Nigeria has a relatively simple and straightforward system of corporate taxation. The main types of taxes that companies are subject to are income tax, VAT, and import duties. The tax rates are reasonable, and there are no export duties. It is essential for businesses operating in Nigeria to comply with all relevant tax legislation and regulations to avoid penalties and fines.
Income Tax:
The corporate income tax rate in Nigeria is 30% for all companies except for small companies, which are taxed at a lower rate of 20%. Small companies are defined as those with a turnover of less than ₦25 million (approximately $64,000) per annum. The Companies Income Tax Act (CITA) regulates income tax in Nigeria.
Value-Added Tax (VAT):
Nigeria operates a VAT system, which is governed by the Value Added Tax Act 2007. The VAT rate is currently 7.5%, and it applies to the supply of goods and services in Nigeria, except those exempted under the law. The tax is payable by businesses registered with the Federal Inland Revenue Service (FIRS).
Sales Tax:
Nigeria does not have a specific sales tax. Instead, it uses a VAT system where tax is charged on the value added at each stage of the supply chain. Therefore, the final price of the product or service includes the VAT.
Import Duties:
Import duties are taxes levied on imported goods. The rates vary depending on the type of goods and range from 0% to 35%. The Customs, Excise Tariff, Etc. (Consolidation) Act 2004 regulates import duties in Nigeria.
Export Duties:
Nigeria does not have any export duties.
Tax Brackets:
Nigeria operates a flat tax rate system, which means that all companies, except small companies, are taxed at the same rate of 30%. Small companies, defined as those with a turnover of less than ₦25 million (approximately $64,000) per annum, are taxed at a reduced rate of 20%.
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