Company Income Tax In Nigeria: All You Need To Know

Tax which originated from the Latin word ''taxo'' is a mandatory
financial charge or levy imposed upon a taxpayer mostly individuals / companies by governmental organization in order to raise funds. 

In most countries,failure to pay tax,tax evasion or resistance to taxation is punishable by law. 
This article contains everything you should know about the Company Income Tax and other forms of tax in Nigeria.

Company Income Tax In Nigeria

Q: Company Income tax definition,what is Companies Income Tax Act in Nigeria?

The Companies Income Tax Act in Nigeria is a tax that is collected from both Nigerians and also foreign companies that are conducting their businesses in Nigeria. 

Q: Quick details about Company Income Tax In Nigeria?

Foreign companies and Nigerian companies are mandated to pay their tax by law,however it's different for both entities.

Nigerian companies pay tax based on their worldwide income whereas their foreign counterpart pay tax based on their profits that are being made as a result of their business activities in Nigeria. 

The corporate tax rate in Nigeria is 30%,which became effective after the 2011 amendment.

Company Income Tax In Nigeria is a very important means of revenue generation for the Nigerian government. In Nigeria the tax charging is governed by CITA (Companies Income Tax Act 1990) which was amended in 2004. 
Some of the ways earnings of companies are taxed in Nigeria include:
  • 1. Rent and all the premiums that are arising from the company operations are charged with tax when it comes to Companies Income Tax.
  • 2. All trade and business related activities of companies are taxable.
  • 3.The proceeds from the business that are distributed to the share holders of public limited companies are also taxable. According to provision 1C of the Nigerian Companies Income Tax Act,all interests, royalties,discounts are also charged with tax.
  • 4. Any amount received by the company which is considered to be a profit profit is also taxable.
  • 5. Annual profit that does not fall within the categories mentioned above is also charged with tax. 
  • 6. Any short term fund raising acts by the company is also  taxable under Companies Income Tax Act.

Q: Where to make payment for the company income tax?

When it comes to making payment for the company income tax,all Nigerian based companies are expected to make tax payments at specified designated banks. 

After making payment an e-ticket will be issued once the payment has been captured by the bank system.

Foreign companies on the other hand need to make sure that the tax is deducted using the specified designated banks.

Also note that all Nigerian companies submit annual tax returns in relation to the Companies Income Tax Act while the withholding tax is deducted from the profits made by the foreign companies in Nigeria. 

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Q: Types of Tax imposed by the Nigerian Government? 

There are different types of income tax that are imposed on the individuals and companies by the federal government,this includes: 

(a) The Personal Income Tax

The personal income tax is the tax imposed on citizens of nigeria and individual foreigners who earn their livelihoods in the country. 
The conditions for these form of tax are: 
  • If he or she is a Nigerian resident and earning in the country.
  • If he is not a permanent resident but still making a livelihood in the country.
  • If he or she has a business in the country.
(b) Company Income Tax & Education Tax Act

The Company Income tax targets Nigerian and foreign companies.The Nigerian companies that are based in Nigeria  are taxed according to the income they make all over the world whereas the foreign companies are taxed according to their profits. 

While the Education Tax Act imposed by the Nigerian government ensures that all the incorporated companies pay 2% of their assessable profits.

(c) Petroleum Profit Tax

The Petroleum profit tax is a form of tax that is imposed on companies that has interest in activities relating to oil and gas in Nigeria.

(d) Excise Duties

These are the income tax imposed on the businesses that involves importation of goods and services.
This duty is collected by the Nigerian Customs and will subsequently forward the earnings to the State government. 

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(e) VAT or Value Added Tax

Consumers of chargeable goods and services are expected to  pay 5% of total value of the purchase price as tax. 

The VAT is handled by The FIRS (Federal Inland Revenue System). The FIRS ensures that the system of VAT is maintained for the local bodies,federal and state government.