COMPANIES INCOME TAX AND OTHER TAXES AS AT FEB 2023

Taxable period
 The taxable period is the fiscal year, which runs from 1 January to 31 December. Tax
returns
 Companies are required to register for tax and file their audited accounts and tax
computations with the FIRS within six months of their financial year-end on a self-
assessment basis or 18 months after incorporation (whichever comes first).
 A company may file an application for extension of filing tax returns for up to two
months at the discretion of the FIRS.
Upon registration, a company is issued a TIN, which serves as the company's file number for all
federal taxes and future correspondence with the FIRS.
Returns Filing For CIT
The company must file the following documents with the tax authority on an annual basis:
 Tax computation for the relevant year of assessment.
 The audited financial statements for the respective period; this should be in conformity
with the International Financial Reporting Standards (IFRS).
 A duly completed and signed self-assessment form for CIT.
 Evidence of remittance of the income tax liability (partly or in full).
Returns Filing For PPT/HCT
 PPT/HCT is payable on an actual year basis.
 Estimated tax returns must be filed within two months of the fiscal year.
 Actual tax returns should be filed within five months after the end of the accounting
period, that is, not later than 31 May.
Assessment
Nigerian companies file their tax returns based on a self-assessment system where the taxpayer
prepares its annual returns and determines its tax liability. However, the FIRS may apply a best
of judgment (BOJ) assessment where it is of the opinion that the tax returns filed are deliberately
misstated or where no returns are filed within the stipulated period.
Business deductions
Examples of deductible business expenses include:
 Interest on money borrowed for business purposes.
 Rent and premium payable on land or buildings occupied for the purpose of acquiring the
income.
 Repairs and maintenance expenses for premises, plant, or machinery used in generating
income.
 Bad debts.
 Subscriptions, provided they relate to the business or profession.
Payment of tax
CIT
  A company that files its self-assessment within six months after the accounting year-end
can apply to the FIRS in writing to pay its income tax in instalments.
 The maximum number of instalments the FIRS may approve is three.
 Such application must go with a portion of the tax liability.
 It is due on or before the due date for filing.
Bonus
 Large companies are granted a bonus of 1% against income tax of future tax years (2%
for medium companies) where the income tax is paid 90 days before the due date for
filing.
Assessments
 Assessments are made on a preceding year basis.
 This means that the financial statements for a period ended in 2017 will form the basis for
the 2018 year of assessment.
Petroleum Profit Tax/Hydrocarbon Tax
 Payments with respect to PPT/HCT in any accounting period of 12 months are made in
12 instalments, with a final 13th instalment (if there is an underpayment).
 The first instalment for the year is due by the end of March.
Penalty for non-compliance-Company Income Tax
 Failure to file CIT returns attracts a penalty of N25,000 for the first month and
N 5,000 for each subsequent month of default.
 Late payment of CIT attracts a 10% penalty and interest at the commercial rate.
Penalty for non-compliance-Petroleum Profits Tax
 Late submission of PPT returns attracts an initial penalty of N10,000 and N2,000 for
each day such failure continues,
 while late payment of tax attracts a penalty of 5% of the tax not paid.
Tax Audit Process
Generally, the tax authority will commence a desk examination of a taxpayer's returns
immediately after filing. This may be followed by a tax monitoring exercise whereby tax officers
visit taxpayers to conduct an interview and on-site high-level review of their tax affairs.
Random or specific tax audit may be carried out usually within six years of filing tax returns. In
unusual cases, a back-duty tax investigation may be conducted for more than six years,
especially where a tax fraud or wilful default is suspected.
In the past, tax audits took a long time to conclude, usually between three to five years.
However, the tax authorities are seeking ways to improve the average turnaround time.
In 2018, the Joint Tax Board issued a collaborative framework for cooperation between the FIRS
and the state tax authorities. This indicated that there is now clear movement in improving
collaboration after many years of simply discussing the concept.
Statute of limitations
The tax authority may carry out a tax audit and issue an additional assessment within six years
from the relevant tax year. However, the limitation does not apply in the event of a fraud, wilful
default, or neglect by the company.
Non-Resident Entities
 non-resident entities that create a PE in Nigeria are to file full tax returns, including
audited accounts, as opposed to filing on a deemed-profit basis.
 the expenses of these PEs will be scrutinised for tax deductibility.
 the FIRS will normally scrutinize related-party transactions as a way of preventing
taxpayers from shifting profits away from Nigeria.
 transfer pricing audits are carried out as required.
 The Finance Act 2020 amended Sections 25 & 26 of the FIRS Establishment Act,
granting the FIRS powers to:
 deploy proprietary or third-party payment processing companies or digital platforms as
agents to collect taxes due on international transactions in the supply of digital services
 deploy technology to automate the tax administration process, including assessment,
collection, and information gathering, provided that it gives the taxpayer a notice of 30
days, and
 receive assistance in the collection of revenue claims or other tax matters relating to
agreements between Nigeria and other countries or bodies.
 The FIRS has released the TaxPro-Max platform for tax compliance.
 TaxPro-Max is the channel for filing naira-denominated tax returns.
 It near future this platform may be updated for foreign currency returns.
 The Finance Act 2021 provided that the FIRS is the only tax authority to account for
taxes due to the Federal Government.

