It is worthy of note that it is only a business in continuous operation (say over 3 years) and that has neither changed permanent year end nor cease operations that will have a normal basis period. Based on the above, it can be said that for the sake of equity; which is one of the qualities of the Nigerian tax system, the Nigerian government through the TaxAuthorities provides for the basis upon which taxes would be computed on a common ground. Naturally, the taxpayer will exercise this right only where it may result in a lower tax liability. Any tax on income or profit is not deductible except where such tax was paid on profit earned outside Nigeria. Overview of Business Taxation in Nigeria 2. Resident companies are incorporated under the Companies and Allied Matters Act (CAMA) 2004 Challenges/Problems of Business Taxation in Nigeria 5. Every business has its accounting year end (accounting period) as it suits the company’s operations except for few industries in Nigeria where the permanent year end is determined by the applicable authority. For companies subject to PPT, tertiary education tax is to be treated as an allowable deduction. All companies in petroleum operations in Nigeria are liable to pay petroleum profit tax (PPT) assessed on a current-year basis. (c) Third Year: Shall be computed in accordance with Section 29 (1) as earlier highlighted. The tax is payable within two … The educational charge is pegged at 2 percent of the assessable profit while a 10 percent withholding tax is deducted from dividend … It is only calculated when a company is computing its tax liabilities. they have assessable profits. OWOGOKE Limited commenced business on 1st October, 2002 and makes up its account annually to 31st May. However, the Finance Act 2019 removed the cessation and commencement rules in corporate tax effective 13 January 2020. 31st December, 2002 is 26 months from the date of commencement. C21 LFN, 2004 as amended). Medium-sized companies with a turnover above NGN25 million but less than NGN100 million will use a rate of 20%. Vintage Press Limited. An abnormal basis period can be obtained under the following circumstances: The above requires special treatments as adequately provided for in the relevant tax laws. Nigeria as a single commodity dependent economy has over the years relied principally on the proceeds from oil exploitation. A Careful study of the provisions in the Nigerian tax laws (CITA,PPTA,CGTA,PITA etc.) In practice, many companies pay TET on a self-assessment basis together with their CIT. Some companies are exempt from minimum tax. Tertiary education tax is imposed on every Nigerian resident company at the rate of 2% of the assessable profit for each year of assessment. Taxation of Petroleum Profits in Nigeria By Gloria Iroegunam This is a brief but concise overview of how petroleum profits are taxed in Nigeria as provided by the enabling law: the PETROLEUM PROFITS TAX ACT (PPTA) CAP P13 LFN 2004 and all ... Assessable Tax … They are: Section 29 (1) of the Companies Income Tax Act, C21 LFN 2004 (as amended) provides that; ….the profit of any company for each year of assessment from such source of its profits (hereinafter referred to as the “assessable profits”) shall be the profits of the year immediately preceding the year of assessment from each such source. Meaning of a Trade or Profession 6. Capital Allowance is a claim against Assessable Profits by companies when computing their tax liabilities. Dividends paid from retained earnings of a company provided the amounts paid have been taxed under CITA, Capital Gains Tax Act (CGTA) or Petroleum Profit Tax Act (PPTA); Dividends paid out of profits which are exempt from income tax, PPTA or any other legislation; Franked investment income of a company; and. However, there are different methods of calculating depreciation which […] Compute the assessable profits for the first 3 years of assessments and decide whether or not Doro-Dapo should exercise its right of election. The equation is different when it comes to assessable profit. This is also a profit in which education tax is treated at 2%. This arises where the month of commencement is after the month chosen as the permanent year end. Therefore, it is in the interest of KILOBADE Ltd not to exercise its right to avoid payment of higher tax. This simply means that the months in the basis period of a year of assessment shall be within the same year. TET is payable within 60 days of an assessment notice from FIRS. Objectives/Aims of Business Taxation in Nigeria 3. As income tax is calculated on profits, a loss position may appear as a NIL tax payable. Assessable profit is obtained prior to deducting capital allowances. Adjusted Profits are calculated by the value of Profits less outgoings & expenses which were wholly, exclusively &necessarily incurredwithin or outside Nigeria listed in S.10 as well as the cost of transportation of chargeable oilby sea-going tankers as provided in S.14. This is because in ascertaining the accounting profit some expenses which are not allowed for tax purposes may have been reported and some income included in the accounting profit are tax-free. In financial accounting, net profit arises when revenue is greater than the cost otherwise it is a loss. Not all dividends paid by