Companies Income Tax Act, 2020
13. Personal Income Tax Act (Cap P8 LFN 2004)
14. https://lirs.gov.ng/tax-information/tax-types accessed 20th January 2022
15. Section 2 of the Value Added Tax Act Cap V1, LFN 2004 (as amended); www.entrepreneurs.ng : types-of-taxes-in-nigeria accessed 20th January 2022
16. Section 4 of the Value Added Tax Act Cap V1, LFN 2004 (as amended)
17. Section 8 of the Value Added Tax Act Cap V1, LFN 2004 (as amended)
18. Ibid
19. Section 14(3) & (4) of the Value Added Tax Act Cap V1, LFN 2004 (as amended)
20. Section 17 of the Hotel Occupancy and Restaurant Consumption Law, 2009
21. https://lirs.gov.ng/tax-information/tax-types accessed 20th January 2022
22. https://www.mondaq.com/nigeria/trademark/1088094/how-to-obtain-a-food-and-alcohol-license-in-nigeria accessed 18th January 2022
23. https://pavestoneslegal.com/doing-business-simplified-regulatory-requirements-for-operating-a-restaurant-in-nigeria/ accessed 15th January 2022
24. https://www.mondaq.com/nigeria/trademark/1088094/how-to-obtain-a-food-and-alcohol-license-in-nigeria accessed 20th January 2022
25. http://www.lasaa.com/who-we-are/ accessed 18th January 2022
26. Section 20 Lagos State Structure for Signage and Advertisement Agency, Law 2006 (as amended)
Originally published February 5, 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.