PERSONAL INCOME TAX/INDIVIDUAL TAXES

Individuals resident in Nigeria are taxable on their worldwide income.

In the case of employment, a non-resident person is liable to tax in Nigeria if the duties of
employment are wholly or partly performed in Nigeria, unless:
 the duties are performed on behalf of an employer who is in a country other than Nigeria,
 the remuneration of the employee is not borne by a fixed base of the employer in Nigeria,
and
 the remuneration of the employee is liable to tax in that other country under the
provisions of the avoidance of double taxation treaty (DTT) with that other country.
Foreign persons earning business profits from Nigeria are taxed under Section 6 of the PIT Act
(PITA) once a fixed base/taxable presence is created, subject to existing treaties.
Residency
 The principal basis of liability to tax under the PITA is residency.
 A person is considered resident if one is physically in Nigeria for at least 183 days
(including leave and temporary absence) in any 12-month period
 or serves as a diplomat or diplomatic agent of Nigeria abroad.
Taxable Period For Individuals
The taxable year is the fiscal year, which runs from 1 January to 31 December.
Tax returns-Individuals
 Returns should be filed with the relevant tax authority within 90 days of the end of the
fiscal year.
 Taxpayers with an income of N30,000 or less are not required to file tax returns.
 Every employer is required to file a return of all emoluments paid to its employees not
later than 31 January of every year in respect of all employees in its employment in the
preceding year.
Payment of tax
Pay-As-You-Earn (PAYE) tax must be remitted on or before the 10th day of the month
following the month in which salaries were paid.

Tax audit process SIRS

The relevant State Internal Revenue is empowered by law to collect taxes on income of
individuals, except the following persons, who are assessed to tax by the Federal Inland Revenue
Service:
 Persons employed by the Nigerian Army, Navy, Air Force, and Police Force, other than
in a civilian capacity, and officers of the Nigerian Foreign Service.
 Every resident of the Federal Capital Territory.
 Persons not resident in Nigeria who derive income or profit from Nigeria.
Apart from the above, no tier of government has legal authority to impose tax on the income of
individuals.
Employment income
Employers can pay or provide, among other items, basic salaries, housing allowances, transport
allowances, utilities, lunch allowances, leave allowances, club subscriptions, clothing
allowances, leave passage, insurance premiums, and certain reimbursements to their employees.
The entire list is fully taxable except for reimbursements supported with third party
invoices/receipts and reasonable relocation expenses.
Benefits
 Employers may provide cars and accommodation for their staff.
 If a company provides accommodation for an employee, the employee is taxed on the
annual ratable value of the accommodation.
  If a car is allocated for an employee's use, 5% of the cost of the car will be treated as
benefit-in-kind that will form part of the employee's taxable income.
 The provision of canteen meals for staff is generally not treated as part of the employee's
taxable income.
 Reimbursements, such as car maintenance, are tax exempt to the extent that the
expenses have been incurred and there is no element of profit to the employee.

