Answer ... The tax regime in Nigeria is multi-level. There are three levels: federal, state and local government.
Answer ... Companies are liable to company income tax (CIT) at the rate of 30%. For small companies in the manufacturing industry and wholly export-oriented companies with a turnover not exceeding NGN 1 million, the CIT rate is reduced to 20% in the first five calendar years of operation.
Companies engaged in upstream petroleum operations are liable to petroleum profit tax (PPT) at varying rates, as follows:
- 50% for petroleum operations under production sharing contracts (PSCs) with the Nigerian National Petroleum Corporation;
- 65.75% for non-PSC operations, including joint ventures, in the first five years during which the company has not fully amortised all pre-production capitalised expenditure; and
- 85% for non-PSC operations after the first five years.
All resident companies are liable to tertiary education tax at 2%. Banks, insurers, pension-related companies and telecommunications and internet providers are liable to information technology tax at a rate of 1% of pre-tax profits.
Capital gains tax at 10% is applicable to chargeable gains arising from the disposal of assets.
Answer ... Corporate income tax is based on accounting profits adjusted for tax purposes. Capital gains tax is based on chargeable gains from the disposal of assets.
Answer ... There is a different tax treatment based on the nature of taxable income. For instance:
- gains on the disposal of assets are subject to capital gains tax, rather than CIT;
- dividend income is taxable at source by way of withholding tax at 10% and is not subject to further tax; and
- trading income forms part of a company’s business income and is subject to CIT.
Answer ... A company resident in Nigeria is taxable on its worldwide income.
Answer ... Losses may be utilised and carried forward indefinitely. However, in the case of insurers, losses may be carried forward for four years only. The losses of a Nigerian company can be utilised domestically regardless of the jurisdiction in which they arose. This does not apply to losses of a foreign subsidiary or other foreign legal entity in which a Nigerian entity has an interest.
Answer ... Only the named or legal owner of income is taxed in Nigeria. However, the concept of beneficial ownership may be applied in the event of a transfer pricing audit.
Answer ... Corporate income tax rates are generally fixed for all taxpayers, regardless of income or balance-sheet size. The only exception is for small companies in certain sectors with turnover below NGN 1 million.
Answer ... Entities other than companies such as partnerships and trusts are subject to personal income tax and not corporate taxes.