It was agreed that the rate of exchange shall be n4 to every lira. Pdf company income tax and nigerian economic growth. For resident companies and organizationcompanies and organizations prepare and submit their annual self assessment tax return according to the firs specifications. Government, tax administrators, practitioners and academics alike. Overview of personal income tax in nigeria explained. Income tax amendment act, 2011 a 111 for an act to amend the personal income tax act, cap. A company that files its selfassessment within six months after the accounting yearend can apply to the firs in writing to pay its income tax in instalments. Pdf the contributions of company income tax cit to any economy globally cannot be overemphasized. Resident companies in nigeria are subject to the company income tax cit on their worldwide income, while only the income from nigerian source of nonresidents companies is taxed under the cit. Tax credit allowable against tax payable on income derived from outside nigeria. The rate is 30% of total profit for income tax and 2% of assessable profit for education tax. P8 lfn 2004 as updated to may 2007, third schedule paragraph on income of ecclesiastical, charitable or educational institution. Establishment and constitution of the board 1 there shall continue to be a board of which the official name shall be the.
All the nonresident companies in nigeria are privileged to have a permanent establishment or fixed base in the country. The companies income tax act in this act referred to as the principal act is amended as set out in this act. The analyses were performed using data from cbn bulletin, nse fact book and firs annual report for an elevenyear period 20072017. Based on the findings, the study recommended that government should strengthen the tax administration system to broaden the tax income, and embark on tax education to ensure voluntary tax compliance. Consequently, its application is provided for in the enabling law of other tax types i. Fifth schedule funds, bodies and institutions in nigeria to which donations may be made under section 25 of this act sixth schedule warrant and authority to enter premises, offices, etc. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960. However the level at which the company income tax administration in nigeria tend to achieve its desired goals and objectives depends mostly on the tax office and the company that is operating in abia state. In nigeria, the corporate income tax rate is a tax collected from companies. Payment of minimum tax by lossmaking companies or companies whose tax calculation show no tax payable. Highlights of companies income tax c it cit is governed by companies income tax act c ita, cap c21, lfn 2004 as amended cit is a tax imposed on profit of a company from all sources the rate of tax is 30% of total profit of a company some profits are exempted from cit provided they are not derived from trade or. Boards power to assess and charge on turnover of trade or business.
Understanding companies income tax part 2 the guardian. Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year. The results of the analysis showed that both company income tax and valueadded tax have significantly positive impact on economic growth. The company income tax act in the law that regulates the taxation of all limited liability company doing business in nigeria private and pubic limited companies alike, other than those engaged petroleum operations, the federal board of inland revenue is the sole authority for the administration of this tax. The choice of the study period provides an opportunity for. Federation of nigeria are compiled in several volumes, the latest comprising of 14 volumes, it.
Resident companies pay tax on their worldwide income. This, in relation to what they do, where they live or any other issues reconized by the law. And for related matters 16th day of april, 2007 enacted by the national assembly of the federal republic of nigeria 1. Understanding companies income tax the guardian nigeria. In nigeria the company income tax administration aims and tries to tax each company in the state more effectively. Business or trade only partially carried on or deemed to be carried on in nigeria. Pdf topic company income tax and nigeria economic development. Introduction companies income tax cit is tax on the profits of incorporated entities in nigeria. The amount charged is 30% o the profit earned in the year preceding assessment. Personal income tax imposed on the income of all nigerian citizens or residents who derive income in nigeria and outside nigeria. Companies liable to ppt are not liable to companies income taxcit on the same. The study focuses on the impact of petroleum profit tax, company income tax, personal income tax, value added tax revenue on nigerias economic growth between 1980 and 20.
Companies income tax returns every company is required to. It also includes the tax on the profits of nonresident companies carrying on business in nigeria. The chartered institute of taxation of nigeria chartered. Vi lfn 2004 as updated and 1 st schedule to the act on goods and services exempted and zero rated goods, section 19, personal income tax act pita cap. However despite there being regulation on companies income tax in nigeria, low.
Charge of tax on interest relating to foreign and agricultural loans and certain reliefs. The cit is generally levied at a flat 30% rate, but is reduced to 20% for smaller companies with a turnover not exceeding ngn 1m operating in the. The tax is payable by all companies at the rate defined by the companies income tax act cita 1. Taxation in nigeria plus history of taxation in nigeria. Overview of personal income tax in nigeria explained oasdom. This study examines the impact of company income tax on economic growth in nigeria. You can read the full provisions of the act here companies income tax act cap.
