Nigeria: Business Environment

Company Tax

30%

Tax Rate For Foreign Companies

Resident companies are liable to corporate income tax on their worldwide income, whereas non-residents are subject to taxation only on their Nigeria-source income.
Non-resident companies providing professional, consultancy, 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.
In general, it is illegal for a non-resident company to operate through a branch in Nigeria.

Capital Gains Taxation

Capital gains tax is generally levied at a rate of 10% of the profit made from assets disposal. Computation of capital gains tax is done by deducting from the sum received or receivable, the cost of acquisition to the person realizing the chargeable gain, plus expenditure incurred on the improvement or expenses incidental to the realization of the asset.

Gains from the sale of shares are exempt in several cases: transactions valued above NGN 100 million or where the gains are reinvested in a Nigerian company within a 12 month period or where the transaction is related to a Regulated Securities Lending Transaction.

Main Allowable Deductions and Tax Credits

Expenses are deductible for depreciation and depletion and for expenses wholly incurred for the business or trade. Interest expenses on money borrowed and employed in producing taxable income, bad debts and charitable contributions are also deductible. Donations made in cash or kind to any fund set up by the government in respect of any pandemic or natural disaster are deductible up to 10% of assessable profit after other allowable donations. Goodwill is not deductible.
The following items are also deductible: rent expenses, expenses incurred in respect of salary and wages, expenses for repair of assets, liability incurred for purpose of trade, R&D costs.
Losses can be carried forward indefinitely, but cannot be carried back.

Other Corporate Taxes

Other taxes include:

• stamp duties
• property tax (governor’s consent fee and land registration fee - rates vary depending on the state and the location - 3% in Lagos)
• pension contributions (for employers with at least 15 employees, at 10% of gross salary). If the employer decides to bear the whole contribution, the minimum contribution is 20% of the monthly salary
• National Housing Fund contributions (2.5% of basic salary; applicable to Nigerian employees earning a minimum of NGN 3,000/year)
• payroll taxes
• capital gains tax (10%)
• information technology tax (1% of its profit before CIT; for companies with an annual turnover of NGN 100 million or more)
• levy on contracts awarded in the upstream oil and gas sector (1%, with a fine of 5% of the contract value in case of violations)
• Police Fund levy (0.005% of the net profit of companies operating a business in Nigeria)
• Tertiary education tax (2.5% of the assessable profit for each year of assessment - non-resident companies and unincorporated entities are exempt)
• levy for the National Agency for Science and Engineering Infrastructure (0.25% of the profit before tax of commercial companies in the banking, mobile communication, ICT, aviation, maritime, and oil and gas sectors - only applies to companies with a turnover above NGN 100 million)
• Cabotage levy (2% surcharge of the contract sums earned by vessels engaged in coastal trade in Nigeria).

Other Domestic Resources

Federal Inland Revenue Service

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

In general, expenses incurred wholly, exclusively, necessarily, and reasonably in the production of taxable income are tax-deductible.
Specific deductions include life insurance premiums, contributions to state pension funds, housing and healthcare, contributions to research centres (up to 10% of taxable income), mortgage or other loan interest relating to owner-occupied accommodations.
The law provides for a consolidated relief allowance (higher of NGN 200,000 or 1% of gross income plus 20% of gross income).

Special Expatriate Tax Regime

Individuals resident in Nigeria are taxable on their worldwide income. For employment income, a non-resident person is liable to tax in Nigeria if the duties of employment are wholly or partly performed in Nigeria, unless: the duties are performed on behalf of an employer who is outside Nigeria; the remuneration of the employee is not borne by a fixed base of the employer in Nigeria; and the remuneration of the employee is liable to tax in that other country under the provisions of a taxation treaty.
For tax purposes, an individual is considered resident if is physically present in Nigeria for at least 183 days in any 12-month period, including leave and temporary absence.