Resources

HomeResources

COMPANIES INCOME TAXATION

Tax Returns

1.1 Every company (including non-Nigerian companies doing business in Nigeria) is expected to file self- assessed tax returns within 6 months after the company’s accounting year-end.
1.2 A new company is expected to file returns within 18 months from the date of incorporation or 6 months after its first accounting period, whichever is earlier.

Tax Rate

Incorporated companies are taxed at 30% of their taxable profits.

PERSONAL INCOME TAX

Tax Returns

  • A taxpayer is required to file returns for the preceding year on/before 31st January of the year.
  • Monthly payments of Pay As You Earn (PAYE) tax liabilities are to be made on or before the 10th day of the month following the applicable month (e.g. January tax to be remitted by 10th of February).
  • The employer has the duty to deduct PAYE and remit to the tax authorities on a monthly basis.

 

Tax Computation

PAYE is computed as follows:

  • A consolidated relief allowance shall be granted on income at a flat Rate of N200,000 plus 20% of gross income.
  • The following deductions are tax exempt

(a) National Housing Fund Contribution
(b) National Health Insurance Scheme
(c) Life Assurance Premium
(d) National Pension Scheme
(e) Gratuities

  • After the relief allowance and exceptions had been granted in, accordance with Paragraphs 1and 2 of this Schedule, the balance of income shall be taxed as specified in the following tax table:

 

Tax Income Rates

Graduated Tax rates with consolidated allowance of N200,000 + 20% of Gross Income, subject to a minimum tax of 1% of Gross Income whichever is higher.

1. First N300,000 @ 7%
2. Next N300,000 @ 11%
3. Next N500,000 @ 15%
4. Next N500,000 @ 19%
5. Next N1,600,000 @ 21%
6. Above N3,200,000 @ 24%

WITHHOLDING TAX

Withholding tax is an advance payment of income tax.

Tax Returns

  • Taxes withheld from companies are to be remitted to the Federal Inland Revenue Service while those withheld from individuals and partnership businesses are to be remitted to the State Internal Revenue Service.
  • Filing of withholding tax returns is due 30 days after the duty to deduct arose or 30 days after the deduction is made; whichever is earlier.
  • The paying company has the duty to deduct on the following transactions at the applicable rates below:

Penalties for Non-Compliance

Penalty of 10% of tax due in addition to the principal tax due and interest at commercial rate (currently fixed at 21%).

TERTIARY EDUCATION TAX

Tertiary education tax is paid at 2% of assessable profits of any company incorporated in Nigeria.

VALUE ADDED TAX

  • All companies making VATable supplies in Nigeria are required to register for VAT and obtain a VAT registration number within 6 months of commencement of business.
  • VAT is chargeable at a flat rate of 5% on the supply of VATable goods and services.
  • Non-resident companies are required to register for VAT using the address of the person with whom it has a subsisting contract. Resident companies are required to withhold VAT on taxable supplies made by the non- resident company and remit the same directly to the Government. Where input tax exceeds output tax, the credit is available to be used as an offset against future VAT liabilities.

Tax Returns

  • Monthly VAT returns are to be filed on or before the 21st  day of the month following the month of transaction.

STAMP DUTIES

  • Stamp duties are chargeable on the price paid on a conveyance. Fixed duties are generally payable on certain deeds where no money changes hands.
  • It is chargeable at 75k per N50 of the price paid for a conveyance (i.e. 1.5%).

PENSION SCHEME

Pension Reform Act enacted in 2014 makes it compulsory for each employee of the Federal Public Service and the private organisation who employs up to five persons, to contribute at least 10% by the employer and 8% by the employee of his total emolument as pension every month. The employer shall also contribute a minimum of the same amount to the employee’s Retirement Savings Account (RSA) as the employee’s pension.

The National Pension Commission (NPC) is charged with the management of pension matters. The Commission grants licenses to applicants of Pension Fund Administration (PFA) and Pension Fund Custodians (PFC).

TAX TREATIES

Nigeria has tax treaties with the following countries: Belgium, Canada, Denmark, France, Netherlands, Pakistan, Romania, United Kingdom, China, South Africa, Italy, Czech, Philippines and Slovakia