Corporate Income Tax in Nigeria
The regulation governing Corporate Income Tax (CIT) is stipulated in the Companies Income Tax Act (CITA), under Cap C21, LFN 2004, with subsequent amendments.
CIT is a levy imposed on a company’s profits garnered from all sources. The prescribed tax rate stands at 30% of the total profits of a company.
Certain profits are granted exemption from CIT, provided they are not derived from the company’s trade or business operations, such as those from a Cooperative society.
Every company is mandated to settle provisional tax obligations within three (3) months from the commencement of each assessment year. This provisional tax sum should mirror the tax remitted in the previous assessment year, serving as a prepayment for the upcoming tax assessment.
The deadlines for filing tax returns are as follows:
- For newly incorporated companies: within eighteen (18) months from their incorporation date or no later than six (6) months after the conclusion of their accounting period, whichever comes earlier.
- For existing companies: within six (6) months following the closure of the accounting year.
A self-assessment filer may opt (through application) to commence installment payments before the due date. However, these installments cannot extend beyond two months after the deadline.
Companies operational for more than four (4) years are subject to minimum tax, unless specifically exempted by tax legislation.
Minimum Tax under CITA is triggered in scenarios where:
- A company records a net loss.
- A company has no tax liability.
- The tax due is lower than the minimum tax threshold.
Starting from January 1, 2020, Nigeria implemented a revised corporate income tax structure, incorporating distinct rates as outlined below:
- Large companies, with an annual turnover of NGN 100 million or more, are subjected to a 30% tax rate.
- Medium-sized companies, with annual turnover exceeding NGN 25 million but less than NGN 100 million, enjoy a reduced tax rate of 20%.
- Small companies, with an annual turnover below NGN 25 million, qualify for an exemption from corporate income tax, contingent upon the timely submission of their tax returns.
Before this adjustment, the standard corporate tax rate stood at 30%.
Capital gains are subject to taxation under a separate capital gains tax category.
Dividend income is typically taxed through a final withholding tax mechanism administered by the distributing company.
As of August 16, 2021, enterprises engaged in the upstream petroleum sector are now liable to a new hydrocarbon tax in addition to the standard corporate income tax. Previously, such operations fell outside the purview of standard corporate tax regulations, instead being subject to Petroleum Profit Tax alongside royalties payable to the State.