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. Corporate income tax is based on accounting profits adjusted for tax purposes.
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In this piece, I shall be walking you through the importance of financial and tax management for start-ups in Nigeria. In recent times, Nigeria has risen to be one of the leading business locations in Africa; most significantly for start-up businesses.
Business in Nigeria is a wonderful experience when your business venture succeeds, however before success there could be great challenges and difficulties that a new business or startup must face, one of which is usually financial and tax management.
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A few months back, I heard the story of a young man who was in a rather unfortunate situation. I could only sympathize with his predicament. Before the COVID-19 pandemic disrupted economic and business activities in the country, this young man had a stable job but had undergone an interview with a prospective new employer in the hope of securing a better job. Based on his performance at the interview, he had been given assurances that he would get the job. However, he was yet to receive an employment letter. This young man went ahead to quit his job at the time and was waiting for the call from his “new employers”. Fast-forward to a few months later; this young man was told that the new company could not offer him the job as the COVID-19 pandemic had seriously affected their operations and ability to recruit new personnel.
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Introduction
The world’s most popular media company Facebook, creates no content. The world’s most popular retailer Ali Baba carries no stock, and the world’s largest accommodation provider, AirBnB, owns no property.
The above quote is as pertinent as it is trite. Straits Times notes that digitization has led to the emergence of new business models and increased international trade, while removing the need for a company to have physical presence in a country to conduct business with its residents.
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- What is Companies Income Tax (CIT)? CIT is tax on the profits of incorporated entities in Nigeria. It also includes the tax on profits of non-resident companies who accrue or derive profits from Nigeria or bring or receive their income in Nigeria. It is therefore commonly referred to as corporate tax. CIT was created by the Companies Income Tax Act (CITA or the Act), it is one of the taxes administered and collected by the Federal Inland Revenue Service (“FIRS” or “the Service”)