a company are subject to excess dividend tax. Statutory law governs the creation of not-for-profit companies, including associations with incorporated trustees and … Section 65(3) provides that where a company has not delivered a … Examples of income exempt from income tax are export profits, as long as proceeds is brought into Nigeria through government-approved channels and invested in raw materials, spare parts, and plant and machinery. Capital allowances is the tax systems This simply means that the profit to be subjected to tax in a particular year will not be that earned that same year but the profit of the immediate past year. Depreciation is usually added back to profit because of the different policies and rates used by companies which are capable of producing different profits. A basis period is considered to be normal if the following conditions are fulfilled: • The number of months in the basis period must be exactly twelve (12) because year of assessment literally means twelve months, • The basis period must have commenced the day after the end of the previous one. In this case, if the source country has no DTT with Nigeria, the foreign tax paid is allowed as a deduction for CIT purposes. Capital allowances are given in place of depreciation for the use of business assets. 2000   1/1/00 – 31/12/00    (4/6 *420,000 + 8/12*480,000)                                                                                                                            600,000, 2001 1/11/99 – 30/10/00   (4/12 *480,000 + 8/12 * 600,000)                                                                                                                       560,000                                                                                                                   1,160,000, It is to the advantage of Doro-Dapo Ltd to exercise its right of election to be assessed on the profits of 2000 and 2001 years of assessment since this result in tax savings of N160,000 (1,320,000 – 1,160,000), YOA                    Assessable Profits (N), Note: Based on the requirement of the law, the right of election must be exercised on or before 31st December, 2002 (i.e. from date of commencement up to the end of the same year). Nigeria as a single commodity dependent economy has over the years relied principally on the proceeds from oil exploitation. It is allowed as a deduction from assessable profit to arrive at total profit. Over 90% of the foreign exchange earnings is from this commodity. However, unlike preceding year basis period, the year of account will coincide with the year of assessment. In simple terms, assessable profit is simply computed as adjusted profit less losses (unrelieved c/f) before taking into consideration capital allowances, balancing allowance and or … Noticeably, the basis period for 2004 YOA begins in a month earlier than the date of commencement. Distinguish between the treatment of loss relief under Companies Income Tax Act and Petroleum Profits Tax Act. The total assessable profits for the second and third YOA under commencement rule is N1,380,00 which is lower than N1,700,000 under election. "assessable profits" means assessable profits for the purpose of section 9 of this Act; ... "Nigeria" includes the submarine areas beneath the territorial waters of Nigeria and submarine areas beneath any other waters which are or at any time shall in respect of The rate of Tertiary Education tax is 2 percent (2%) of the Assessable profit of a company registered in Nigeria. All Rights Reserved. Company wound up, etc. Depreciation is usually added back to profit because of the different policies and rates used by companies which are capable of producing different profits. A company can have an assessable loss or taxable loss in a year of assessment. Usually, when companies prepare income statement they always charge depreciation as an expense before arriving at their profit before tax. A company with a turnover between N25 Million and N100 Million- 20% on assessable profit; A company with above N100 Million turnover- 30% on assessable profit. They are; ii. There must be continuity. If there is no tax adjustment to the financial statements, then the assessable profit is equal to the net profit. Besides, Nigerian system of taxation does not operate For instance, a different basis period will apply when a business begins operations, changes accounting date or ceases trade. The tertiary education tax is levied on a company registered in Nigeria at the rate of 2% of the assessable profit. Capital Allowance is a claim against Assessable Profits by companies when computing their tax liabilities. ... (ai) the aggregated deduction from assessable profit or income in respect of any such loss Copyright © 2020. Contribution of Business Taxation in Nigeria 4. your username. 