Nigeria

Corporate Income Tax

Resident companies are liable to corporate income tax (CIT) on their worldwide income while non-residents are subject to CIT on their Nigeria-source income.

The CIT rate is 30% for large companies (i.e. companies with gross turnover greater than NGN100 million or fixed asset of more than N250m), assessed on a preceding year basis (i.e. tax is charged on profits for the accounting year ending in the year preceding assessment).

Investment income paid by a Nigerian resident to a non-resident is sourced in Nigeria and subject to WHT at source, which serves as the final tax.

In respect of business profits, a non-resident company (which is not tax resident in a treaty country) that has a taxable nexus in Nigeria is taxable on the profits attributable to that taxable presence. Non-resident digital companies (which are not tax resident in a treaty country) that has a significant economic presence (SEP) will be subject to income tax in Nigeria on profit attributable to the taxable presence in Nigeria.

A foreign entity involved in digital transactions will be deemed to have created an SEP in Nigeria and is therefore liable to tax if it:

1. derives income of NGN 25 million or equivalent in other currencies from Nigeria in a year
2. uses a Nigerian domain name (.ng) or registers a website address in Nigeria, or
3. has purposeful and sustained interactions with persons in Nigeria by customising its digital platform to target persons in Nigeria (e.g. by stating the prices of its products or services in naira).

For the purposes of (i) above, revenue derived from Nigeria includes that in respect of:

• Streaming or downloading of digital contents.
• Transmission of data collected about users in Nigeria.
• Provision of goods or services directly or through a digital platform.
• Intermediation services that link suppliers and customers in Nigeria.

Activities carried out by connected persons shall be aggregated to determine the NGN 25 million threshold (where applicable).

Any company covered under any multilateral agreement to which Nigeria is a party will be treated in accordance with those agreements from the effective date in Nigeria.

Small company rates

The CIT rate is 0% for companies with an annual gross turnover of N100m with total fixed assets not exceeding N250m.  

Any other company rates

The rate of income tax for any Nigerian Company other than a small company (as defined) is  30%, with a provision for subsequent reduction to 25% from a date specified in an order issued by the President on the advice of the National Economic Council.  

Real Estate Investment Companies

Real Estate Investment Companies approved by the Securities Exchange Commission to operate as a real estate investment scheme in Nigeria will be exempt from income tax on rental income, and dividend income earned in a financial year will be exempt from income tax provided that at least 75% of such income is distributed within 12 months. For the purposes of the Nigeria Tax Act, A Real Estate Investment Company is a company duly approved by the Securities and Exchange Commission.

Petroleum profit tax (PPT)

PPT is a tax on the income of companies engaged in upstream petroleum operations in lieu of CIT.

The PPT rates vary as follows:

• 50% for petroleum operations under production sharing contracts (PSC) with the Nigerian National Petroleum Company Limited (NNPCL).
• 65.75% for non-PSC operations, including joint ventures (JVs), in the first five years during which the company has not fully amortised all pre-production capitalised expenditure.
• 85% for non-PSC operations after the first five years.
• 30% for upstream gas profits.

Following the enactment of the Petroleum Industry Act 2021, holders of a Petroleum Prospecting Licence and Petroleum Mining Lease will be subject to both CIT at 30%, and Hydrocarbon Tax (HCT). This position is retained in the Nigeria Tax Act 2025.

HCT rates are as follows:

• 30% for converted/renewed onshore and shallow offshore Petroleum Mining Lease.
• 15% for onshore and shallow onshore Prospecting Petroleum Licence and Marginal Fields.
• Deep offshore maybe subject to HCT based on the Nigeria Tax Act however the HCT rate is not clear.

This means that the highest headline tax rate for companies in the upstream oil and gas industry will be 60% under the provisions of the Petroleum Industry Act and the Nigeria Tax Act.

Current Oil Mining Licence and Oil Prospecting Licence holders will continue to be taxed in line with the Petroleum Profits Tax Act (PPTA) unless a conversion contract is executed in line with the provisions of the Petroleum Industry Act 2021.

Minimum effective tax rate

The Minimum ETR is set at 15% of net income (i.e. covered taxes as a percentage of net income) for Nigerian companies with turnover of N50billion and above or multinational companies with an aggregate group turnover of at least £750 million or its equivalent in the financial year.   

If in any year of assessment, a company’s effective tax rate is less than 15%, the company is required to recompute and pay additional tax to bring its effective tax rate up to 15%.  

Net income refers to the profit before tax as reported in the audited financial statement excluding franked investment income (dividend income that has suffered Nigerian WHT and unrealised exchange gains and losses).  

Covered taxes include income tax paid or payable, petroleum profit tax, hydrocarbon tax, development levy and priority sector tax credit.  

Controlled Foreign Companies (CFCs)

CFC rules that grants the Nigerian tax authority the power to deem a portion of the undistributed profits of the foreign subsidiary of a Nigerian parent company as distributed (i.e dividend) and assess the Nigerian company to income tax at a maximum rate of 34% 

Top up tax for foreign subsidiaries

Further, the Nigerian parent company of a non-resident subsidiary is required to pay a “top-up” tax where the effective tax rate (ETR) of the foreign subsidiary is below 15%.  

Capital Gain Tax

Capital gains (now referred to chargeable gains under the Nigeria Tax Act) are now taxable as part of total profit of the Company and is taxed at the applicable income tax rate of 30%. The rate can be decreased to 25% via presidential order.  

Indirect transfer of shares

The indirect transfer of ownership in a Nigerian company will be subject to tax in Nigeria if the sale results in a change in the ownership structure of a Nigerian company, or a change in ownership or interest in assets located in Nigeria  subject to treaty exemptions where a tax authority approval is required.  

Income tax deductibility

In computing adjusted profit, a company can deduct expenses wholly and exclusively incurred during the period to generate taxable profits.  

Undistributed profits deemed to be distributed

Undistributed profits in closely held Nigerian company controlled by not more than 5 individuals may be deemed distributed and subject to withholding tax at the applicable WHT rate of 10%. 

Alternative tax on distribution

There is a tax on distribution where a company pays a dividend in excess of its taxable profit. Certain profits should be deducted from the dividend that is compared to the taxable profit, including dividend income that has suffered WHT, profits exempt under the Companies Income Tax, Capital Gains Tax, Petroleum Profit Tax, Hydrocarbon tax, Industrial Development (Income Tax Relief) Act and retained earnings that had suffered tax previously.

Alternative tax on deemed profit

Presumptive tax assessment

In any other case, where a person's income cannot be ascertained or records are inadequate, the person shall be assessed under a presumptive tax regime on terms prescribed by the Minister on the advice of the Joint Revenue Board.

Local income taxes

CIT is payable only to the federal government. State governments collect income taxes of individuals and unincorporated entities, while local governments are only allowed to collect levies and rates but not income tax.