COMPANIES INCOME TAX
The principal law governing the taxation of Companies is the Companies Income Tax Act 1961, CAP.C21,Vol.3 LFN, 2004.
Under the Act, every registered company is required to file tax returns within six (6) months after its financial year-end with the Federal Board of Inland Revenue. Tax returns include audited accounts of the company and completed self-assessment forms.
Newly registered companies have up to 18 (eighteen) months after registeration or not later than 6 (six) months after the end of the first accounting period, whichever is earlier, to file its tax returns. The rate of corporate income tax is currently 30% of net profit and the basis of assessment is the profit for the preceding year. Assessable profit for newly incorporated companies for the first year is the profits of that year.
CAPITAL GAINS TAX
The principal law governing the operations of Capital Gains Tax is the Capital Gains Tax Act CAP C1 Vol. 2 LFN 2004 Capital Gains Tax is assessed at the rate of 10% on gains or profits accruing of the Company or individual from the disposal of any asset.
According to section 13 of the Capital Gains Tax Act, allowable deductions include (1) the amount or value of the consideration spent wholly, exclusively and necessarily for the acquisition of the asset; (2) any expenditure wholly, exclusively and necessarily incurred for enhancing the value of the asset; (3) any expenditure wholly, exclusively and necessarily incurred to establish, preserve or defend your title to, or a right over the asset; and (4) incidental costs incurred while acquiring or disposing the asset (Incidental costs including fees, commission or remuneration for professional services of any surveyor or valuer, auctioneer, or accountant, or legal adviser and the cost of transfer or conveyance, including stamp duties, together with the costs of advertising to find a buyer or seller of an asset.
The principal law governing the operations of Education Tax is the Education Tax Act 1993, CAP.E4, Vol 5 LFN 2004. Education Tax is assessed at the rate of 2% of the assessable profit of a Company; payable annually within 60 days of receipt of the notice of assessment.
VALUE ADDED TAX (“VAT”)
The principal law governing the operations of Value Added Tax is the Value Added Tax Act 1993, CAP V1, Vol.17, LFN 2004. VAT is assessed at the rate of 5% on all taxable goods and services.
PERSONAL INCOME TAX (“PITA”)
The principal law governing the operations of PITA in Nigeria is the Personal Income Tax Act 1993 1993, Part 9, CAP.P8, Vol.13 LFN, 2004).
Personal income of resident foreigners are taxed on a graduated scale of 5% to 25% for incomes ranging from N20, 000 to N120, 000 and above per annum. Liability to income tax is assessed on a 183-day residence basis, calculated over a 12 (twelve) month period. Taxable income includes offshore income brought into or received in Nigeria.
The principal law governing the application of Stamp Duties on commercial documents is the Stamp Duties Act, 1939, CAP. S8 Vol 14, LFN 2004). By virtue of the Act, these commercial documents are:
- executed in Nigeria; or
- relate, wheresoever executed, to any property situate in Nigeria; or
- relate, wheresoever executed, to any matter or thing done or to be done in Nigeria; or
- to be enrolled, registered or entered in or upon any rolls, books or records in Nigeria.
The rate of duty is determined by the nature of the document or the transaction. Duties are charged at fixed (flat) or ad valorem rates and failure to duly stamp inter alia render the document inadmissible in evidence and or unacceptable for enrolment, registration or entering in or upon any rolls, books or records.
The principal law governing the application of withholding Tax is the Companies Income Tax Act, 1961 (Companies Income Tax (Rates, etc., of Tax Deducted at Source (Withholding Tax) Regulations, 1995 – CAP.C21, Vol.3 LFN 2004
Withholding taxes are deducted at source from certain specified payments including interests, rents, dividends, management and consultancy fees. However, recognition is given for any amount of withholding tax deducted at source in the final computation of the tax liability.