Current Tax Rates and Provisions Nigeria

7/29/2019 Current Tax Rates and Provisions Nigeria

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CURRENT TAX RATES AND PROVISIONS

A. PERSONAL INCOME TAX (PITA CAP P8 2004 LFN)

Tax table of rates Cumulative

Taxable

Income

Rate of Tax Tax

Payable

Taxable

Income

Tax

PayableN % N N N

First 30,000 5 1,500 30,000 1,500

Next 30,000 10 3,000 60,000 4,500

Next 50,000 15 7,500 110,000 12,000Next 50,000 20 10,000 160,000 22,000Over 160,000 25

Income Tax ReliefsPersonal allowance N5, 000 plus 20% of earned incomeAdditional personal allowance (For disabled persons) N3, 000 or 20% of earned income

Whichever is higher.

Children allowance (Limited to 4 children) N2, 500 per childDependent relative (Limited to 2 dependants) N2, 000 per dependantPension Fund Contribution 7.5% of (Basic, Housing and

Transport)

Life Assurance Relief Actual premium paid

Benefits-in-kindType Basis

1. Free Accommodation Rateable value of accommodation occupied or

the rent paid by the employer whichever is higher

2. Free use of a companys asset e.g. Car 5% p.a of cost of the asset

3. Assets rented or hired for use of employee Actual rental or hire charge paid

4. Services of support staff Actual amount incurred

Non taxable payments/allowances

Gratuities Actual amount paid

Rent allowance Maximum of N150, 000 per annum

Transport allowance Maximum of N20, 000 per annum

Meal allowance Maximum of N5, 000 per annum

Utility allowance Maximum of N10, 000 per annum

Entertainment allowance Maximum of N6, 000 per annum

Leave allowance Maximum of 10% per annum

Compensation for loss of office Actual amount paid

Provision of meal in staff canteen

Provision of uniforms and other protective clothingMedical and dental expenses incurred and reimbursed by the employer

Payment to staff in respect of relocation

Reimbursement of expenses incurred in the course of employment

Passage expenses incurred by the employer

Minimum Tax provision for individuals 0.5% of total income

Statutory Payroll Deduction

i. Pension Fund Contribution 7.5% of (Basic, Housing and Transport)

ii. The National Housing Fund 2.5% of Annual Basic Salary

iii. Industrial Training Fund 1% of Total payroll cost

Withholding Taxes


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Type of payment Rates

Individuals Companies

Royalty 5% 10%

Interest 10% 10%

Dividend 10% 10%

Rent (including hire of equipment) 10% 10%

Directors Fees 10% 10%

All aspects of building construction and related activities 5% 5%All types of contracts and agency arrangements other than

sales in the ordinary course of business

5% 5%

Consultancy and professional fees 5% 10%

Management fees 5% 10%

Technical fees 5% 10%

Commission 5% 10%

With effect from 16th

April 2007, withholding tax returns are to be filed within 21 days of the end ofeach month. Penalty for failure to withhold or failure to remit tax withheld within 21days is 10% of

tax involved plus interest at the prevailing CBN re-discount rate.

B.COMPANIES INCOME TAX (CITA CAP C21 2004 LFN)

The profit or gain of any company accruing in, derived from, brought into , earned in or received in

Nigeria are assessable to tax under Companies Income Tax Act CAP C21 2004 LFN. The current tax

rate is 30% and it is applied on the total profit or chargeable profit of the company.

i. Registration of CompaniesAll companies whether resident or non-resident are to be registered with the Federal Inland

Revenue Service (FIRS) for tax purpose.

ii. Self AssessmentAll companies are required to file self assessment return within six months of its accounting

year end. For a newly incorporated company, filing should be done within eighteen monthsfrom the date of its incorporation or not later than six months after the end of its first

accounting period whichever is earlier.

iii. Due Date of Filling Tax ReturnsAccounting year end Date of filling

December 31st 30t June

September 30t 31

stMarch

June 30th 31st December

April 30t 31st October

March 31st 30

tSeptember

iv. Penalty for late filing Tax ReturnsFailure to comply with the self assessment system attracts penalty of:

(a) N25, 000 for the first month in which the failure occur &

(b) N5, 000 for each subsequent month in which the failure continues


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v. Penalty for late payment of taxIf payment is not made within the specified time period, a sum of 10% of the amount of tax

payable shall be added.

For Naira remittances, the tax due shall carry interest at the prevailing minimum rediscount rate

of CBN plus spread to be determined by the finance minister from the date when the tax

becomes payable until it is paid. For foreign currency remittance, the tax due shall accrueinterest at the prevailing London Inter Bank Offered Rate or the prevailing minimum

rediscount rate of the CBN,whichever is higher, plus spread to be determined by the minister.

vi. Minimum Tax(a) For companies within turnover of N500, 000 or less, highest of:

i. 0.5% of gross profit

ii. 0.5% of net assets

iii. 0.25% of paid-up capital

iv. 0.25% of turnover.

