Nigeria

The following income is subject to CIT in Nigeria:

• Profits accruing in, derived from, brought into, or received in Nigeria in respect of any trade or business.
• Dividends (extended to include compensating payment arising from Regulated Securities Lending Transaction), interest (extended to include compensating payment arising from Regulated Securities Lending Transaction), royalties, discounts, charges, or annuities.
• Rent or any premium arising from the right granted to any person for the use or occupation of any property, where applicable.
• Any source of annual profits or gain not falling within the preceding categories.
• Fees, dues, and allowances (wherever paid) for services rendered.
• Any amount of profits or gains arising from the acquisition or disposal of short-term money instruments like treasury bills, treasury or savings certificates, debenture certificates, and treasury bonds.

Inventory valuation

The first in first out (FIFO) valuation method is commonly used. Average and standard cost methods are also allowed, but last in first out (LIFO) is not permitted. Other than the accounting requirement in the local generally accepted accounting principles (GAAP), there are no special statutory provisions for inventory valuation.

Capital gains

Chargeable gains are now subject to tax at the prevailing CIT rate currently at 30%. Income tax now applies to indirect transfers of Nigerian shares through offshore holding companies, while for direct share disposals, the exemption threshold has been raised to NGN150 million for disposal proceeds, and NGN10 million for attributable chargeable gain, in any consecutive 12-month period.  . See Capital gains tax in the Other taxes section for more information.

Dividend income

Dividends received by a Nigerian resident company from another Nigerian resident company are taxable at source and are exempt from further taxation. In contrast, dividends received from non-resident companies are generally taxable unless they are repatriated into Nigeria through government-approved channels. 

Dividends received from small manufacturing companies are exempt from income tax for the first five years of operation. The threshold for qualifying as a small company has been increased to NGN 100 million in turnover or NGN 250 million in fixed assets. 

Additionally, dividends from investments in wholly export-oriented businesses are exempt from tax. Dividends paid to Unit Trusts and Real Estate Investment Companies are also exempt from withholding tax. 

Stock dividends

Stock dividends (bonus shares) are not subject to WHT but are not included in the taxable income of the recipient company.

Interest income

Interest received by a Nigerian company is subject to corporate income tax at the applicable rate, with 10% withheld at source as a credit against the final tax liability. 

Interest earned on State or Federal Government bonds is exempt from tax. 

Interest payable to non-resident investors is subject to a final withholding tax of 10%. However, recipients who reside in countries with double taxation treaties (DTT) with Nigeria may benefit from a reduced withholding rate of 7.5%, if explicitly provided for in the treaty. 

Royalty income

Royalties received by a Nigerian company are liable to tax at the relevant CIT rate. WHT at 10% is available as an offset against the final CIT liability.  

Royalties received by a Nigerian company from non-resident payers are taxable except if repatriated into Nigeria through government-approved channels.  

Non-resident companies who receive Nigerian royalties are subject only to WHT at 10%, which is reduced to 7.5% if a treaty is in place with Nigeria (and where it is stated expressly in the DTT).  

Other significant items

The following entities' income or profit is exempt for CIT purposes:  

• Statutory or registered friendly societies.  

• Co-operative societies registered under any ecclesiastical or charitable establishments of a public character.  

• Profits of a company established within an EPZ or FTZ are conditionally exempt. Full exemption applies only if ≥75% of output is exported; proportionate tax applies if more than 25% is sold locally; full tax applies from 2028 for any sales to customs territory.  

• Profit of a registered trade union.  

• Profit's of a small company (threshold of NGN100 million turnover and NGN250 million fixed assets) are taxed at 0%.  

Foreign income

A Nigerian resident company is taxable on its worldwide income. On the other hand, a non-resident company is subject to tax only on income derived from Nigeria.  

The worldwide income of Nigerian companies is now taxable whether or not repatriated. Controlled Foreign Company (CFC) rules have been introduced i.e undistributed profits of foreign subsidiaries controlled by Nigerian companies may be deemed distributed and taxed in Nigeria. The modalities for the deemed distribution are yet to be released by the tax authorities.  

Dividends, interest, rents, and royalties earned abroad and brought into Nigeria through government-approved channels are exempt from Nigerian tax; otherwise, the income is taxable at the corporates income tax rate. 

A top-up tax has been introduced i.e. where a non-resident subsidiary of a Nigerian company, or a member of a multinational group of a Nigerian company (with aggregate group turnover of at least €750 million or its equivalent), has an effective tax rate below 15%, the Nigerian parent company is required to pay an additional tax to bring the subsidiary's effective tax rate up to 15%. The modalities for the computation and administration of the top-up tax are yet to be released by the tax authorities.

Taxation of Non-Resident Companies

The Nigeria Tax Act expands the framework for taxing Non-Resident Companies (NRCs) that have dealings with Nigeria. The NTA more clearly provides that furnishing services in Nigeria through employees and/or subcontractors. This implies that NRCs who carry out operations through employees/ subcontractors will need to register for tax in Nigeria and file annual income tax returns on the attributable profits.  

Non-resident companies, whether operating independently or in collaboration with others, that undertake projects in Nigeria involving surveys, designs, deliveries, construction, assembly, installation, commissioning, decommissioning, or any related supervisory activities is deemed to have a PE in Nigeria.  

The Nigeria Tax Act (NTA) provides that the profits attributable to the PE of a non-resident in Nigeria shall not be less than:   

• the EBIT (Earnings Before Interest and Taxes) percentage of the foreign company multiplied by its Nigerian turnover; or   

• The WHT deducted at source by the customer; or    
• 4% of the Nigerian revenue where the income is not liable to WHT.