Nigerian Tax Sound bites — Companies IncomeTax

Chidi U
Chidi U
Aug 25, 2017 · 2 min read

In the last post, I listed some of the more popular Nigerian taxes that I have tried to discuss with business owners and salary earners.

In this post and subsequent post in the series, I would like to take it a bit further by providing tax sound bites — little nuggets of tax wisdom that you can throw in mid-conversation to impress everyone. Today’s nugget is on Companies Income Tax (CIT)

The CIT is established and governed by the Companies Income Tax Act (CITA), Laws of the Federation of Nigeria (LFN), 2004 (as amended).

If you followed my mini thread on twitter, you would know by now that CIT is administered by the Federal Inland Revenue Service (FIRS). Companies incorporated in Nigeria (and foreign companies doing business in Nigeria) are required to register with the relevant FIRS office nearest to their location. As these are sound bites, what’s important to know about the FIRS is that tax payers are required to register based on income and industry. In Lagos for instance, there’s the Large Tax Office (LTO), Medium Tax Offices (MTO) and other tax offices that deal will lower income companies.

CIT is computed as 30% of total profit. CIT is prepared and filed on an annual basis. The deadline for companies that have been in business for more than 18 months is 6 months after the end of the accounting year. In order to prepare the CIT computations, a Nigerian company i.e. a company incorporated in Nigeria is required to consider all of its revenue/income from all sources. If a company is registered in Nigeria, but has income sources outside Nigeria, the company is required to disclose these for CIT purposes.

Foreign companies (usually called non-resident companies (NRCs) prepare their tax computations on a derivation principle. This basically means they only prepare income tax computations for the income earned from their operations in Nigeria. There’s a bit more that goes into determining if income has been earned from Nigeria, but that won’t fit into a sound bite and if anyone asks you, you’re permitted to take a bite of puff-puff, smile and walk away.

Finally, it is important to know that accounting profit, usually referred to as profit before tax (PBT) is not the profit on which 30% is applied and remitted. In the process of computing CIT, you will come across the following profits; PBT, assessable profit, and total profit. After the sound bites series is over, I’ll explain these.

For reference purposes, please check out sections 9 and 40 of CITA.

Please remember that my posts should not be construed as professional advice. You are advised to speak with your tax consultant about your particular situation.

Cheers!

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Chidi U

Written by

Chidi U

Tax adviser. Road trip lover. Food is a love language. #myopinion

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