PITA-significant economic presence (SEP) rules

 Section 6(A) of the PITA introduces the significant economic presence (SEP) rules to the
taxation of non-resident individuals, executors, or trustees carrying on a trade or business
comprising technical, professional management, or consultancy (TPMC) services to
persons resident in Nigeria.
o The MoF may, by Order, define what constitutes SEP for this purpose.
o The MoF has yet to define what constitutes SEP for this purpose.
Note that employees who earn not more than the national minimum wage (currently NGN
30,000) are no longer liable to tax or deduction of monthly pay-as-you-earn (PAYE).
Deductions
 Deductions for tax purposes are granted if the expenses meet the criteria for allowable
deductions.
 Allowable deductions are expenses incurred wholly, exclusively, necessarily, and
reasonably in the production of taxable income
Employment expenses
NHF contributions, National Health Insurance Scheme contributions, life assurance premiums
(not including deferred annuities), national pension scheme contributions, and gratuities are
deductible.
Mortgage or other loan interest relating to owner-occupied accommodations is deductible from
employment compensation.
Personal deductions
Healthcare expenses
Medical expenses and insurance premiums are deductible.
Life insurance premiums
Relief for life insurance premiums (not including deferred annuities) for the taxpayer and the
taxpayer's spouse is restricted to the actual premium paid to an insurance company by the
individual during the year preceding the year of assessment.
Personal allowances

Allowance Limit

Consolidated relief Higher of N200,000 or 1% of gross income plus 20% of gross income *
allowance
As a result of the consolidated relief allowance of at least 21% of gross income, the top marginal
tax rate is 18.96% for income above N20 million as only 79% of income is taxed at 24%;
however, for income below N20 million, the marginal rate is 19.2%.
* 'Gross income' means income from all sources less all non-taxable income, income on which
no further tax is payable, tax-exempt items listed in paragraph two of the sixth schedule, and all
allowable business expenses and capital allowances.
Individual - Sample personal income tax calculation
Last reviewed - 24 February 2023
PAYE calculation for an individual
Below is the basis of PAYE calculation for an individual whose gross income is N4 million. For
the purpose of this calculation, it is assumed that pension is calculated at 8% of gross income and
no NHF deduction.

NGN NGN

Gross income (GI) 4,000,000

Gross income (GI2) for consolidated relief

3,680,000
allowance purposes (i.e. GI less pension)

Less reliefs:

Higher of NGN
200,000 or 1% of 200,000
Consolidated relief allowance GI

20% of GI2 736,000

Pension 8% of GI 320,000 (1,256,000)

Taxable income 2,744,000

Annual income (NGN) PIT rate (%) Tax payable (NGN) NGN

First 300,000 7 21,000

 Next 300,000 11 33,000

Next 500,000 15 75,000

Next 500,000 19 95,000

Next 1,600,000 21 240,240

Over 3,200,000 24

Gross income 4,000,000

PAYE 464,240 (464,240)

