A company’s income tax in Nigeria is based on profits earned by all companies liable to company income tax (CIT). CIT in Nigeria has entered a new era with the new tax act and Nigerian tax bill laws, which introduce a more comprehensive overhaul of the country’s tax system and affect Nigerian companies. For businesses operating in or with Nigeria, understanding company income tax under this new tax act is no longer optional but important for effective tax planning and compliance. Let’s see everything the company income tax in Nigeria entails.
Companies Liable to Income Tax in Nigeria
Also known as corporate tax, resident and non-resident companies are liable to company income tax (CIT) in Nigeria, regardless of their business activity. If you own a Nigerian company that is a resident company, it is liable to CIT on its worldwide income, not just the income they earn in Nigeria.
Non-resident companies with a permanent establishment in Nigeria are liable for corporate tax, especially those with a significant economic presence. However, they are only liable to company income tax on the income they get in Nigeria and not in other countries where they are based. What this does is prevent double or multiple taxation.
Other companies that also pay company income tax in Nigeria include private limited liability companies, public limited liability companies, and limited liability partnerships. In addition, any investment income paid by a Nigerian resident company to a non-resident company is sourced in Nigeria and subjected to withholding tax at source. For non-resident companies with a permanent base in Nigeria, all profits from that fixed base will be attributed to it.
Corporate Tax Rates For Different Company Sizes in Nigeria
Tax rate differs for different Nigerian companies, and they are as follows:
1. Small Company Tax Rates
The Nigerian company income tax rate for a small company is 0%. A small company in Nigeria usually has a gross turnover of NGN 25 million or less. These companies enjoy a zero percent CIT, meaning they are exempt from paying CIT. The zero per cent CIT is the government’s way of supporting small businesses while allowing them to grow without the pressure that comes with tax obligations.
2. Medium-size Company Tax Rate
Medium-sized companies in Nigeria are liable to a corporate tax rate of 20% on gross turnover over NGN 25 million but less than NGN 100 million. This strikes a balance between large companies and small companies, hence encouraging business growth and tax compliance as companies expand their operations.
3. Large Company Tax Rate
Large companies in Nigeria are considered to have a greater earning capacity and are expected to contribute more significantly to government revenue. Companies referred to as large in Nigeria pay a company income tax (CIT) is 30%. Large companies here refer to companies with gross turnover greater than NGN 100 million.
4. Petroleum Company Tax
Corporate income tax for petroleum companies is a different ball game, as they are heavily taxed. Under the Petroleum Industry Act, petroleum companies in Nigeria are subject to a special petroleum tax regime, and the standard CIT system does not apply to them. Their tax is likewise dependent on the type of petroleum operations.
Petroleum profit tax (PPT) is up to 85% of the chargeable profits for upstream petroleum companies under legacy oil mining leases. However, a reduced rate of 65.75% may apply to petroleum companies in their early years of operation before fully starting up. For a company operating under petroleum mining leases for crude oil, the hydrocarbon tax HCT) of 30% applies to the. Companies producing associated and non–associated gas are also liable to the hydrocarbon tax, with an HCT of 15%.
Nigeria’s Tax Authority and Legal Framework
The Nigerian tax landscape has a three-tier system: federal, state, and local. All of these are anchored by the Nigeria Tax Act (NTA), which is administered by the Nigeria Revenue Service (NRS), formerly known as the Federal Inland Revenue Service (FIRS). The 2025 reforms aim to modernise simplify, and consolidate Nigeria’s tax law.
Nigeria’s company income tax is governed by the following finance act:
- Nigeria Tax Act (NTA), 2025: This company income tax act consolidates major taxes, including the company income tax.
- Nigeria Tax Administration Act (NTAA), 2025: This harmonizes the tax administration processes and also introduces advanced tax rulings to improve compliance.
- Nigeria Revenue Service Act (NRSA), 2025: This replaces the FIRS as the primary federal tax authority.
- Joint Revenue Board Act (JBRA), 2025: This is to harmonise tax operations across the three tiers of government.
