Key Aspects of Company Income Tax (CIT) in Nigeria.

Introduction:

Companies operating in Nigeria, earning legitimate income, fall under the purview of the Company Income Tax Act (CITA), Cap C21, LFN 2004 (as amended). While CITA mandates the payment of taxes on revenue from various sources, there are exemptions outlined in the Act.

Taxable Income Sources:

The following income sources are subject to CIT in Nigeria:

1. Profits from Trade or Business: Any profits accruing within, derived from, brought into, or received in Nigeria related to trade or business.
2. Dividends, Interest, Royalties, and Annuities: Profits from dividends, interest (including compensating payments from Regulated Securities Lending Transactions), royalties, discounts, charges, or annuities.
3. Rent and Premiums: Income from rent or any premium arising from granting the right to use or occupy any property.
4. Other Annual Profits or Gains: Any source of annual profits or gain not falling into the aforementioned categories.
5. Fees, Dues, and Allowances: Amounts received for services rendered, regardless of the location of payment.
6. Profits or Gains from Short-Term Money Instruments: Profits or gains arising from the acquisition or disposal of short-term money instruments like treasury bills, certificates, debenture certificates, and treasury bonds.

Finance Act 2021 Amendments:

The Finance Act 2021 introduced amendments, making profits earned by educational institutes chargeable under CIT, reversing their previous exemption.

Entities Exempt from CIT:

The following entities enjoy exemption from CIT:

1. Statutory or Registered Friendly Societies
2. Co-operative Societies: Those registered under any ecclesiastical or charitable establishments of public character.
3. Companies in EPZ or FTZ: Profits of companies established within an Export Processing Zone (EPZ) or Free Trade Zone (FTZ).
4. Export Profits: Profits from exports, given that proceeds are repatriated through government-approved channels and invested in raw materials, spare parts, plant, and machinery.
5. Small Company’s Profit: Companies with a turnover of 25 million Naira and below.
6. Agricultural Companies: Profits of companies engaged in primary agricultural production for an initial four years, extendable for another two years upon satisfactory performance.

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