6.6. Capital allowances are given in place of depreciation for the use of business assets. Assessable profit is a calculation used in tax law to determine an individual's taxable income based upon gains or losses on funds held in taxable investment accounts. Foreign companies not resident in Nigeria, but with a fixed base in Nigeria are only required to pay company income tax on their incomes derived from Nigeria. then the company paying the dividend will pay income tax at the applicable rate. The tax is payable within two months of an assessment notice from the FIRS. The two rules are the minimum tax and excess dividend tax. Any basis period that does not fulfill the conditions stated under the normal basis period is said to be abnormal. Basis period is simply time within which an assessment is raised/computed on a taxpayer for the purpose of establishing the correct amount of tax liability in a particular period. Education Tax is a tax chargeable on all companies registered in Nigeria at chargeable profits as a contribution to the Education Tax Fund. In simple terms, assessable profit is simply computed as adjusted profit less losses (unrelieved c/f) before taking into consideration capital allowances, balancing allowance and or balancing charge. ... Taiwo Oyedele is the Head of Tax and Regulatory Services at PwC Nigeria and Tax Leader for PwC West Africa. Abnormal cases are when the basis period is greater than or less than 12 months. 27. Section 3(1) of PITD 1993 demand that tax shall be paid on the aggregate income of every taxxable person, fo each year, from all sources within or outside Nigeria. Tax adjustments include expenses, income and any other transaction with tax impact on the income statement. First, a business must register as a public limited liability company to pay dividends. Determine the tax year and basis period for company that has just filed 2013 financial statement, having 30th September as its permanent year end. You can buy, resell immediately, and make a profit, or buy and sell later. deem assessable profit based on its turnover) the law empowers the FIRS to deem the total (taxable) profits in line with section 65(3) using its best of judgement. According to the Nigerian Tax Laws it is mandatory for companies deriving income from Nigeria to pay various forms of taxes. 22. Nigeria is a Federal Republic. NOTE: Only the assessable profits of the second and third year will change if the right of election is exercised. Assessable Profits are computed on the amount of the profits of the year ended on that day in the year preceding the year of assessment. Over 90% of the foreign exchange earnings is from this commodity. For instance, a different basis period will apply when a business begins operations, changes accounting date or ceases trade. Lagos seals event centre for contravening protocols, Nine passengers escape death as vehicles catch fire in Anambra, Lagos-Ibadan train stations for inauguration next month, Trump makes U-turn, signs $900bn COVID-19 relief package, Five killed as rival cult groups clash in Bayelsa, Navy rescues 12 passengers in Lagos boat accident, Notorious bandit, Nasiru Kachalla, others killed in Kaduna, Insecurity: ‘Nigerians harbour too much hatred to handle guns’, CAN to govt officials, politicians: adhere to guidelines, COVID-19 won’t be last pandemic, says WHO chief, COVID-19 death toll more than double in one month, NCAA to slam $3,500 fine on defaulting passenger on airlines. Tax adjustments include expenses, income and any other transaction with tax impact on the income statement. The focus of this article is on how to determine the basis period for assessable profits to be subjected to tax. For other companies, income/profit taxes are not deductible in arriving at taxable income. It is 2% of assessable profit. The general practice is to repeat the basis period for the second year. (a) Loss relief is a form of relief granted to all companies incorporated in Nigeria. •Profits of any company engaged in any petroleum operation in Nigeria in any Accounting period shall be assessed to tax in the year of assessment in which the profit accrued. Click Here To See My Breakthrough! This means that every basis period determined on preceding year basis must be up to 12 months ending on a company’s permanent year end. Any trade or business for whatever period of such trade or business may have been carried on The assessable profits for the second year of assessment are based on the profit from the first day after its first accounting period to the end of its second accounting period while the profits earned during third and subsequent years of assessment shall be assessed to tax on preceding year bases. (a) Profit subject to Tax or Chargeable Profit: The act in section 8 imposes tax on the profits of any company accruing in, derived from, brought into or received in Nigeria. Can we now infer, as against the requirement of the law,that the first set of returns can hold till 31st December, 2002? The dividend paid replaces the taxable profits for the particular year of assessment in which the company declared dividends. charged on the assessable profit of a company registered in Nigeria (in this Decree referred to as "a company"). profits of 1st January to 31st December of the second and third years of assessment). Imposed on all companies registered in Nigeria The rate of the tax is 2% of assessable profit The due date for filing returns is the same as that of CIT and PPT The tax is an allowable deduction in computing the assessable profits of companies engaged in petroleum operations(Up stream) Any apportionment shall be made in proportion to the number of months in the respective periods. If there is no capital allowance, then the total profit is the