Company Income Tax in Nigeria: What You Need To Know

A registered business in Nigeria that earns a legitimate income is captured under the Company Income Tax Act (CITA), Cap C21, LFN 2004 (as amended) to pay the tax due from all its revenue sources. 

However, the provision of the Company Income Tax Act (CITA), Cap C21, LFN 2004 (as amended) exempts income or profits earned from some particular sources from CIT.

Companies Income Tax (CIT) is a tax collected on the profits of registered companies in Nigeria. This also includes the tax on the profits of foreign companies carrying on any business in any part of Nigeria. CIT is one of the many means through which the country generates revenue. Companies founded in Nigeria which are referred to as Resident companies are liable to remit CIT on their global income while non-residents are required to remit CIT on their Nigeria-source income. Companies Income Tax is based on accounting profits adjusted for tax purposes.

The following income is subject to CIT in Nigeria:

  • Profits accruing in, derived from, brought into, or received in Nigeria in respect of any trade or business.
  • Dividends (extended to include compensating payment arising from Regulated Securities Lending Transaction), interest (extended to include compensating payment arising from Regulated Securities Lending Transaction), royalties, discounts, charges, or annuities.
  • Rent or any premium arising from the right granted to any person for the use or occupation of any property, where applicable.
  • Any source of annual profits or gain not falling within the preceding categories.
  • Fees, dues, and allowances (wherever paid) for services rendered.
  • Any amount of profits or gains arising from the acquisition or disposal of short-term money instruments like treasury bills, treasury or savings certificates, debenture certificates, and treasury bonds.

The Finance Act 2021 also includes the profits earned by an educational institute to be chargeable under CIT at the applicable rates which were earlier exempted.

Some of the profits exempted for CIT purposes are as follows:

  • Statutory or registered friendly societies.
  • Co-operative societies registered under any ecclesiastical, or charitable establishments of a public character.
  • Profit of a company established within an EPZ or FTZ.
  • Export profits, as long as proceeds are brought into Nigeria through government-approved channels and invested in raw materials, spare parts, and plant and machinery.
  • Small company’s profit. (Companies with Turnover of 25m and Below)
  • Profits of a company carrying on primary agricultural production for four years and can be extended for another two years upon satisfactory performance.

Minimum Tax under CITA arises where:

  • A company has no taxable profit after profit adjustments;
  • A company has no tax payable;
  • Tax payable is lower than the minimum tax.

The due date for filing returns:

  • Newly incorporated companies must file within eighteen (18) months of their incorporation date or six (6) months after the end of their accounting period, whichever is earlier;
  • Companies that are already in operation must initiate the process within six (6) months of their accounting year-end;
  • All CIT filings are done on the Taxpro-Max platform.
  • The Taxpro-Max system provides the pay on account option which can be used to commence payment of instalment before the due date, but such instalment may not extend past two months after the due date;
  • Unless specifically exempted by law, companies in operation for more than four (4) years are liable to pay minimum tax;

Conclusion

The CIT is applicable on all profits earned by a company throughout its operations. There is no limit to the amount of tax that a company can pay to the government.

However, the rate of CIT depends on the amount of profit earned by the company during a specific period as seen in the table below:

Turnover AmountCIT Rate
Less than N25m0%
Above N25m but less than N100m20%
N100m and above30%

In Nigeria, for companies whose financial year ends in the month of December 2021, June 30th is the deadline for filing their Company Income Tax (CIT) and if a company fails to pay its CIT by this date, then it will be penalized.

Finally, Taxaide is well equipped to provide a wide range of tax management services with and without the integral use of its technologies. Taxaide Corporate Income Tax Management services include but not limited to:

  • Preparing Income Tax Computations including: Tertiary Education Tax, Capital and Investment Allowances and Deferred Tax computation and analysis;
  • Assembling Transfer Pricing (TP); Documentations; Preparing of TP Returns documents and filing of TP Returns on the FIRS TP platform;
  • Filing of CIT Returns and or remittance of applicable taxes inclusive of newly implemented taxes like National Agency for Science and Engineering Infrastructure Levy (NASENI Levy);
  • Facilitating the process of obtaining Tax Clearance Certificates and other relevant certifications.

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