Starting a Business in Nigeria: Corporate Tax
Corporate Income Tax
Main taxes and Rates
Large companies (gross sales of more than NGN 100 million) : 30%
Read more : Employer of Record Nigeria
The tax rate for foreign companies :
Resident companies are subject to corporate income tax on their worldwide income, while non-residents are only subject to tax on their Nigerian-source income.
Non-resident companies providing professional, consulting, management and technical services to Nigerian residents are subject to a 10% final tax if the company has a “significant economic presence” in Nigeria. The same principle applies to digital companies, which are subject to income tax in Nigeria on profits attributable to the taxable presence in the country.
Taxation of capital gains :
Capital gains tax is generally levied at the rate of 10% of the profit realized on the disposal of assets. Capital gains tax is calculated by deducting from the amount received or receivable, the acquisition cost to the person realizing the taxable gain, plus expenses incurred for the improvement or incidental to the realization of the asset.
Gains from the sale of shares are not subject to capital gains tax. Similarly, corporate securities are exempt from capital gains tax.
Tax deductions and credits :
Expenses are deductible for depreciation and depletion and for expenses wholly incurred for the business or trade. Interest expense on money borrowed and used to produce taxable income, bad debts and charitable donations are also deductible.
Also deductible are rental expenses, salary and wage expenses, asset repair expenses, liability expenses incurred for business purposes, research and development expenses.
Losses can be carried forward indefinitely, but cannot be carried back.
Other corporate taxes : Other taxes include :
– stamp duty
– property tax (governor’s consent fee and land registration fee – rates vary by state and location – 3% in Lagos)
– Pension contributions (for employers with 15 or more employees, at 10% of gross salary)
– National Housing Fund contributions (2.5% of base salary; applicable to Nigerian employees earning at least NGN 3,000 per year)
– payroll taxes
– Capital gains tax (10%, not applicable to the transfer of shares)
– information technology tax (1% of its profit before tax; for companies with annual sales of NGN 100 million or more)
– levy on contracts in the upstream oil and gas sector (1%, with a fine of 5% of the contract value in case of violation)
– police fund tax (0.005% of the net profit of companies operating in Nigeria)
– Higher education tax (2% of taxable profit for each tax year).