Profitability Is Not Enough, Repatriation Is Key.
For many foreign investors entering Nigeria's fast-growing markets, profitability is only half the battle. The real challenge lies in how much of those profits can be legally repatriated and how much will be eroded by taxes, regulatory delays, or foreign exchange restrictions.
This article outlines the tax regimes, highlighting the new 2025 tax reforms, planning strategies, and repatriation channels that foreign-owned businesses and foreign investments in Nigeria should understand from day one.
Understanding Nigeria's Corporate Tax Framework
Nigeria operates a multi-layered corporate tax system governed by the Companies Income Tax Act (CITA), the Finance Acts (which amend tax laws annually), and regulations issued by the Federal Inland Revenue Service (FIRS).
As of the latest update under the Finance Act 2024, the current corporate income tax regime is as follows:
· 0% for small companies with an annual turnover of ₦25 million or less.
· 20% for medium-sized companies with a turnover between ₦25 million and ₦100 million. (Small companies (turnover below NGN 100 million, fixed assets less than NGN 250 million) are now fully exempt from CIT, CGT, and the new Development Levy.
· 30% for large companies with a turnover above ₦100 million. (Recent reforms aim to reduce the standard CIT rate to 27.5% by 2026 and 25% by 2027 for large companies.
· Tertiary Education Tax (TET): 2.5% of assessable profit.
· National Information Technology Development Agency (NITDA) Levy: 1% for companies in specific sectors like telecoms, banking, and ICT.
· Capital Gains Tax: Increase from 10% to 30% for companies, aligning with CIT
· Withholding Tax (WHT): 10% on dividends, interests, royalties, and rent (5% for individuals/local entities). Reduced rates under double tax treaties (DTTs) may apply.
Minimum Effective Tax Rate (ETR)
· Multinational companies (turnover greater than NGN 50 billion or group turnover greater than EUR 750 million) must ensure a 15% ETR, with a "top-up" tax to meet the threshold
Investors must also register for Value Added Tax (VAT), which is currently at 7.5%, and ensure compliance with Transfer Pricing Regulations for related-party transactions.
Tax Planning for Foreign Investors
Foreign investors can legally optimize their tax obligations in Nigeria through:
1. Tax Incentives & Reliefs:
o Pioneer Status Incentive (PSI): Offers a 3 to 5-year tax holiday for companies in eligible sectors.
o Export Expansion Grant (EEG): Incentive for exporters through tax credits.
o Free Trade Zones (FTZs): Companies operating in FTZs enjoy 100% tax exemptions and unrestricted capital repatriation.
o Double Tax Treaties (DTTs): Nigeria has treaties with countries like the UK, China, South Africa, etc., reducing withholding tax rates and preventing double taxation.
2. Group Structuring:
o Holding companies in tax-efficient jurisdictions like Mauritius or the Netherlands can help manage tax exposure.
o Structuring with Special Purpose Vehicles (SPVs) for capital raising, project finance, or asset protection.
3. Strategic Use of Transfer Pricing:
o Ensure all intercompany transactions are conducted at arm's length.
o Prepare and maintain appropriate documentation to avoid penalties.
4. Capital Allowances & Investment Deductions:
o Leverage accelerated depreciation on qualifying capital expenditure to reduce taxable income.
How Foreign Investors Can Legally Repatriate Their Profits Out of Nigeria
Foreign investors in Nigeria are permitted to repatriate capital, dividends, interest, and profits through legitimate channels, provided they comply with the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act and Central Bank of Nigeria (CBN) regulations.
Key Repatriation Channels and Requirements:
1. Certificate of Capital Importation (CCI):
o Issued by Nigerian banks on behalf of the CBN within 24–48 hours of capital inflow.
o It is the primary evidence that funds were imported through official channels and is mandatory for the repatriation of proceeds.
2. Dividend and Profit Repatriation:
o Profits, dividends, and interest earned can be repatriated net of applicable taxes (WHT and corporate tax).
o Dividends attract a 10% withholding tax (or a lower rate under DTTs).
3. Sale or Liquidation Proceeds:
o In the event of divestment or liquidation, the proceeds (capital and gains) may be repatriated upon presentation of the CCI and tax clearance.
4. Loan Repayments and Interest:
o Foreign loans must be registered with the CBN via Form M and be backed by proper agreements.
o Interest payments can be repatriated, subject to applicable WHT (usually 10%).
5. Use of Authorized Dealers:
o All remittances must be processed through licensed banks (authorized dealers) and must comply with anti-money laundering and tax compliance documentation.
6. Investment via Free Zones:
o Businesses operating in Free Zones enjoy unrestricted repatriation without FX restrictions.
Common Pitfalls to Avoid
· Failure to Obtain CCI: Without a CCI, capital and returns may be trapped or face regulatory delays.
· Non-compliance with Transfer Pricing: Can lead to audits, penalties, and disallowance of intercompany expenses.
· Inadequate Tax Planning: May lead to higher tax exposure and repatriation delays.
· Misalignment with BOFIA and SEC Regulations: Especially for financial and capital market investments.
FAQs: Tax and Repatriation in Nigeria
Q1: Can foreign investors repatriate 100% of their profits from Nigeria?
A: Yes, provided they obtained a Certificate of Capital Importation (CCI) and have fulfilled all tax obligations, including withholding and corporate income taxes.
Q2: What happens if I didn't get a CCI?
A: Repatriation becomes difficult or impossible. A CCI is a precondition for legal remittance of funds abroad.
Q3: What are the new tax updates in the Finance Act 2023?
A: Key updates include increased tertiary education tax from 2% to 2.5%, clarification on digital service taxes, and tax reliefs for startups and MSMEs.
Q4: Are there sectors where tax holidays apply?
A: Yes, under the Pioneer Status Incentive, eligible sectors such as manufacturing, agro-processing, ICT, and infrastructure may enjoy 3 to 5 years of tax holidays.
Q5: Are capital gains from foreign investors taxed when exiting investments?
A: Yes, capital gains tax at 10% applies unless exemptions under restructuring provisions or tax treaties apply.
Q6: How long does it take to repatriate profits?
A: Typically 1–2 weeks, depending on documentation completeness and bank processing times.
Q7: Can I repatriate in foreign currency?
A: Yes. CBN allows repatriation in the currency of the original investment, often USD, EUR, or GBP.
Plan Repatriation Now to Keep Your Profits
Tax and repatriation planning can't be an afterthought—you need to build it into your investment structure. With Nigeria's reforms coming into effect by January 2026, preparation today is essential for tomorrow's success.
At The Trusted Advisors, we specialise in tax structuring, repatriation strategy, and cross-border investment planning to protect your returns and secure your investment.
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.