(b) For companies with turnover in excess of N500, 000.00:

0.125% of turnover in excess of N500, 000, plus the highest tax arrived at in (a) above.

vii. Exemption from payment of Minimum Tax Companies with at least 25% foreign participation or imported equity Companies engaged in agricultural trade Companies still in their first four calendar years of business.

viii. Capital Allowances(a) Rate

Qualifying expenditure

In respect of:

Initial allowance Annual allowance

(Straight line)

% %

Industrial and non-industrial buildings 15 10

Mining 95 NilPlant & Machinery

For agricultural production 95 Nil

Others 50 25

Furniture and Fittings 25 20

Motor Vehicles:

For public Transportation 95 Nil

Others 50 25

Plantation Equipment 95 Nil

Housing Estate 50 25

Ranching and Plantation 30 50

Research and Development 95 Nil

(b) Capital allowances granted in any year are restricted to 662/3% of the assessable profit for theyear for companies not engaged in manufacturing, mining and agricultural trade or business.

(c) It is a condition for granting capital allowance that capital expenditure acceptance certificatesare obtained from the Industrial Inspectorate department of the Federal Ministry of Industries

for capital expenditure of a company incurred in any one year in excess of N500, 000.

(d) Investment allowance on plant Equipment and Machinery is available at 10%.


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(C) VALUE ADDED TAX (VAT A CAP VI 2004 LFN)

Value Added Tax (VAT) was introduced on 1st

January 1994 to replace Sales Tax. Taxable

persons are obliged to register under the VAT Act. The tax is at a single rate of 5% of taxable

goods and services.

Supply of all goods and services except those specifically exempted are subject to VAT. Non-

resident companies, which transact business in Nigeria, are also required to register for VATand render VAT returns using the address of the company in Nigeria with whom they have

subsisting contract.

The following goods and services are specifically exempted from VAT:

Exempted goods1. All medical and pharmaceutical products2. Basic food items3. Books and Educational material4. Baby products5. Fertilizer locally produced agricultural and veterinary medical farming machinery

and farming transportation equipment.6. All exports7. Plant and machinery imported for use in the Export Processing Zone8. Plant, machinery and equipment purchased for utilization of gas in downstream

operations

9. Tractors, ploughs, agricultural and implements purchased for agricultural purposes.Exempted services1. Medical services2. Service by community Bank, Peoples Bank and Mortgage institutions.3. Plays and performances conducted by education institutions as part of learning.4. All exported services.Zero rate status1. Non-oil export2. Goods and Services purchase by diplomats3. Goods purchased for use in humanitarian donor funded projectsOffences and penalties under VAT(a) Failure to registered within 6 months of commencement of the decree i.e. 1 st January

1994 or commencement of business: Fine as follows:

(i) N10, 000 1st month of failure(ii) N5, 000 for each subsequent month for which the failure continue

(b) Failure to keep proper record of account: fine of N2, 000 for every month the failure

continues.(c) Failure to collect tax: penalty of 150% of the amount not collected plus 5% interest

above the CBN rediscount rate.(d) Failure to submit return attracts fine of N5, 000 for every month the failure continues.

D. CAPITAL GAINS TAX (CGTA CAP CI 2004 LFN)

With effect from 1996, CGT is computed at the rate of 10% of the chargeable gain. Witheffect from 1998, gains on sale of shares and stock of all forms are exempted from tax.


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E. OIL AND GAS COMPANIES

(i) Oil Marketing Companies are liable to tax under CITA at the rate of 30% andEducation Tax at rate of 2% on the assessable profit. Education tax is treated as

allowable expense.

(ii) Oil Services companies are liable to tax under CITA at the rate of 30% and EducationTax at the rate of 2% on the assessable profit.

(iii) Oil producing Companies are liable to tax under the Petroleum Profit Tax Act CAPP13 LFN 2004 at the following rates:(a) Joint Venture Contracts, Risk Service

Contracts and Sales Risk Operators - First Five years 65.75%

- Subsequently 85%

(b) Production Sharing Contracts (PSCs) - 50% of Chargeable Profit

(Mainly for Deep Off-shore exploration & production)

Oil producing sharing companies are to file tax returns within five months of the year end.

PPT is payable in 12 monthly installments plus a final installment payable within 21 days of

the date of service of the notice of assessment.

F. INFORMATION TECHNOLOGY (IT Tax)

This is backed up by the National Information Technology Development Agency Act 2007.

i) The FIRS is to assess and collect the tax

ii) The rate of tax is 1% of profit before tax and it is tax deductible when paid.

iii) The levy applies to companies and enterprises with annual turnover of N100m and

above in following businesses.

(a) GSM Service provider and all telecoms companies

(b) Cyber Companies and Internet service provider

(c) Pension Manager and pension related companies

(d) Banks and other financial Institution

(e) Insurance companiesiv) Penalty of 2% is added for failure to pay the tax within 60 days after service of notice

of assessment

v) Failure to pay the tax attract a fine of not less than N1million on convictionG. TAX REFUND PROCEDURE

The Federal Inland Revenue Services Establishment Act 2007 make provision for tax

refund to tax payers who have valid claims within 90 days.

A claim for tax refund may arise from any of the following:

1. Over payment of tax in error2. Double remittance by banks

3. Double payment for the same tax liabilities by the tax payers4. Withholding Tax credit higher than the final tax liability

5. Input VAT in excess of output VAT

6. Input VAT claims in zero-rated transactions

Any claim for tax refund less than three hundred thousand Naira (N300, 000.00) could besettled immediately provided:

i. The tax payer has made valid tax claim previouslyii. The tax payer has beer tax audited within the last two years


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iii. The tax payer has no outstanding tax liability with the Federal Inland Revenue ServicesAny claim for tax refund amounting to three hundred thousand Naira (=N=300, 000.00)

and above must go for tax audit procedure or a spot check before the refund can be

approved.

Current Tax Rates and Provisions Nigeria

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