Investor Presentaiton
The Country and its
institutions
Business Organisation Labour and Social
and Regulation
Security Regulations
The Nigerian Financial Tax System
Services Industry
Foreign Exchange
Transactions
Investment in Nigeria
Accounting and
Auditing Requirements
Importation of Goods
Exportation of Goods
COVID-19 Economic
and Fiscal Measures
5.1.9
·
profit of a company whose supplies are exclusively inputs to the
manufacturing of export products;
dividend and rental income received by a real estate investment
company on behalf of its shareholders provided that a minimum of 75%
of the income is distributed within 12 months;
.
•
compensating payments which qualify as dividend received by a lender
from its approved agent or borrower in a RSLT;
compensating payments which qualify as dividend or interest received
by an approved agent from a borrower or lender on behalf of a lender or
borrower in a RSLT;
However, profits derived by such companies/organisations from a trade
or business (other than their core activities) are not entitled to such
exemptions.
In December 2011, the Federal Government issued an Order which
exempts from CIT, bonds issued by the Federal, State and Local
Governments and their agencies, and bonds issued by corporate and supra-
national entities. The Order also exempts interest earned by holders of the
bonds and short-term securities from CIT. The exemption was effective
from 2 January 2012 and is, generally, for a period of 10 years. However,
bonds issued by the Federal Government will continue to enjoy the
exemption after the 10-year term.
Tax Losses
Under Nigerian tax laws, a company can carry forward its tax losses for
offset against its future assessable profits indefinitely.
Prior to Finance Act, 2019, unutilised losses of a company during its first
tax year could not be deducted from its assessable profits after the fourth
year of its commencement of business40. Likewise, insurance companies
were only allowed to carry forward their unutilised losses for a maximum
period of four years. However, the Act has removed these restrictions on
the availability of unutilised tax losses to companies operating in Nigeria.
Consequently, companies can offset their losses against future profits
indefinitely. However, a company cannot offset the loss from one trade or
business against the profit from another trade or business.
5.1.10
Minimum Tax
Minimum tax applies when a company makes a loss and has no tax payable
or the tax computed is less than the minimum tax. The current minimum
tax rate is 0.5% of gross turnover 41 of a company less any franked
investment income. However, to mitigate the harsh economic conditions
occasioned by COVID-19 pandemic, Finance Act, 2020 has temporarily
reduced the 0.5% minimum tax rate to 0.25% for companies liable to
minimum tax in the years of assessment falling due on any dates between
1 January 2020 and 31 December 2021..
The minimum tax provision does not apply to the following companies:
•
•
•
a company with a gross turnover of less than #25 million in any relevant
year of assessment;
a company carrying on agricultural trade or business; and
a company that is in its first four (4) calendar years of commencement
of business operations.
5.1.11 Basis of Assessment
Generally, tax is assessed on profit from the accounting period ended in
the preceding fiscal year (i.e.1 January - 31 December). The basis period
for assessment is determined on prior year basis such that the profits
assessable to tax in a year of assessment is the profits in the preceding
accounting year. The only exception is the year of cessation of business
which is determined on actual year basis. The tax returns are due within six
months of the end of a company's accounting period.
Further, Finance Act, 2019 has amended the erstwhile "commencement"
and "cessation" rules which applied specific rules for determination of
the basis period for assessment in the first three and last two years of
operations for companies commencing and ceasing business operations
in Nigeria, respectively. By virtue of the amendment, the preceding and
actual year rules now apply tor commencement and cessation of business
operations in Nigeria.
"Under Nigerian tax laws, a company can carry
forward its tax losses for offset against its
future assessable profits indefinitely."
40 The rationale for this distinction is not quite clear and it may well be due to a referencing error in the amendment legislation.
41 "Gross turnover" is defined as the "gross inflow of economic benefits during the period arising in the course of the operating activities
of an entity, other than increases relating to contributions from equity participants, including sales of goods, supply of services, receipt of
interest, rent, royalties or dividends'
KPMG
Investment in Nigeria Guide - 8th Edition 48View entire presentation