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Nigeria Corporate - Deductions

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Expenses are deductible for CIT purposes if they are wholly, reasonably, exclusively, and necessarily incurred for the business or trade.


Capital allowances are calculated on a straight-line basis. Capital allowances claimable in any year are restricted to two-thirds of assessable profits for all companies, except companies in the manufacturing and agricultural sectors, which are excluded from this restriction.

The following are the capital allowance rates on fixed assets (qualifying expenditures):

Qualifying expenditure Initial allowance (%) Annual allowance (%)
Building (industrial and non-industrial) 15 10
Furniture and fittings 25 20
Plant expenditure (1) 50/95 0/25
Mining expenditure 95 0
Plantation equipment 95 0
Motor vehicle (2) 50/95 0/25
Ranching and plantation expenditure 30 50
Housing estate expenditure 50 25
Research and development (R&D) 95 0


  1. 95% initial allowance for plant used in agricultural production; others 50%.
  2. 95% initial allowance is granted for motor vehicles used for public transportation if the company has a fleet of at least three buses; all other motor vehicles 50%.

The initial allowance is first deducted, and the balance is written off on a straight-line basis over a fixed period, depending on the rates of annual allowance. There is a requirement that assets not yet disposed of cannot be fully written off in the books. A nominal amount of NGN 10 per asset must be retained in the books till the assets are disposed of. However, where 95% has been claimed as an initial allowance, the 5% balance is the value that must be maintained in the books until the final disposal of the asset.

When assets are sold, the proceeds over the tax written-down value are taxed at 30% to the extent of the allowances already claimed.


There is no tax deduction for goodwill.

Start-up expenses

Start-up expenses are not specifically stated as non-deductible in the tax law, but, in practice, they are usually not allowed by the tax authority. This is based on the assumption that start-up expenses are not directly attributable to any taxable income of the company, which is a fundamental condition for tax deductibility of expenses.

Interest expense

Interest on money borrowed and employed in producing taxable income is a deductible expense. There is currently no thin capitalisation regulation in Nigeria, but general anti-avoidance rules are usually applied to limit deductible interest on related-party loans.

Bad debt

Bad debt incurred in the course of trade is deductible.

Charitable contributions

Donations are deductible, subject to the provisions of the law.

Fines and penalties

Any punitive payments for default or violation of law are expressly not deductible for CIT purposes. In practice, this is usually extended to include default surcharges and other avoidable fines.


Any tax on income or profit is not deductible except where such tax was paid on profit earned outside Nigeria. In this case, if the source country has no DTT with Nigeria, the foreign tax paid is allowed as a deduction for CIT purposes. State and local taxes (business rates) and levies may be deducted from taxable income.

Other significant items

Other deductible expenses include the following:

  • Sum payable by way of interest on capital borrowed.
  • Rent for the period.
  • Expenses incurred in respect of salary and wages.
  • Expenses incurred for repair of assets.
  • Liability incurred for purpose of trade.
  • R&D costs.

Net operating losses

Losses can be carried forward indefinitely, except for insurance companies, where losses can only be carried forward for four years. Losses made from one line of business cannot be relieved against another line of business. Losses cannot be carried back.

Payments to foreign affiliates

Payments considered to be artificial are not deductible for CIT purposes. Royalties, management fees, and technical fees require the approval of the National Office for Technology Acquisition and Promotion (NOTAP) for exchange control purposes and for tax deduction. NOTAP-approved royalties and technical fees are limited to a range of 1% to 5% of net sales, while management fees are limited to a range of 2% to 5% of profit before tax, and consultancy fees are limited to 5% of total project cost. Technical fees are limited to approved man-hour rates.

Trademark fees are disallowed where the trademark owner has more than 75% equity participation in the local company.

Last Reviewed - 19 December 2018

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Nigeria contacts
Taiwo Oyedele Title = Taiwo Oyedele width=55px
Taiwo OyedelePartner / Head of Tax & Regulatory Services+234 1 271 1700 ext. 50002
Russell Eastaugh Title = Russell Eastaugh width=55px
Russell EastaughPartner / Director General Tax Services+234 1 271 1700 ext. 50001
Emuesiri Agbeyi Title = Emuesiri Agbeyi width=55px
Emuesiri AgbeyiPartner / Director Tax and Private Wealth Services+234 1 271 1700 ext. 50006
Kenneth Erikume Title = Kenneth Erikume width=55px
Kenneth ErikumePartner / Director Tax Reporting & Strategy+234 1 271 1700 ext. 50004
Moshood Olajide Title = Moshood Olajide width=55px
Moshood OlajidePartner / Director Tax, Regulatory Compliance, and Advisory+234 1 271 1700 ext. 50005
Seun Adu Title = Seun Adu width=55px
Seun AduPartner / Director Tax and Transfer Pricing+234 1 271 1700 ext. 52001
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