Company Income Tax in Nigeria; Rates, Exemptions & Payment

Company Income Tax (CIT) is a type of tax paid on the profits of incorporated entities in Nigeria. CIT is paid by companies inclusive of the public limited liability companies, companies operating in or outside Nigeria but derive their profit from or receive income in Nigeria. It is paid to the federal government of Nigeria through the Federal Inland Revenue Service (FIRS). It is commonly referred to as corporate tax.


According to the new law i.e. Finance Act 2020, companies have been categorized into three for the purpose of filing CIT:

  1. Companies with turnover of over N100 million annually will pay 30% CIT; 

  2. Companies with turnover of between N25 million and N100 million annually will pay 20%; 

  3. Companies will less than 25million turn over are completely exempted from filing CIT.


The following are FAQs on Company’s Income Tax In Nigeria



HOW IS COMPANY INCOME TAX CALCULATED?

Company Income tax is calculated at the rate of between 20% - 30% subject to the applicable exceptions. 

 

HOW MUCH TAX IS DEDUCTED FROM SALARY IN NIGERIA?

Taxes deducted from an individual is called a Personal Income Tax is calculated on a graduated rate i.e. there income tax rate brackets and the amount deducted would depend on the amount earned.

 

TAX EXEMPTION FOR NEW COMPANIES IN NIGERIA

The New Finance Act exempts companies within the first four calendar years of operation from the obligation to pay Companies income tax in Nigeria.

 

SMALL BUSINESS TAX IN NIGERIA

Small businesses in Nigeria a new companies with a revenue of 25million naira and below from the obligation to pay the Company Income Tax.

 

 

COMPANIES EXEMPTED FROM TAX IN NIGERIA

No company is given a blanket exemption from paying taxes. There can however be exceptions from paying specific taxes that are generally applicable to other companies. Pioneer status is also an exemption granted to businesses in certain industries and with a reasonable amount of capital investment.

 

HOW TO PAY COMPANY INCOME TAX?

The requirement and steps for filing CIT with the FIRS are basically the same for small, medium or large taxpayers. To many taxpayers, CIT is a complicated kind of tax, too technical to understand and comply with. Below are the easy steps to file your CIT:

Step 1: Obtain Forms

Applicant is required to obtain the Company Income Tax and a Self- Assessment Forms from the nearest FIRS office and carefully fill the form and confirm for correctness.

The Federal Inland Revenue Service permits companies to file their tax returns based on a self-assessment system where the company prepares its own annual returns and determines its tax liabilities. Although, the FIRS may carry out further assessment to ascertain the validity of the tax returns filed where it suspects that the information are false or no returns where filed at all.

Step 2: Make Payment

Applicant is required to make payment through any of the provided means such as draft, cash, internal transfer, etc. through the approved or collecting banks. Upon payment of the applicable fee, applicant will be issued an e-ticket as evidence of payment. Applicant is expected to verify the details on it to ensure completeness and correctness.

Step 3: Submit Documents

Applicant is to submit all documents such as the E-ticket issued by the bank as evidence of tax payment, duly completed CIT return form, Self-Assessment form, audited financial statement, and tax computation for the relevant year of assessment to the FIRS office for approval.

The accounts should be audited and signed by External Auditors who must be members of a recognized professional body. The Audited financial statement must consist of the following:

  • Statement of financial position (Balance Sheet),

  • Statement of comprehensive income (Profit and Loss Account),

  • Statement of changes in equity,

  • Statement of cash flows,

  • Notes on significant Accounting Policies and other explanatory  information,

  • Comparative figures of preceding year on the Generally Accepted Accounting Principles (GAAP) basis to be included in the returns. 


In filing for Companies Income Tax, audited financial statements are statutorily required. The returns should mandatorily be accompanied by the tax computations and capital allowances computations on qualifying assets of the company. 

Step 4: Tax Receipt

Upon approval, Applicant will be issued a tax receipt as evidence of filing for that year of application.

DUE DATE FOR FILING CIT

The due date for filing tax returns for new companies is within eighteen (18) months of incorporation or six (6) months after accounting year end whichever comes first. For old and existing companies, tax returns should be filed within six (6) months from the end of the company’s accounting Company Income Tax in Nigeria

 

MINIMUM TAX IN NIGERIA 2020

Minimum tax is paid by companies that have no taxable profits for the year ended. Companies in the first four calendar years of business, companies engaged in agricultural business and small companies as defined above are exempt from minimum tax. Minimum tax is calculated as 0.5% of gross turnover minus franked investment income. Special rules apply to insurance business.

 

DO BUSINESS NAMES PAY TAX IN NIGERIA?

Business name owners like companies are required to pay taxes but because they are not an incorporated entity thus business name owners do not pay companies income tax. What they pay is personal income tax.

 

NIGERIAN TAX RATES

The tax rates in Nigeria depend on the particular type of tax. The Companies Income Tax rate is 30% subject to the available exceptions.

 

WITHHOLDING TAX IN NIGERIA

Withholding Tax (WHT) is an advance payment of income tax. There are varying rates of WHT ranging from 2.5% to 10% for companies and 5% to 10% for individuals depending on the transaction. 


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