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
Companies Income Tax (CIT)
The CIT Act (CITA), Cap C21, LFN, 2004 (as amended), is the enabling legislation
on taxation of profits of any company (other than profits derived by oil exploration
and production companies from petroleum operations33) accruing in, derived from,
brought into, or received in, Nigeria.
Any company incorporated in Nigeria is liable to tax on its worldwide income.
A non-Nigerian company, however, is subject to tax on profits accruing to it in,
or derived by it from, Nigeria, to the extent that the profit is not attributable to
operations outside Nigeria.
The profit of a non-Nigerian company from trade or business is deemed to
be taxable in, or derived from, Nigeria for tax purposes under the following
circumstances:
•
.
•
if the company has a fixed base 34 of business in Nigeria, to the extent that the
profit is attributable to the fixed base;
if it does not have such a fixed base of business in Nigeria, but habitually
operates a trade or business through a dependent agent;
if it transmits, emits or receives signals, sounds, messages, images or data of
any kind by electronic or wireless apparatus in Nigeria to the extent that the
company has significant economic presence (SEP) in Nigeria and profit can be
attributable to such activity.
if that trade or business or activity involves a single contract for surveys,
deliveries, installation or construction;
if the trade or business comprises of the furnishing of technical, management,
consultancy or professional services outside of Nigeria to a person resident in
Nigerian to the extent that the company has SEP in Nigeria
where the trade or business or activity is between the company and another
person (or company) controlled by it or which has controlling interest in it such
that the transactions between them are deemed to be artificial or fictitious.
INCOME/TAX
33 Profits derived by a company from petroleum operations are currently exempt from CIT, but liable to Petroleum Profits Tax (PPT).
34 A fixed place of business does not include facilities held solely for the storage or display of goods and merchandise and for the collection
of information.
5.1.1
5.1.2
Income Liable to Tax
Under CITA, the profits of any company accruing in, derived from, brought
into, or received in, Nigeria that are not subject to tax under Capital Gains
Tax Act, Petroleum Profit Tax Act and Personal Income Tax Act, such as
stated below are liable to tax:
•
•
•
any trade or business for whatever period of time such trade or business
may have been carried on;
rent or any premium arising from a right granted to any other person/
company for the use or occupation of any property;
dividends 35, interest 36, royalties, discounts, charges or annuities;
• profits from securities lending other than compensating payments to
lender or borrower;
• fees, dues and allowance for service rendered;
•
•
any amount of profits or gains arising from acquisition and disposal of
short-term monetary instruments; and
any source of annual profits or gains not falling within the above
categories.
Allowable Expenses
For any expense or outgoing to be allowed as a deduction from the income
of a business in any period, that expense must be wholly, exclusively,
necessarily and reasonably incurred during that period for the purpose of
earning that chargeable income and, ultimately, borne by the business.
The following expenses, if incurred for the purpose of acquiring taxable
profits, are allowable:
•
.
interest on money borrowed and employed as capital in acquiring the
profit 37;
rent and any premium paid in respect of land or building, including rent
on residential buildings. In the case of residential building, allowable rent
is restricted to the basic salary of employees for the relevant period;
35 Dividend includes compensating payments received by a lender from its approved agent or borrower in a Regulated Securities Exchange
Transaction (RSET).
36 Interest includes compensating payments received by a borrower from its approved agent or a lender in a RSET.
37 The Seventh Schedule of CITA, introduced by the Finance Act, 2019, restricts the interest expense deductible in respect of loan received
from a foreign connected person, except where the foreign company is engaged in banking or insurance. Accordingly, the allowable
interest expense in any year of assessment (YOA) is limited to 30% of earnings before interest, taxes, depreciation and amortisation of the
Nigerian company. The excess interest expense would be available for deduction for five subsequent YOAs.
KPMG
Investment in Nigeria Guide - 8th Edition
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