Investor Presentaiton
49
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
5.1.12 Tax Clearance Certificates
A Tax Clearance Certificate (TCC) is a document that certifies that a
company has paid income tax for the three immediately preceding years of
assessment. However, issuance of a TCC to a company does not preclude
the FIRS from subsequently assessing the company to additional tax based
on a tax query, audit or investigation.
Based on the CITA, a company is required to demonstrate compliance in
respect of CIT and Withholding Tax only, in order to be eligible to obtain
a TCC from the FIRS. In practice, however, the FIRS has extended this
requirement to include compliance with Tertiary Education Tax, Value Added
Tax, etc. In some FIRS offices, companies are also required to submit
copies of the TCCs of their directors or promoters before the corporate TCC
is issued.
ATCC is a prerequisite for practically all official transactions conducted by a
company in the public sector, including tendering for government contracts,
etc.
5.1.13 Head Office Expenses
Generally, expenses incurred outside Nigeria for and on behalf of a
company (e.g. head office expenses attributable to Nigerian subsidiaries)
are deductible only to the extent that they are wholly, reasonably,
necessarily and exclusively incurred by the company for the purpose of
generating its profits and consistent with the Transfer Pricing Regulations.
5.1.14 Pioneer Companies
Except otherwise stated, eligible companies operating in designated
pioneer industries and or producing pioneer products, which apply for and
are granted pioneer status, are entitled to income tax holiday under the
Industrial Development (Income Tax Relief) Act, Cap 17, LFN, 2004, for up
to five (5) years - three (3) years in the first instance, but renewable for
an additional maximum period of two (2) years. In addition to income tax
holiday, dividends paid out of pioneer profits are not subject to withholding
tax.
Where capital expenditure on qualifying assets has been incurred during
the tax relief period, and the assets are available for use after the period,
the expenditure is treated as having been incurred on the first day following
the tax relief period. In addition, any aggregate loss (losses less profits)
incurred during the tax relief period is deemed to have been incurred on the
first day following the tax relief period and is available for carrying forward
by the company.
5.1.15 Taxation of the Digital Economy
Prior to the enactment of Finance Act, 2019, Nigeria had no legal basis for
taxing digital transactions, as CITA only provides for the taxation of NRCS
with a degree of physical presence in the country. Finance Act, 2019
expanded the scope of taxable income derived by a NRC from Nigeria from
digital activities to include income from transmission, emission or receipt
of signals, sounds, messages, images or data of any kind by cable, radio,
electromagnetic systems or any other electronic or wireless apparatus to
Nigeria, provided that the company has Significant Economic Presence
(SEP) in Nigeria, and the income derived is attributable to the digital activity.
Consequently, NRCs involved in e-commerce, filming, computing, ride-
hailing, media, etc., who previously had no fixed base or tax obligations in
Nigeria, are now liable to CIT provided they meet the SEP threshold.
In addition, NRCs that transact businesses with connected persons or
render technical, management, consultancy or professional services to a
person resident in Nigeria are liable to tax to the extent that the NRC has
SEP in Nigeria. However, withholding tax shall be the final tax applicable to
the profit of such NRCs.
5.1.16 Significant Economic Presence (SEP)
In line with the provisions of Finance Act 2019, the Minister of Finance,
Budget and National Planning has issued the Companies Income Tax
(Significant Economic Presence) Order, 2020 ("the Order") by which a NRC
will be deemed to have SEP in Nigeria in any accounting year, where it
a) derives #25 million annual gross turnover or its equivalent in other
currencies from any or combination of the following digital activities:
i.
ii.
streaming or downloading services of digital contents, including
but not limited to movies, videos, music, applications, games and
e-books to any person in Nigeria; or
transmission of data collected about Nigerian users which has been
generated from such users' activities on a digital interface including
website or mobile applications; or
iii. provision of goods or services other than those under sub-
paragraph 5 of the SEP Order, directly or indirectly through a digital
platform to Nigeria; or
iv. provision of intermediation services through a digital platform,
website or other online applications that link suppliers and
customers in Nigeria;
Investment in Nigeria Guide - 8th Edition
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