Guides on The Payment of Company Income Tax in Nigeria

All companies registered in Nigeria must pay company income tax in Nigeria to the federal inland revenue service (FIRS) at a particular time using the appropriate tax rate. Therefore, it is important for directors to know how to pay company tax in Nigeria and when their companies are due for tax to avoid penalty. However, this article provides the guidelines on the payment of company income tax in Nigeria.

What is company income tax in Nigeria

Company income tax in Nigeria is the tax pay by the companies in Nigeria on the profit made at the end of an accounting year. Currently, the rate to charge by the company depends on whether the company is a small, medium, or large company. The rate is charged on the profit derived in, accrued in, or brought into Nigeria.

The rate of company income tax in Nigeria

Based on Finance Act 2019, companies are classified into small, medium, and large companies. Small companies are companies with gross turnover of below NGN25 million. Medium companies are companies with gross turnover of between NGN25 million and below NGN100 million. While the large companies are with a turnover of NGN100 million and above. The definition of a small company under CAMA 2020 contradicts this definition of a small company. So, the Finance Act 2020, recommended the FIRS to amend that. However, the company income tax rate for small companies is 0%. So, this means they are now exempt from company income tax. The tax rate for medium and large companies are 20% and 30% respectively. If a company has no taxable income or computed tax liability is less than minimum tax in a Tax year, the company pays minimum tax.

Filling of returns to FIRS

All companies must file their returns every year to the FIRS. So, new company must file its returns within 18 months from the date of incorporation or within 6 months after the end of the first accounting year-end, whichever comes first. The existing company has to file the returns within 6 months after the accounting year-end. The information to file to FIRS includes:

  • Audited financial statements
  • Capital allowance and tax computation for relevant tax year
  • Duly completed self-assessment form
  • Evidence of payment of part or whole of the amount due as tax to the approved bank for the collection of tax.
  • Statement of a declaration by either director or secretary of the company that all the information contained in the form are true and correct.

However, Based on CAMA 2020 (As amended), the Appointment of an auditor is not compulsory for small companies. Therefore, Finance Act recommended the small and medium companies to file a special type of accounts as may be prescribed by FIRS.

Tax Receipt

However, payment of company income tax in Nigeria is a statutory obligation. Upon the approval of the filed returns by the FIRS, the company will be used tax receipts as the evidence of filing for that year of assessment.

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