Net income after PAYE 3,535,760

Pension contributions
 The Pension Act signed on 1 July 2014 provides that employers with at least 15
employees are required to participate in a contributory pension scheme for their
employees.
 The minimum contribution under the Act is 18% of monthly emolument (with a
minimum contribution of 10% by the employer and 8% by the employee).
 If the employer decides to bear all the contribution, the minimum contribution is 20% of
monthly emolument. Mandatory and/or voluntary contributions by the employers and
employees to schemes approved by the Pension Act are deductible for tax purposes.
The Act also requires every employer to take out life insurance coverage for its
employees.
National Housing Fund (NHF) contributions
 NHF contributions are applicable to Nigerian employees earning a minimum of N3,000
per annum.
  The employer is required to deduct 2.5% of basic salary from employees earning more
than N3,000 per annum and remit it to the Federal Mortgage Bank of Nigeria within one
month of deduction.
Minimum income tax
Where a taxpayer has no taxable income because of personal reliefs and allowances or total
income produces a tax lower than the minimum tax, a minimum tax rate of 1% of the total
income is payable.
tax credits or incentives for individuals
There are no other significant tax credits or incentives for individuals in Nigeria.
Foreign tax relief for individuals
Foreign tax payable in respect of income in a country with which Nigeria has a DTT is allowed
as a credit against tax payable in respect of that income in Nigeria. There is an administrative
requirement to obtain the treaty benefits.
Capital gains tax (CGT) on termination benefits
 Income that qualifies as termination benefits (compensation for loss of office) in line with
the Capital Gain Tax Act will be subject to CGT on the portion of the income above N10
million Capital gains tax (CGT)
 Gains accruing to a chargeable person (individual or company) on the disposal of
chargeable assets shall be subject to tax under the Capital Gains Tax Act at the rate of
10%.
 There is no distinction between long-term and short-term gains and no inflation
adjustment to cost for CGT purposes.
 All forms of assets, including options, debts, goodwill, and foreign currency, other than
those specifically exempt, are liable for CGT.
 The Finance Act 2021 amends the CGT Act to impose tax at 10% on gains from the
disposal of shares in a Nigerian company worth N100 million or above in any 12
consecutive months, except to the extent that the proceeds are reinvested in the shares of
any Nigerian company.
 CGT will accrue proportionately on the portion of sales proceeds not reinvested in the
above manner. Regulated securities lending transactions are exempt from CGT as well as
government securities and gain on trading shares.
 CGT is applicable on the chargeable gains received or brought into Nigeria in respect of
assets situated outside Nigeria.
Prior to FA 2023, Capital losses are not allowed as an offset against chargeable gains accruing
to a person from the disposal of any assets. FA 2023 NOW ALLOWS CAPITAL LOSSES
CGT will apply on compensation of loss of office that exceeds N10 million.
There is a requirement to self-assess and remit CGT due no later than 30 June and 31 December
of the same year upon the disposal of a chargeable asset.
NET WEALTH/WORTH TAXES
There are no net wealth/worth taxes in Nigeria.
Investment income
Dividends, interest, rent, or royalties derived and brought to Nigeria in convertible currency
through government approved channels and paid into a local account in an approved bank is
exempt from Nigerian tax.
CONSUMPTION TAXES
VALUE-ADDED TAX (VAT)
 The standard VAT rate is 7.5% (increased from 5% on 1 February 2020).
 Zero-rated items include non-oil exports, goods and services purchased by diplomats, and
goods and services purchased for use in humanitarian donor funded projects.
 Exempt items include plants and machinery for use in export processing zones or free
trade zones, basic food items, medical products and services, pharmaceutical products,
books and educational materials, and exported services. Property taxes
PROPERTY TAXES
 They are usually levied annually by the state government with varying rates depending
on the state and the location of the property within the state.
 The two major property taxes are governor’s consent fee and land registration fee.
 In Lagos (which is the economic hub of Nigeria), governor’s consent fee, land
registration fees, and other levies payable to the state give rise to a total levy of 15% of
the transfer value of the land.
 Also, Right of Occupancy fee and tenement rates are chargeable by state and local
government authorities.

LUXURY AND EXCISE TAXES

 Excise duty is applicable on beer and stout, wines, spirits, cigarettes, and tobacco
manufactured and sold in Nigeria and imported into Nigeria at rates ranging from 5% to
20%.
 Excise duty will not apply on imported excisable goods not produced in Nigeria and raw
materials not available in Nigeria.
Special levies have been introduced on luxury items in the 2015 Budget effective from 2015.
Details of these surcharges are as follows:
 Purchase of new private jets will be subject to a 10% import surcharge.
 Purchase of luxury yachts will be subject to a 39% import surcharge.
 Purchase of luxury cars will be subject to a 5% import surcharge.
 Purchase of champagnes, wines, and spirits will be subject to a 3% luxury surcharge.
 1% Mansion Tax on residential properties within the Federal Capital Territory, Abuja.
The tax is applicable to property with value of NGN 300 million and above.
 There will be a surcharge on business and first-class tickets on airlines. The rate is yet to
be determined.