Corporate taxes in Nigeria are administered by the Federal Inland Revenue Service (FIRS). The body is also responsible for tax collection.The Corporate Affairs Commission (CAC) is integrated with the FIRS thus upon registration of a business in Nigeria and issuance of company incorporation documents, the Tax Identification Number is also issued. This is contained just below the QR code on the certificate of incorporation. When doing business in Nigeria it is important to note tax obligations and ensure compliance. The law requires that you have a FIRS Tax Identification Number(TIN) before you can open a business bank account, and a TIN is necessary to complete specific commercial transactions.
Taxes collected by the Federal Government of Nigeria
Taxes in Nigeria are administered by different levels of government depending on the tax type. Taxes paid by companies are primarily administered by the FIRS on behalf of the Federal governments. It is important to note that companies also have certain tax obligations to the state and local governments however, this is not the focus of this article.
Company Income Tax
Company income tax is a type of tax payable by companies in Nigeria that generate income from Nigeria. All companies incorporated and doing business in Nigeria must pay the required company income tax. There are however, a few exceptions to this rule, such as a 0% tax rate for companies that make less than N25 million, or 20% for companies that make between N30-100 million annual turnover. Asides these exceptions, the tax rate is marked at 30% for all other companies. Company income tax is to be filled on or before the 30th of June, each year.
Value Added Tax
Value Added Tax is a monthly tax imposed on all good and services produced within Nigeria or imported into the country. The VAT rate is currently 7.5% and is to be paid on the 21st day of the following month.There are a good number of items exempt from VAT including educational items, medical goods, and services, and many more which can be reviewed here.
Tertiary Education Tax
The Tertiary Education Tax (TET) is a type of tax mandatory for all companies registered in Nigeria. All companies except Non-Resident or small companies must pay 2.5% of their profits every year. The Tertiary Institution Tax is usually paid at the same time as the Company Income Tax, although, there is no due date for paying it. This tax goes into funding projects that help develop Nigeria's Tertiary Institutions, e.g Universities, Polytechnics and College of Educations.
National Information Technology Development Fund (NITDF) Levy
The National Information Technology Development Fund (NITDF) Levy also known as Information Technology Tax, is payable by companies who make over N100 million in select sectors. These sectors include; cyber and internet service providers, pension companies, financial institutions and insurance companies. The Information Technology Tax is payable within 60 days of the notice of assessment handed out to the company by the FIRS. The tax rate is set at 1% of the profit before income tax (PBT)
Police Trust Fund
The Police Trust Fund is levied on all companies operating within Nigeria without exception. This tax was introduced in 2019. It is to be filed on June 30 of the following year, and is set at 0.005% of net profits.
The National Agency for Science and Engineering Infrastructure Levy
The National Agency for Science and Engineering Infrastructure Levy is a levy imposed on organizations with an annual turnover of over N100 million in the sectors of ICT, banking, maritime, aviation, or oil and gas sector. The rate is set at 0.25% of profits before tax and it has no specific filing date. It is however very common for companies to pay the levy along with their Company Income Tax.
Withholding Tax (WHT) is a method used to collect Income Tax in advance. WHT is deducted at varying rates ranging from 5% to 10% depending on the transaction. Dividends, Interest, rents (10%), Royalties (10% for Companies' and 5% for individuals), Commission, technical or service fees (10% for Companies' and 5% for idividuals). The due date for filing WHT returns is 21st day of every succeeding month. Penalty for late filing of returns is N25, 000 for the first month it occurs and N5, 000 for each subsequent month the failure continues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.