Understanding taxation in Nigeria for Companies –
Part 1-
– Applicable laws
– Governing body
– Assessment classification in company tax
– Rates for company income tax
The primary law governing how companies are taxed in Nigeria is the Company Income Tax Act (CITA).
The Federal Inland Revenue Service (FIRS) administers or oversee the income tax for companies.
Companies Income Tax (CIT) is a tax on the earnings of Nigerian-registered companies. The tax on the earnings of overseas companies operating in Nigeria is also included. Limited liability companies, including public limited liability companies, are responsible for paying the CIT.
ASSESSMENT CLASSIFICATION IN COMPANY TAX
Self-Assessment of Tax Payable: This method of determining the amount of tax due is one in which a company pays taxes in installments and is given permission by the appropriate tax authority to project its chargeable income and tax liability for the assessment year. Section 53 of the Company Income Tax Act (CITA) of 2011 allows for self-assessment of tax liability.
The currency of assessment: This specifies the currency in which a company’s tax obligations under section 54 are assessed. According to this provision of the Act, an income tax assessment made under sections 52, 53, or 55 of this Act shall be made in the currency in which the transaction that gave rise to the assessment was carried out, despite anything to the contrary in any other legislation.
RATES FOR COMPANY INCOME TAX
Companies with a turnover of more than N100 million Naira have become subject to a 30% CIT. Additionally, it is taxed at a rate of 20% for companies with a N25 million to N100 million annual revenue. The tax is calculated based on the prior year (i.e. tax is charged on profits for the accounting year ending in the year preceding assessment).
Companies that are residents must pay corporate income tax (CIT) on their worldwide income, while non-residents must pay CIT on their income that comes from Nigeria.
A non-resident corporation that has a fixed base or a permanent establishment (PE) in Nigeria and is not tax resident in a treaty country is subject to tax on the company’s profits attributable to such PE.