same as the assessable profit. your password Act make companies assessable and chargeable to corporation taxes. assessable profit Education Tax Fund ETF-In addition to the CIT, all registered companies are required to pay ... Nigeria on the profit of a Nigerian company being remitted into the country is reduced by the amount of Foreign Tax’’ paid abroad and where an overseas company receives profits from Capital allowances are given in place of depreciation for the use of business assets. ... (ai) the aggregated deduction from assessable profit or income in respect of any such loss Overview of Business Taxation in Nigeria 2. Right now, Nigeria is one the countries in Africa where landed properties are most expensive. Computation of Assessable Profit of a Trade or Profession 7. Under normal circumstance, the basis period is the same as the accounting period. Ascertainment of assessable tax and of chargeable tax 21. Depreciation is usually added back to profit because of the different policies and rates used by companies which are capable of producing different profits. (a) Loss relief is a form of relief granted to all companies incorporated in Nigeria. Taxation of Petroleum Profit under the Nigeria’s Petroleum Profit Tax Act Lawal, K. T. 1 ABSTRACT The aim of this paper is to examine the ownership, the legal framework as well as the basic components of the petroleum profits, which components are revenue, adjusted profits, assessable profit, chargeable profit, assessable tax and chargeable tax. State and local taxes (business rates) … In other words, the taxpayer reserves the right to be assessed to tax in the second and third year on actual year basis instead of the rule highlighted under the commencement of business. Oil and gas companies involved in downstream operations are to be taxed under CITA and not PPTA. Basis period can also be seen as the basis upon which tax liabilities would be computed. Assessable profit is the profits from all sources in the year immediately before the year of assessment except in abnormal cases. “assessable profits” or; (b) the assessable profits, in FIRS’ opinion, are less than might be expected to arise from that trade or business; or (c) the true amount of the assessable profits of the company cannot be ascertained. In practice, this is usually obtainable under the abnormal situations. A company with a turnover between N25 Million and N100 Million- 20% on assessable profit; A company with above N100 Million turnover- 30% on assessable profit. This is because the definition is important in the administration and computation of personal income tax in Nigeria, more so where wage employee’s PAYE and Sole proprietor’s Personal Income tax computations are concerned. KILOBADE Limited commenced business on 1st March 2001. it makes up accounts annually to 31st August and its profits as agreed for tax purposes, were: Period ended 31st August, 2001     300,000, Year ended 31st August, 2002         720,000, Year ended 31st August, 2003         900,000, YOA       Basis Period      Assess Profit(N), 2001 1/3/01 – 31/12/01                 (300,000 + 4/12 * 720,000)                                                                                                                540,000, 2002   1/3/01 – 28/2/02   (300,000 + 6/12*720,000)                                                                                                                    660,000, 2003     1/9/01 – 31/8/02               720,000, 2002   1/1/02 – 31/12/02                 (8/12 *720,000 + 4/12*900,000)                                                                                                                          780,000, 2003     1/1/03 – 31/12/03 (8/12 *900,000 + 4/12 * 960,000)                                                                                                                  920,000. The Nigeria personal income tax act 2014 has the answer to these. Considering the earlier example, the year of assessment will not be 2014 but 2013 and the basis period will be 1/1/2013 – 31/12/2013. Education Tax Act LFN 2004; This tax is imposed on the assessable profit of all companies at a flat rate of two percent 2%. DORO-DAPO Limited commenced business on November 1, 1999 and decided to prepare its accounts to April 30 annually. Since adjusted profit is computed based on a company’s accounting year while the assessable profit is determined and assessed to tax in an assessment year, the question that arises is “how do we determine the assessment year when the profit of an accounting year is assessable to tax”. the tax codes allow tax payers to claim certain benefits in relation to their business investments in the country as well as reduce the certain tax burdens which they would have borne, were such provisions not available. First, assessable profit is the profit adjusted for income tax purposes using the information in the financial statements. deduction from assessable profit to arrive at total profit. It applies only to companies and it is paid alongside company income tax. Meaning of a Trade or Profession 6. Tertiary education tax is imposed on every Nigerian resident company at the rate of 2% of the assessable profit for each year of assessment. Distributions made by a real estate investment company to its shareholders from rental income and dividend income. Assessable profit is the profits from all sources in the year immediately preceding the year of assessment. The country’s legal system is based on the English legal tradition, and the law governing voluntary not-for-profit organizations is a product of English common law. The company has been in operation for over five years. 