How to File Company Income Tax in Nigeria
If your company is a medium or large company, filing your company tax and submitting a statement of comprehensive income are necessary to avoid issues with the government. To file a company income tax in Nigeria, you need to do the following:
1. Register Your Company For Tax
It is mandatory for Non-Nigerian and Nigerian resident companies to register for tax. They must likewise submit their audited Statement of Cash Flows to file corporate tax returns. This must be done alongside tax computations to the FIRS within six months after the end of their financial year under the self-assessment system. This should be done within 18 months of incorporation, whichever occurs first.
In a case where you might not be able to meet the deadline, you can apply to the NRS for an extension of time to file its tax returns. If your application is successful, the Nigerian tax authority may grant you a maximum of 2 months, depending on the timeframe it grants. After registration, your company will get a Tax Identification Number (TIN). The TIN serves as its unique reference number for all federal tax obligations and official correspondence with the FIRS.
2. Declare Source of Income and Submit Required Documents
In Nigeria, companies submit their tax returns under a self-assessment regime, which requires taxpayers to prepare their financial statements and annual returns and also compute their own tax liabilities. Companies are required to submit the following documents to the tax authority for corporate tax filing:
- Your Company’s Tax Identification Number (TIN) and RC Number.
- The tax computation for the relevant year of assessment.
- Audited financial statements for the applicable period. This must be prepared in accordance with the financial reporting standards in Nigeria.
- Capital Allowance Schedule.
- Withholding Tax (WHT) credit notes, if applicable.
- A well-completed and signed CIT self-assessment form.
3. File Returns and Pay Your Tax
Regarding payment of company income tax in Nigeria, you can formally request an installment payment, and this is if you submit your self-assessment returns within six months after the end of your company’s financial year. Usually, the NRS approves up to three installments only when your request is submitted alongside your initial payment.
4. Wait For Post-Filing Review
After you’ve filed and paid, you have to wait for NRS to do a desk assessment and auditing. If your submission is accurate, then you can proceed to apply for a tax clearance certificate. However, in a situation where inaccuracies leading to underpayment are found in your filing and payment, NRS will issue you an additional assessment notice. This notice is accompanied by penalties and interest, which you must pay within 3 days.
5. Apply For a Tax Clearance Certificate
Once cleared, you can proceed to pay for your tax clearance certificate. The tax clearance certificate is important because it serves as evidence that you paid tax.
Tax Audit For Companies in Nigeria
This is usually done after self-assessment, filing, and payment of tax. After filing, the tax authority will start a desk examination of a taxpayer’s returns immediately after filing. This often follows a tax monitoring exercise, during which tax officers visit taxpayers to conduct an interview and a high-level review of their tax affairs. During this period, you can expect a random or specific tax audit. This is usually done within six years of filing tax returns. In most cases, a back-duty tax investigation is normally conducted for more than six years, especially when tax authorities suspect tax fraud.
Penalty For Non-Compliance
Of course, there are penalties for non-compliance with company income tax (CIT) payment in Nigeria. Non-compliance comes with significant financial consequences for defaulting companies. In a situation where a company fails to file its CIT as required, it is liable to a penalty of ₦25,000 for the first month of default and an additional ₦5,000 for every subsequent month of non-compliance with the CIT payment. However, if you’ve filed your tax but did not pay as at when due, you’re liable to a 10% penalty on the outstanding tax amount. You must calculate this alongside the interest calculated at the prevailing commercial rate until you’ve fully paid the CIT.
Non-compliance penalty might be stricter for some, usually companies paying the petroleum profits tax (PPT). Late filing of the PPT return attracts a penalty of ₦10 million, plus an additional ₦2 million for each day the default persists. For PPTs that are not paid on time, 5% of the unpaid tax becomes applicable, in addition to interest at the prevailing Central Bank of Nigeria (CBN) rate.
Conclusion
In conclusion, company income tax in Nigeria remains an important part of Nigeria’s framework for assessing and taxing Nigerian corporations. Staying informed and compliant is important for any business in Nigeria to avoid having issues with the government. With a good tax advisory professional, you can enjoy a smooth company income tax filing process.
