Despite the heavy reliance on oil and mining revenues, other direct taxes remain relatively high. The corporate tax rate was 30% in 2002. A reduced rate of 20% is available for enterprises engaged in the production, agricultural production or extraction of solid minerals, as well as for enterprises entirely export-oriented. A withholding tax of 10% is levied on dividends, but with exceptions for export-oriented companies and small manufacturers. Dividends paid in scripted shares or company shares are also not taxable. However, earnings from the export of Nigerian goods by foreign companies were not subject to tax. There was also a 10% capital gains tax and a 10% dividend tax. Taxpayers are subject to a 10% capital gains tax on the sale of assets inside or outside Nigeria, although from 1. January 1998 Capital gains from the sale of shares and shares are exempt. Companies are subject to an education tax of 2% of taxable profit. The tax on companies engaged in upstream activities (exploration and production) in the oil sector amounts to 85% of eligible profits.
Other – Oil profit tax, or PPT, instead of corporate tax, is imposed on oil companies. Income for the purposes of the TPP refers to the value of the oil and related substances extracted, with the exception of gas, plus all other revenues of the corporation. Various prints are allowed. The tax rate is usually 85%. The CIT rate is 0% for companies with a gross turnover of NGN 25 million or less. Higher education tax is imposed on each Nigerian company up to 2% of the taxable profit for each valuation year. The tax must be paid within two months of the issuance of a tax notice by the FIRS. In practice, many companies pay tax on a self-assessment basis with their CIT.
Therefore, when determining the tax rate, a simplified calculation would be the IRS rate of 30% for large companies (i.e. companies with gross turnover greater than NGN 100 million) valued on the basis of the previous year (i.e. profits for the year ending in the year preceding the imposition of the assessment). The following table provides a summary of the taxable tax brackets and tax rates applicable on an annual basis. Adjusted profit is calculated after the addition of prohibited expenses and the deduction of eligible expenses and exempt income. The value derived from this calculation is the adjusted profit and, at this point, the education tax rate can also be deducted. The education tax rate is 2% of adjusted earnings. The 2% education tax is due by all resident companies. The taxable amount is calculated on the basis of the company`s adjusted/taxable profits for corporate tax or TPP purposes before deduction of capital deductions. The tax is payable by self-assessment or assessment notice from the federal tax authorities and is an eligible expense for oil profit tax purposes.
Under the Personal Income Tax Act, Nigerian and foreign residents in Nigeria are subject to global income tax. Tax rates range from 5% to 30% on taxable income. Property taxes are levied by state governments. Alternative minimum tax – A minimum tax is levied to ensure that each business, unless exempt, pays a certain amount of corporate income tax. The minimum tax is payable by a corporation if, in each taxation year, all taxable profits from all sources result in a loss or a tax or a tax lower than the minimum tax. If the turnover is less than or equal to NGN 500,000, the minimum tax is the higher of 0.5% of gross profit or 0.5% of net assets or 0.25% of paid-up capital or 0.25% of turnover. If the turnover is more than NGN 500,000, an additional tax is due, calculated at the rate of 0.125% of the turnover greater than NGN 500,000. Agricultural and agro-related enterprises, enterprises with at least 25% foreign equity and all enterprises in the first 4 years following the start of their business activities are not obliged to pay the minimum tax. After reaching the adjusted profit, the taxable profit must be calculated.
Thus, taxable profit results from the addition of the balance charge to adjusted earnings after deduction of capital cost allowance and compensation for loss. The value derived from this calculation is the taxable profit and, at this stage, the corresponding tax rate can be applied. Miscellaneous – Payments, such as . B management consulting fees and fees for technical services and commissions, are subject to a withholding tax of 10% for commercial beneficiaries and 5% for individuals. A withholding tax of 10% applies to all rents and directors` fees. These withholding taxes are final for non-resident beneficiaries, but may not be final for residents. Tax return requirements – A corporate taxpayer must file an annual return based on their income for the fiscal year. The return is due within 6 months of the end of the fiscal year. The audited annual accounts of the taxable person must be attached to the tax return. Residency – Nigeria`s Corporate Income Tax Act uses the concept of a “fixed tax base” at the place of residence. Any company that operates in the country and has a solid base in accordance with the law is subject to the tax. A non-resident company operating through a fixed base or permanent establishment within the meaning of a tax treaty is also subject to the Nigerian tax system.
A Nigerian company is a company registered in Nigeria. All companies involved in petroleum transactions under the Petroleum Profits Tax Act (PPT) are subject to the Petroleum Profits Tax (PPT), regardless of where they are registered. We have many clients who live in Egypt and know how to integrate your USA…