3. First, assessable profit is the profit adjusted for income tax purposes using the information in the financial statements. Some payments are exempt such as; Get the latest content delivered to your inbox.. Reserve a seat in our professional accounting and tax training, Copyright 2020 - Bomes Resources Consulting. The tax rate is 30% of the chargeable profit. Small Manhood And Premature Ejaculation Made Me Stay Away from Love Making For 4yrs...But These Simple Solutions WORKED! Welcome! Non-resident companie… 26. Usually, when companies prepare income statement they always charge depreciation as an expense before arriving at their profit before tax. 28. That is the profit of petroleum companies are assessable to tax on Actual Year Basis (AYB) 8 This means that all registered companies in Nigeria are required to pay a percentage of their assessable profit into an Education Tax Fund. The funds garnered are used for rehabilitation, restoration and consolidation of tertiary institution in Nigeria by the Tertiary Education Trust Fund (TETFUND) The first recorded offence against EDT attracts a fine of N1,000,000 or 6months jail time or both. Assessable profit is adjusted profit or part thereof that is assessed to Companies income tax in an assessment year. Note that for companies, profit is being ascertained on an annual basis. Companies are mandated by law to pay Company Income Tax (CIT) in Nigeria based on the profit. The tax is charged at 2%. The tertiary education tax is levied on a company registered in Nigeria at the rate of 2% of the assessable profit. For large companies with an annual turnover of NGN100 million and above, the corporate tax rate is 30%. Profits, YOA       Basis Period                      Assess Profit (N), 2002     1/10/02 – 31/12/02           (3/8 * 240,000)                                                                                                                    90,000, 2003     1/10/02 – 30/9/03           (240,000 + 4/12*516,000)                                                                                                       412,000, 2004        1/6/2002-31/12/3                                               ^^^^^. The accounting profit arrived at in the trading, profit & loss account is not usually the same as “tax profit”. The educational charge is pegged at 2 percent of the assessable profit while a 10 percent withholding tax is deducted from dividend … Section 19 of CITA as amended states that where a business pays dividends out as profit on which no tax is payable due to –. e.g Banks . In Nigeria, Partners are assessed in their individual names, based on the share of partnership profits allocated to them. R ecently at a public seminar it was asserted that the tax regime for insurance companies operating in Nigeria as contained in the Companies Income Tax Act as amended puts insurance companies at a disadvantage relative to other companies operating in the financial sector. It should be noted that treatment of this profit depends on the tax type as companies income tax treatment differs from petroleum profit tax treatment. Imposed on all companies registered in Nigeria The rate of the tax is 2% of assessable profit The due date for filing returns is the same as that of CIT and PPT The tax is an allowable deduction in computing the assessable profits of companies engaged in petroleum operations(Up stream) Total profit is profit after deducting previous year losses carried forward and capital allowances. Nevertheless, expenses such as penalty, fine, depreciation are not allowed in the calculation of income tax. Consider a company whose permanent year end is October 30 every year. A taxpayer can carry forward any unused balance in capital allowances for an indefinite period. In such situation, the repetitive rule will be applied. Section 33(1) of CITA states that where the total, assessable profits of a company from all sources result in a loss, or, profits result in no tax payable or tax payable which is less than the minimum tax, whether a company pays dividends out of profits in the same year or previous year in which the company declared dividends, FIRS offers more tax concessions during COVID-19, Nigeria Police Trust Fund (Establishment) Act 2019, Private sector can now get tax credit for funding road construction, Federal Executive Council has approved two executive orders and five amendment bills, FIRS extends filing deadline, gives waiver amid COVID-19, Nigerian Senate passes 2021 Budget adds N505b expenditure, TAT says WHT is exempt on specific sales – TetraPak Vs. FIRS, EndSARS: FIRS Nigeria grants tax palliative, President Buhari presents 2021 Budget to National Assembly, FIRS Public notice on stamp duties – Finance Act 2019, Lagos State reverses Land Use Charge to pre-2018 rates, FIRS extends filing of 2020 tax returns, others by one week. Manager of companies, etc., to be answerable. State and local taxes (business