What is Company Income Tax (CIT) in Nigeria?
Company Income Tax (CIT) is a federal tax levied on the profits of companies incorporated in Nigeria, administered by the Nigerian Revenue Service (NRS, formerly FIRS). It is governed by the Companies Income Tax Act (CITA) Cap C21, LFN 2004 as amended by successive Finance Acts. CIT applies to the assessable profits of a Nigerian company from all sources — whether derived inside or outside Nigeria — and to the Nigerian-source profits of foreign companies. It is distinct from PAYE (which taxes employee salaries), VAT (which taxes consumption), and Personal Income Tax (which applies to sole traders and partnerships).
What are the CIT rates in Nigeria under the NTA 2025?
Under the Nigeria Tax Act 2025 (NTA 2025), CIT uses a two-band rate structure based on annual turnover: (1) Small companies — turnover below ₦25 million per year: 0% (fully exempt from CIT). (2) Medium companies — turnover between ₦25 million and ₦100 million: 20% of assessable profit. (3) Large companies — turnover above ₦100 million: 30% of assessable profit. The small company exemption replaced the old ₦1 million threshold introduced under the Finance Act 2019. Companies must self-classify based on their most recent audited accounts and apply the correct rate when filing. Note: the 0% exemption covers CIT only — VAT, PAYE, and other obligations still apply.
When must Nigerian companies file and pay CIT?
The CIT filing deadline is 6 months after the end of a company's financial year (also called the accounting year or basis period). For example: if your financial year ends 31 December 2024, your CIT return and payment are due by 30 June 2025. New companies in their first year of trading have 18 months from incorporation to file their first CIT return (covering the period up to their first financial year-end). CIT returns are filed with NRS using Form CIT (Company Income Tax Return). Payment is made to the Integrated Tax Administration System (ITAS) or through a designated bank. Companies are also required to pay CIT in three installments (Provisional Tax) based on the prior year's liability — the final balancing payment is due with the return.
What is the difference between CIT and PAYE?
CIT and PAYE are two entirely separate tax obligations that most incorporated businesses must manage simultaneously: CIT taxes the COMPANY'S profits — it is assessed on the business entity itself. PAYE taxes the EMPLOYEES' salaries — it is deducted from staff wages and remitted to the relevant state Internal Revenue Service (IRS) by the 10th of the following month. A director who takes a salary from their own company still has PAYE deducted on that salary by the company. Then separately, the company also pays CIT on the profits it earns. Both taxes must be filed and paid independently. CIT goes to NRS (federal); PAYE goes to the state IRS where employees reside.
What is a Tax Clearance Certificate (TCC) and why does it matter?
A Tax Clearance Certificate (TCC) is a document issued by NRS confirming that a company (or individual) has no outstanding tax liabilities for the preceding 3 years. It is compulsory for: (1) Bidding for government contracts and tenders, (2) Obtaining import/export licences, (3) Applying for certain permits (construction, broadcasting, etc.), (4) Opening a corporate bank account at some institutions, (5) Directors who need personal TCC for certain transactions. A company must be up to date on CIT, PAYE, VAT, and withholding tax filings before NRS will issue a TCC. Without a TCC, companies are effectively locked out of public sector business. JusticeSure's compliance dashboard tracks all filing deadlines to keep your TCC renewable on time.
What expenses are deductible from CIT in Nigeria?
Under CITA, a company may deduct from its assessable profits all expenditure incurred wholly, exclusively, and necessarily in the production of income, including: (1) Staff salaries, wages, and allowances (including PAYE paid on their behalf), (2) Rent and rates on business premises, (3) Interest on business loans (subject to thin capitalisation rules — debt:equity ratio limit of 3:1 for related-party lending), (4) Capital allowances (instead of depreciation) on qualifying assets — e.g. 95% initial allowance on plant and machinery, (5) Bad debts written off and provisions that are specific and supportable, (6) Contributions to approved employee pension schemes, (7) Legitimate marketing and advertising costs. Non-deductible items include: capital expenditure, personal expenses, fines, penalties, dividends, and entertainment beyond a reasonable limit. NRS may disallow claims on audit if supporting documentation is missing.
How does Withholding Tax (WHT) interact with CIT?
Withholding Tax (WHT) is a payment-on-account mechanism — it is not a separate tax but an advance collection of CIT (and income tax for individuals). When your company receives a payment for services, the payer deducts WHT at source (typically 5% for most services, 10% for rent, dividends, and director fees) and remits it to NRS. The company receives a WHT credit note. At CIT filing time, total WHT credits received during the year are offset against the CIT liability computed on the company's profits. If WHT credits exceed the CIT liability, a tax refund can be claimed from NRS (in practice, refunds are slow — excess credits are more often carried forward). WHT must also be deducted when your company pays qualifying amounts to suppliers.
What is minimum tax and when does it apply to Nigerian companies?
Minimum tax is a floor charge that applies when a company has no taxable profit or its computed CIT is lower than the minimum tax — for example, in a loss-making year. It is charged at 0.5% of gross turnover (less franked investment income). Exemptions: small companies (turnover below ₦25 million) are exempt, as are companies in their first 4 calendar years of business and companies engaged in agricultural trade or business. Minimum tax ensures a company that is trading (generating revenue) still contributes something in a year where deductions and capital allowances wipe out taxable profit. If your regular CIT computation yields more than the minimum tax, you simply pay the regular CIT.
What are the penalties for late CIT filing or underpayment?
NRS imposes significant penalties for CIT non-compliance: (1) Late filing — ₦25,000 for the first month of default, then ₦5,000 for each subsequent month the return remains unfiled. (2) Late payment — 10% of the unpaid tax as a penalty, plus interest at the prevailing CBN Monetary Policy Rate (MPR) + 3%, compounding monthly from the due date. (3) Understatement of profits — penalties of 100% of the tax underpaid if NRS determines an assessment on audit. (4) Failure to maintain adequate records — up to ₦2 million fine. (5) NRS can also issue a 'best-of-judgment' (BOJ) assessment if a return is not filed, estimating the company's profits and raising a tax bill — which the company must pay while disputing it. Maintaining accurate bookkeeping and filing on time is far cheaper than the penalty regime.