Companies are mandated by law to pay company income tax cit in nigeria based on the profit. The corporate tax rate is 30% in nigeria which has been same after the 2011 amendment as well. The income tax act hereinafter referred to as the principal act is amended in section 2 cap. Resident companies are liable to corporate income tax cit on their worldwide income while nonresidents are subject to cit on their nigeria source income. Te tax law regulating taxation of individual is the income tax management act itma of 1961 which was replaced with the personal income tax decree pitd 104 of 1993. Under companies income tax act you have to pay companies income tax if you are a resident or nonresident company incorporated in nigeria. Nigeria imposing tax on the income of persons other than companies, shall be guilty of an offence against this act. The main purpose of wht is to capture as much tax payers that may have evaded tax into the tax net and the rate is usually 5%10% depending on the type of transaction. Investment income paid by a nigerian resident to a nonresident is sourced in nigeria and subject to wht at source, which serves as the final tax. The benchmark we use refers to the highest rate for corporate income. Compute the income tax payable on nigerian operation for the relevant tax year. Companies resident in nigeria are liable for cit on their worldwide income and nonresident companies are liable only to cit on their nigeriansource income. Section 55 of the companies income tax act cita, which is the enabling legislation on the taxation of profits of nonoil producing companies, provides that all companies including those registered in or outside nigeria must prepare and file annual income tax returns. Section 81 of the company income tax act or section of the value added tax act.
However the level at which the company income tax administration in nigeria tend to achieve its desired goals and objectives depends mostly on the tax. Assessable profit is obtained prior to deducting capital allowances. Corporate income tax cit is a tax imposed on companies resident in the republic of south africa i. The calculator is a very simple application that helps to calculate tax due in line with the nigerian income tax law. Section 55 of the companies income tax act cita, which is the enabling legislation on the taxation of profits of nonoil producing companies, provides that all companies including those registered in or outside nigeria must prepare and file annual income tax. Companies resident in nigeria are assessable to tax on their worldwide income, whilst nonresident companies are subject to. Where actual profits cannot be determined, the federal inland revenue. Unfortunately, we are far behind on tax law reform in nigeria as the last time any business tax legislation was enacted or. How to calculate company income tax in nigeria legit. A tax returns is a report prepared by a taxpayer containing informaon on his tax a. This publication has been written to give insights to doing business in nigeria. Company income tax is one of the most important sources of revenue collection for the government of nigeria.
Resident companies are liable to corporate income tax cit on their worldwide income while nonresidents are subject to cit on their nigeriasource income. Nigeria is liable to tax in nigeria, the place of payment not withstanding. The cit rate is 30% for large companies companies with gross turnover greater than n100m, assessed on a preceding year basis i. The study period spans economic cycles for about 66 percent of the life of. Development levy a flat charge imposed on every taxable person typically within a state.
If the turnover of the company is n500,000 or below and the company has been in business for at least four calendar years, the minimum tax payable shall be i. Nonresident companies are liable to tax on the profit or income derived from nigeria. Such application must go with a portion of the tax liability. Thank you for reading this post, if you have found it useful please share with your network using one of the share buttons below. Nigerian companies pay 30 percent of their worldwide profit while foreign companies pay 30 percent of only the profit made in nigeria. As a limited liability company, you are liable to pay company income tax. Pdf company income tax and nigerian economic growth ogwuche. This act may be cited as the income tax amendment act 2014, and commences on the pt day of july 2014. Relevant tax authority may assess and charge tax on the turnover of a business, etc. An act to consolidate the provisions of the companies income tax act 1961 and to make other provisions relating thereto. The maximum number of instalments the firs may approve is three. Understand how company income tax is computed in nigeria. Federation of nigeria, 2004 as amended by the companies income tax. Companies income tax act arrangement of sections part i repealed part 11 imposition of tax and profits chargeable section 9.
The nigeria income tax calculator nitc shows in one click a. In the country the tax charging is governed by the cita or the companies income tax act 1990 which amended in 2004. Any company doing business in nigeria, whether resident registered in nigeria or non resident foreign company registered outside nigeria is expected to pay company income tax on profits accruing in, derived from, brought into or received in nigeria. The educational charge is pegged at 2 percent of the assessable profit while the a 10 percent withholding tax is deducted from dividend payments to companies and individuals. It means that the profit is charged on profits for the accounting year, but in the year which precedes the assessment. Where actual profits cannot be determined, the federal inland revenue in practice, profit is deemed at 20% which is then taxed at the income tax rate of 30%, resulting in an effective tax of 6% of turnover. Corporate income tax south african revenue service. Total profit is profit after deducting previous year losses carried forward and capital allowances. Fourth schedule warrant and authority to levy by distress under the companies income tax act fifth schedule funds, bodies and institutions in nigeria to which donations may be made under section 25 of this act sixth schedule warrant and authority to enter premises, offices, etc. Company tax all companies operating in nigeria outside the oil and gas sector of the economy are. However despite there being regulation on companies income tax in nigeria, low tax compliance has become a matter of grave concern in. Petroleum profits tax is imposed on income of companies in petroleum.