FAQs on Company Income Tax (CIT) in Nigeria.

Company income tax is tax payable by Incorporated businesses i.e. Companies in Nigeria. CIT is due 6months after the financial year end of a company. Therefore, for a company with 31^st December financial year end, June 30^th is the due date for filing CIT. June is thus the busiest tax filing month in Nigeria as most businesses use the calendar year system as their yearend too.

CIT is computed on a preceding year basis. For instance, corporate tax on profits for the financial year ended 31^st December 2019 will be reported as the 2020 year of assessment.

Below are some of the most frequent questions about CIT.

1.    What is a CIT return?

A company income tax return is a return that shows the income tax payable of a company. Resident companies will pay CIT on their worldwide income while non-residents will pay CIT on income sourced from Nigeria.

2.    What is the CIT rate in Nigeria?

The rate for CIT was amended on 13^th January, effective immediately. The rate range from 0% to 30% based on a company’s annual turnover. 

Categorization	Turnover	Rate
Small Company	Up to N25Million	0%
Medium Company	> N25 Million  < 100 Million	20%
Large Company	>100 Million	30%

There is an early tax payment bonus for a company who pays her tax at least 90days before due date. The bonus is 2% and 1% for medium and large companies respectively.

Exempt businesses are still required to pay and file tertiary education tax returns as well as submit capital allowance computation (if any).

3.    Who is the relevant tax authority for CIT?

The relevant tax authority for CIT is the Federal Inland Revenue Service.

4.    What do you need to file your CIT returns?

You need the following to file CIT in Nigeria;

• An audited financial statement.
• A schedule of tax computation for the year of assessment including the schedule of fixed assets and capital allowance computation.
• A duly completed CIT self‐assessment form
• Evidence of payment of CIT
• A duly completed TET SAF and evidence of TET paid (i.e. Tertiary Education Tax.

5.    How do I file a CIT return?

•  Prepare the accounts of the company for the financial year.
•  Appoint an external auditor to audit the accounts and issue an audited financial statements
•  Prepare the tax computation for the year of assessment. Also prepare the schedule of fixed assets and capital allowance computation if the company has fixed assets.
•  Pay the tax payable at any of the banks designated for tax collection. Tax paid should take cognizance of unutilized Withholding Tax (WHT) Credit Note
•  Complete the self-assessment form. A copy of this form can be obtained from the nearest FIRS tax office.
•  Prepare a cover letter to FIRS for the submission
•  Submit all above documents at the taxpayer’s FIRS tax office and retain acknowledged copies of the return for record purpose.

There are two additional returns that may accompany the CIT return. They are the tertiary education tax (TET) returns and the transfer pricing (TP) returns.

7.    When I make a loss in the business, will I still need to file CIT returns.

Yes. Every company is required to file a return with Federal Internal Revenue Service (FIRS) even if the company reports a loss. Such a company will pay the minimum tax as tax.

 Minimum tax is payable by companies with no taxable profits or where the tax calculated is below the minimum tax. Only companies with a turnover of N25 million and above will be subject to minimum tax at 0.5% of turnover less franked investment income.

9.  When is the deadline for filing Companies Income Tax Returns?

It depends on whether the taxpayer is a new company or an existing company.

• For existing companies, CIT returns should be filed within six (6) months after accounting year end
• For a new company,, CIT returns should be filed within eighteen (18) months from the date of incorporation or six (6) months after accounting year end whichever is earlier.

Companies that make CIT payment within 90 days from the due date for filing the corporate tax returns will get a discount on tax payable. For large companies with a turnover above NGN 100 million, the bonus is 1% while medium-sized companies with a turnover between NGN 25 million and NGN100 million will enjoy a bonus of 2%.

10.    Can a taxpayer request for an extension of time to file a CIT return or TP returns?

Yes. A taxpayer may request for an extension of time, in writing, to file a CIT return or TP return. However, taxpayers are required to fulfill specific conditions at the time of submitting an application for extension of time to file CIT returns. As FIRS has the discretion to accept or reject the application, taxpayers are therefore encouraged to submit CIT, TET and TP returns at their assigned tax offices before the due date to prevent these penalties.

11.    What is the penalty for late filing of CIT returns?

The penalty for failure to file CIT returns on the due date is ₦25,000 for the first month and N5000 for each subsequent month the failure continues.

12. What is the implication of CIT exemption for Small Companies?

 The amended CITA exempts a company that earns a turnover of N25m or less from CIT.  The FIRS clarifies that:

• The exemption covers CIT and Tertiary Education Tax (TET) and is subject to a small company registering for tax, filing its tax returns and complying with other provisions of CITA otherwise the exemption will be forfeited.
• Capital allowances during the tax exemption period will be deemed as fully utilized. Only capital allowances arising in tax years where a small company becomes taxable can be claimed.
• WHT will continue to apply on qualifying payments to a small company notwithstanding the CIT exemption. Eligible small companies may apply for refund.
• A small company is expected to continue deducting WHT on qualifying payments to its suppliers.
• The FIRS will apply the general anti-avoidance provision in CITA to counter artificial arrangements designed to exploit the tax exemption.

 However, to make the exemption for small companies meaningful, FIRS needs to make the tax refund process seamless for such companies in respect of WHT deducted on their income.

For further discussions:

Contact

Oluwakemi Ogun

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Info@kestherconsulting.com