Companies Income Tax Act in Nigeria is collected from both Nigerian as well as foreign companies. The rates are however different for both entities. Nigerian companies needs to pay tax based on their worldwide income whereas the foreign companies need to pay tax on their profits that are being made as a result of their business activities. The corporate tax rate is 30% in Nigeria which has been same after the 2011 amendment as well. Company income tax is one of the most important sources of revenue collection for the Government of Nigeria. In the country the tax charging is governed by the CITA or the Companies Income Tax Act 1990 which amended in 2004.
Chargeable profits
It is one of the most important provisions of the Companies Income Tax Act. According to this following are some of the ways of earnings of the companies that are charged with tax:
1. All trade and business related activities without considering the time for which they have been carried are taxable.
2. Rent and all the premiums that are arising from the company operations are also charged with tax when it comes to Companies Income Tax. In this regard the period of rent is not considered by the government.
3. The dividends that are distributed to the share holders of public limited companies are also taxable. This is the provision 1c of the Nigerian Companies Income Tax Act where it has also been mentioned that all interests, royalties and discounts are also charged with tax.
4. The source of annual profit that does not fall within the categories mentioned above is also charged with tax.
5. Any amount the company receives in terms of profits according to the provisions that are mentioned within the income tax act is also taxable.
6. All short term fund raising acts performed by the company is also considered to be taxable under this act. It includes Federal Government security, treasury bonds, saving and debenture certificates are also charged under this act.
Where the tax has to be paid
1. All the Nigerian based companies need to make sure that the tax is paid at the source of designated bank. Once the payment has been received an e-ticket is issued which the company needs to present at the tax office within the jurisdiction of which the company office lies. The e-ticket is always issued once the payment has been captured by the bank system.
2. All the foreign companies need to make sure that the tax is deducted at source to the designated banks in this regard.
3. You can also make use of Nigeria Federal government tax online payment It serves as a means of reducing time and cost of compliance for the taxpayers and reducing interface between the taxpayers and tax authorities. It provides added convenience for taxpayers who will now sit at the comfort of their homes and offices and upload their tax returns on the e-Tax Pay Solution platform,†he further explained.
All Nigerian companies submit annual tax returns in relation to the Companies Income Tax Act whereas the foreign companies need to make sure that the withholding tax is deducted from the profits they make within Nigeria. Once the returns are filed by these companies it becomes their tax.
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