Taxes are a crucial source of revenue for governments, playing a vital role in funding public expenditures and infrastructure development.
In Nigeria, various types of taxes are imposed, including income tax, value-added tax (VAT), and capital gains tax, among others. These taxes apply to individuals, companies, employees, and employers, as well as transactions on assets, with different payment deadlines and authorities across the three levels of government.
This article provides an in-depth analysis of the different taxes imposed in Nigeria, including the taxpayers liable for each, payment deadlines, and specific tax authorities to which payments are remitted.
Table of contents
Company Income Tax
Company Income Tax (CIT) is one of the major taxes imposed on all companies (other than companies engaged in petroleum operations) incorporated in Nigeria. It is charged on profits that accrue in, are derived from, brought into, or received in Nigeria. This tax is collected and administered by the Federal Inland Revenue Service (FIRS).
CIT rates vary:
- Companies with gross turnover > ₦100 million: 30%
- Companies with gross turnover > ₦25 million but ≤ ₦100 million: 20%
- Companies with gross turnover < ₦25 million: Exempt, but still required to file CIT returns
Existing companies must file returns within 6 months from the end of the accounting year. Newly incorporated companies must file within 18 months from the date of incorporation or no later than 6 months after the end of its accounting period, whichever comes first.
Value Added Tax
VAT is an indirect tax imposed on goods and services. The final consumer pays the VAT charges at a 7.5% rate on every good sold and service rendered. VAT is filed monthly at the taxpayer’s Correspondence Tax Office. The previous month’s activities must be reported on or before the 21st of the following month.
READ ALSO: Tax Avoidance vs. Tax Evasion: Difference and Nigeria Legal Implications
Capital Gains Tax
Capital Gains Tax (CGT) is imposed on profit derived from the sale, lease, transfer, assignment, or compulsory acquisition of proprietary rights in chargeable assets.
- Tax rate: 10% of profit after deducting allowable expenses and acquisition cost
- Chargeable assets include all forms of property (local or foreign), debts, and incorporeal property
Payment and filing deadlines:
- Assets disposed between 1 January – 30 June: Due by 30 June
- Assets disposed between 1 July – 31 December: Due by 31 December
FIRS administers CGT for corporate entities, while State Internal Revenue Services (SIRS) handle non-corporate CGT within their states.
Stamp Duties
Stamp Duty is imposed on written and electronic documents or instruments relating to acts performed in Nigeria.
- Rates may be fixed or ad valorem, depending on the document
- FIRS collects duties for corporate transactions, while SIRS collects duties for documents executed between individuals
- Documents must be stamped within 30 days (ad-valorem) or 40 days (fixed duty) from execution
Personal Income Tax
Personal Income Tax is a direct tax levied on the income and earnings of individuals, including wages, salaries, dividends, interest, royalties, and rent.
- Paid to SIRS in the taxpayer’s state of residence
- FCT residents, Nigerian Police, Armed Forces members, and foreigners earning in Nigeria pay to FIRS
Personal Income Tax Rates:
- First ₦300,000: 7%
- Next ₦300,000: 11%
- Next ₦500,000: 15%
- Next ₦500,000: 19%
- Next ₦1,600,000: 21%
- Next ₦3,200,000: 24%
Consolidated Relief Allowance: ₦200,000 or 1% of gross income plus 20% of gross income, whichever is higher. Minimum tax rate: 1% if no taxable income remains after deductions.
- PAYE System: Employers deduct and remit tax from employee salaries
- Self-employed individuals must file returns of profits earned in the previous year
- Returns are filed within 90 days after the fiscal year ends (31 December)
Conclusion
Taxes are vital for supporting Nigeria’s economic growth and development. Understanding the types of taxes, taxpayers liable, payment deadlines, and tax authorities ensures individuals and businesses comply with regulations and avoid penalties.
Frequently Asked Questions
PAYE is deducted from employees’ salaries by employers and remitted to the relevant tax authority (SIRS or FIRS) on or before the 10th day of the following month.
Existing companies file returns within 6 months from the end of the accounting year. Newly incorporated companies file within 18 months from incorporation or no later than 6 months after the end of its accounting period, whichever comes first.
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Disclaimer
This publication is for general guidance only and does not constitute professional advice. You should not act upon the information without obtaining specific legal advice.
WRITTEN BY:
OGHENEYOMA E. IBUJE LL.B, B.L, ACIS
LEGAL ASSOCIATE
TCORPORATE LEGAL ADVISORY