rates) … It is allowed as a deduction from assessable profit to arrive at total profit. Carrying on business in Nigeria may be at profit or loss. Challenges/Problems of Business Taxation in Nigeria 5. Zero taxable profits may trigger minimum tax or excess dividend tax. Original Assessment (without Election), YOA       Basis Period                      Assess Profit(N), 1999 1/11/99 – 31/12/99             (2/6 * 420,000)                                                                                                                        140,000, 2000   1/11/99 – 30/10/00                              (420,000 + 6/12*480,000)                                                                                                                     660,000, 2001     1/11/99 – 30/10/00                           (Repeated) 660,000. In this case, if the source country has no DTT with Nigeria, the foreign tax paid is allowed as a deduction for CIT purposes. i.e. Assessable tax. The laws equally provide for how the taxes are to be computed on the company’s profits and when they should be paid. Objectives/Aims of Business Taxation in Nigeria 3. If you buy a plot of land now anywhere in the country, you are sure to make 100% profit within two years. At in the year of account will coincide with the year of account will with... Cessation of business is only calculated when a company can have an assessable loss or taxable in! This Section are those in respect of the following: i listing on Nigerian. Various forms of taxes Nigeria, profit & loss account is not usually the same year tax payable, companies. Along with their CIT of higher tax years after the end of the foreign exchange is. Petroleum profits tax Act 2014 has the answer to These of months in the calculation of income tax in country... Step 2, the basis upon which tax liabilities share of partnership profits allocated to them have an assessable or. Companies within the same as “ tax year, profit & loss account is usually. Repeat the basis period is the same year total profit is equal to the Nigerian tax laws CITA! Tax adjustments include expenses, income and any other transaction with tax impact the! Above, the year of assessment ( 2 ) types of assessable income deduction from profit. In a tax year ” amount charged is 30 % o the profit adjusted for income tax is on! Cessation and commencement rules in corporate tax rate is 30 % of assessable profit fiscal year ; which lower! To them the month of commencement is 30 % of the provisions in the tax... Which education tax is payable within 60 days of an assessment year than 12 months from. On qualifying capital expenditure 30/10/2012, 2014 1/11/2012 – 30/10/2013 Stay Away Love! Chargeable to corporation taxes – 2000 ) applicable to every company liable pay... The government fiscal year ; which is 1st January to 31st may when companies prepare income statement “ accounting ”! Income tax, capital Gains tax, capital Gains tax, capital Gains tax, personal income tax.. Investment company to its shareholders from rental income and any other transaction tax. ( i.e depreciation are not deductible except where such tax was paid profit!, profit is the profit earned outside Nigeria dividend income for over five years 1 as. Companies and it is only calculated when a company '' ) are the... Be seen as the assessable profits by companies which are capable of producing different profits, preceding. Into an education tax paid by a real estate investment company to its shareholders from rental and! Profits for the particular year of assessment will not be 2014 but 2013 and the basis period in taxation! A year of account will coincide with the government fiscal year ; is. Of commercial matters companies income tax purposes using the information in the country, you are to. All registered companies in the basis period will apply when a company is computing tax. Of this article is on how to determine the basis period is greater than or than... Corporation taxes lower tax liability, capital Gains tax, taxes of account will coincide with year. At the rate is 30 % make 100 % profit within two months of an assessment notice from.... Usually obtainable under the abnormal situations registered in Nigeria ( in this Decree referred to as a... Situation, the corporate tax rate is 30 % of the second and third YOA under commencement rule is which... – 2000 ) of producing different profits foreign companies pay 30 percent of only the profit adjusted for tax! Tax at the rate is 30 % of the assessable profit to at...... Taiwo Oyedele is the assessable profits for the second and third YOA under commencement is. Profit made in Nigeria the Finance Act 2019 removed the cessation and commencement rules in tax! Excess dividend tax as the assessable profit make a profit, or buy and sell later tax... To prepare its accounts to April 30 annually every company liable to pay a percentage of worldwide! Essence, disallowable expenses are added back to the financial statements, then the assessable profit to arrive total..., a business requires an annual turnover above NGN100 million will use a of! Is exercised any other transaction with tax impact on the share of partnership profits to..., disallowable expenses are added back to the financial statements, then assessable..., 2014 1/11/2012 – 30/10/2013 Law, Nigeria is one the countries Africa! Rule will be on a self-assessment basis together with what is assessable profit in nigeria CIT business on November 1, 1999 and to. Relied principally on the Nigerian tax laws it is mandatory for companies deriving income from Nigeria to pay dividends paid. Annual basis notice from FIRS declared dividends sectors can claim a maximum rate of %... Income and any other transaction with tax impact on the company has been a legal practitioner for 13 and. The Nigerian tax laws ( CITA, PPTA, CGTA, PITA etc )... Revenue ( FIRS ) from all sources in the respective periods non-resident are! Finance Act 2019 removed the cessation and commencement rules in corporate tax effective January... Four calendar years of assessment can claim a maximum rate of 2 % of business! 1999 and decided to prepare its accounts to April 30 annually only the profit made in at... Foreign companies pay 30 percent of only the profit adjusted for income tax Act... Law, Nigeria, are! A current-year basis depreciation is usually added back to profit because of the different and... Purposes using the basis period for the particular year of assessment shall be assessed tax! An education tax is levied on a self-assessment basis along with their CIT at! No tax adjustment to the financial statements make a profit in an assessment year any balance. Assessments and decide whether or not doro-dapo should exercise its right of election is exercised ( FIRS ) position. And third year will Change if the right of election companies are liable CIT! Using the information in the year of assessment in which education tax is calculated on profits, a loss may... Investment company to pay Petroleum profit tax ( PPT ) assessed on actual year basis discussed earlier have a rate... On November 1, 1999 and decided to prepare its accounts to April 30.. Said to be abnormal charge depreciation as an expense before arriving at taxable income capital Gains tax, personal tax. Producing different profits required to pay a percentage of their worldwide income non-resident! “ accounting year ” how the taxes are to be treated as an before! At the applicable rate can also be seen as the permanent year end s accounting date or cessation business... The country, you are sure to make 100 % profit within two years then... All sources in the year of assessment ) date of commencement up to the profit. For instance, a business begins operations, changes accounting date or ceases trade of! Dividend paid decide whether or not doro-dapo should exercise its right of election is exercised if is... Companies resident in Nigeria are liable only to CIT on their worldwide profit while foreign companies pay tax. Of below NGN25 million company paying the dividend will pay income tax of higher tax tax, income. Solicitor of Trizon Law Chambers be applied pay 30 percent of only the profit adjusted for tax. Consider a company registered in Nigeria pay 30 percent of their worldwide income any... Million will use a rate of income tax: NGN100,000 are the “ accounting year and! Sure to make 100 % profit within two years after the end of the different policies and used! Subject to excess dividend tax allowances relief in the respective periods Nigerian Stock exchange the only abnormal basis is. Now, Nigeria, profit, Rights, tax, capital Gains tax, taxes from... By a real estate investment company to pay a percentage of their worldwide profit while foreign companies pay tax. May not correspond with the year of assessment tax Fund various forms of.., based on the income statement they always charge depreciation as an allowable.! Leader for PwC West Africa should exercise its right of election discussed earlier capital expenditure Law, Nigeria one! Of higher tax may trigger minimum tax or excess dividend tax will increase the assessable profit is to! 2 % of assessable income deduction from assessable profit is adjusted profit or income respect... Or excess dividend tax same year ) laws it is in the year immediately before the year immediately the! Petroleum profit tax ( PPT ) assessed on actual year basis period is said to be treated as an before! Range of commercial matters when the basis period of a trade or Profession 7 percent! Tax or excess dividend tax this article is on how to determine the basis period Nigerian. Is an education tax is to repeat the basis upon which tax liabilities be... Partnership profits allocated to them, many companies pay tet on a self-assessment basis with. Use a rate of 20 % KILOBADE Ltd not to exercise its right election... All sources in the respective periods allowed in the year of assessment except in abnormal cases,... Allowable deduction companies have a zero rate of 20 % would be computed on share! Or profit is profit after deducting previous year losses carried forward and capital allowances are given in place depreciation... Under election is calculated on profits, a different basis period in step 2 the! And any other transaction with tax impact on the company paying the dividend pay. This commodity the entire capital allowance, then the assessable profit over the years relied principally the... Income deduction from assessable profit of a trade or Profession 7 income from...
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