Investor Presentaiton
45
The Country and its
institutions
Business Organisation Labour and Social
and Regulation
Security Regulations
The Nigerian Financial
Services Industry
Tax System
Foreign Exchange
Transactions
Investment in Nigeria
Accounting and
Auditing Requirements
Importation of Goods Exportation of Goods
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repairs and renewal costs relating to the premises, plant, fixtures etc.,
used in the business;
bad and doubtful debts to the extent that they are estimated to the
satisfaction of the FIRS to have become bad or doubtful of collection,
respectively. In practice, general provisions for doubtful debts are not
deductible;
contributions to approved pension, provident or other retirement benefit
funds, society or scheme;
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expenses incurred on research and development;
COVID-19 Economic
and Fiscal Measures
any expenses incurred in deriving tax exempt incomes, losses of a
capital nature and any expense allowable under the Capital Gains Tax
Act;
any compensating payment made by a borrower, which qualifies as
dividends to its approved agent or to a lender in a RSET;
any compensating payment made by an approved agent which qualifies
as interest or dividends to a borrower or lender in a RSET;
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any penalty prescribed by any Act of the National Assembly for violation
of any statue; and
5.1.3
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donations to approved bodies listed in the Fifth Schedule to the CITA,
as may be amended from time to time by the Minister of Finance. In
December 2011, the list of approved bodies was expanded to include
public institutions established for the promotion of the defense of
human rights, women empowerment, accident prevention, transparency
in governance and electoral processes, sports, art and culture, etc.;
dividends or mandatory distributions made by a real estate investment
company duly approved by SEC to its shareholders;
compensating payments, which qualify as interest made by a lender
to its approved agent or a borrower in a Regulated Securities Lending
Transaction (RSLT).
Disallowable Expenses
The following expenses are specifically disallowed under the Act:
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capital repaid or withdrawn or any expenditure of a capital nature;
any sum recoverable under an insurance or contract of indemnity;
taxes on income or profits levied in Nigeria or elsewhere. Where
foreign tax is levied on profits chargeable to tax in Nigeria and there
is no double taxation relief for such tax, the tax would be allowed as a
deduction;
payments to unapproved pensions, provident, savings, widows and
orphan society, funds or schemes;
• depreciation;
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appropriation of profits;
any related party expense incurred within or outside Nigeria not
consistent with the Transfer Pricing Regulations;
Investment in Nigeria Guide - 8th Edition
5.1.4
• any tax or penalty borne by a company on behalf of another person.
Capital Allowances
Depreciation does not qualify as an allowable deduction for tax purposes.
However, capital allowances are granted to companies on their qualifying
capital expenditure. These allowances comprise:
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Investment Allowance - this is a 10% uplift granted only in the year that
an item of plant and equipment is first put to use.
• Initial Allowance - this is also a one-off allowance granted only in the
first year based on prescribed rates. It applies to all items of qualifying
expenditure.
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Annual Allowance - this is granted every year based on prescribed rates.
It is computed on the residue of qualifying expenditure, after deduction
of initial allowance on a straight-line basis. An amount of #10 per item is
retained in the books for tax purpose until the asset is disposed of.
• Balancing Adjustment - this arises on the disposal of an asset. It
represents the difference between the consideration received on the
disposal of an asset and the tax written down value (TWDV) of the asset
(cost of the asset less the total initial and annual allowances claimed to
date on the asset). If the consideration is higher than the TWDV, there
is a balancing charge, which represents additional income liable to tax.
However, the amount taxable will be restricted to the actual capital
allowances (initial and annual allowances only) claimed to date on the
asset. On the other hand, if the consideration is less, there will be a
balancing allowance, which is added to the capital allowance for the year
and qualifies for tax deduction.
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