Nigeria

1. Expenses are deductible for CIT purposes if they are wholly and exclusively incurred for business or trade.  
2. Any expense in respect of which Value Added Tax is due but was not charged, or, in the case of imported items, any expense for which the applicable import duty or levy was not paid is not deductible for income tax purposes.  

Depreciation

Capital allowances are calculated on a straight-line basis. Companies can claim the full annual allowance provided the asset is used for generating taxable income. Annual allowances apply across asset classes as initial allowances are no longer applicable.  

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

Notes

1. 1. Initial allowance has been eliminated.  Capital allowances are now computed on a straight-line basis over the useful life of the asset.  
   2. Assets cannot be fully written off in the books until disposal. Instead of a nominal NGN 10, companies must retain 1% of the asset’s cost in the books until disposal, which shall not increase or reduce the amount of capital allowance claimable.  
   3. When assets are sold, the proceeds over the tax written-down value are taxed at 30% for companies that are not small.
   4. Capital expenditure incurred on the development or acquisition of software or other electronic applications are now qualifying expenditures eligible for capital allowance claim. Previously, the applicable capital allowance rate was not specified in the law. In practice, the capital allowance rate for plant expenditure was usually adopted. The NTA has now provided the capital allowance rate at 25%.  
   5. The law restricts the claim of capital allowances to the portion of qualifying assets used for generating taxable income. Capital allowance on assets that are partially used for generating taxable income will be prorated except where the proportion of non-taxable income is less than 10% of the company’s total income.  
   6. Capital allowances related to priority activities under an economic development incentive can only be deducted from the assessable profits generated by the priority business, not from the company’s other trading income.  
   7. An asset is only eligible for the claim of capital allowance where any value added tax due on the asset has been charged or in the case of an imported item, where the applicable import duties have been duly paid. 

Transitional Rules for capital allowances  

1. For assets on which capital allowances were granted prior to the commencement of the Act, the remaining basis periods shall be determined by deducting the number of years already claimed from the total allowable period prescribed under the new Act. 
2. In instances where the capital allowances granted before the commencement equal or exceed the allowable period under the new Act, a singular residual allowance shall be granted, contingent upon the retention of 1% of the qualifying expenditure in the accounting records solely for statistical purposes, until such time as the asset is disposed. 
3. Where capital allowances on assets were fully claimed under the previous Nigeria Tax Act, no additional allowance shall be granted under the new regime with respect to amounts retained in accordance with the repealed provisions. 

Goodwill

There is no tax deduction for goodwill.

Commencement expenses

Commencement expenses are now expressly deductible. Any expenditure incurred within six years prior to the commencement of business that would have been deductible if incurred after commencement shall be deemed incurred on the first day of business.

Interest expense

Interest in 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.    

The Act provides a limitation of 30% of earnings before interest, taxes, depreciation and amortisation (EBITDA) on interest expense on connected party debt (which includes local and foreign debt guaranteed either implicitly or explicitly). Excess interest can be carried forward for up to five years.  

Bad debt

Bad debt incurred in the course of trade is deductible. However, bad debts arising from transactions with related parties are specifically excluded from deductible expenses

Charitable contributions

Donations to fund, body or institutions in Nigeria are deductible in line with statutory provisions. Under the Nigeria Tax Act 2025, deductible donations now include those of a capital nature. However, the total allowable deduction against profits is capped at 10% of Profit Before Tax.

Deduction for research and development

Companies can deduct amounts incurred on R&D when computing taxable profits.  

The deduction is now capped at 5% of the company’s turnover for the year. Additionally, if the R&D outcome is later sold or transferred for commercial use, the proceeds are taxed as chargeable gains.  

Fines and penalties

Any punitive payments for default or violation of law are expressly not deductible for CIT purposes. 

Taxes

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. Taxes borne on behalf of another person are not tax deductible.  

Other significant items

Other deductible expenses include the following:

• Sum payable by way of interest on capital borrowed and used to generate taxable profits.

• 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 capped at 5% of turnover

Net operating losses

Losses can be carried forward indefinitely. Losses made from one line of business cannot be relieved against another line of business.

Payments to foreign affiliates

Payments considered to be artificial are not deductible for CIT purposes. Royalties, management fees, and technical fees required between connected parties are to conform with the Transfer Pricing Regulation.