Corporate Taxation and Tax Planning
Corporate Taxation and Tax Planning tests Nigerian tax law and lawful planning: Companies Income Tax, VAT, WHT, CGT, capital allowances, incentives and transfer pricing. CAP-III requires computation and judgement on whether a scheme has commercial substance.
Core rules
- CIT: 30% for large companies; 20% for medium companies with turnover ₦25m–₦100m; 0% for small companies with turnover ≤₦25m (Finance Act thresholds), subject to filing and other conditions.
- Minimum tax: 0.5% of gross turnover where there is no taxable profit or capital allowance exceeds profit, with statutory exceptions.
- Capital allowances: initial and annual allowances on qualifying expenditure; allowance deductible is restricted to 66⅔% of assessable profit, with unrelieved allowance carried forward.
- WHT: deducted at source as advance CIT; credit only with valid receipts and FIRS remittance.
- Transfer pricing: the Income Tax (Transfer Pricing) Regulations require arm's length pricing for controlled transactions, with documentation and disclosure.
- Incentives: pioneer status, rural investment allowance and gas utilisation incentives; planning must have commercial substance and not breach the GAAR.
Worked example: Adjusted profit ₦12m; capital allowances ₦15m. Allowance claim restricted to 66⅔% × ₦12m = ₦8m; ₦7m unrelieved carried forward. Taxable profit ₦4m; CIT at 30% = ₦1.2m before WHT credits. If the company instead had a loss and turnover ₦200m, minimum tax at 0.5% = ₦1m may apply.
Traps: claiming 100% of capital allowance; treating WHT as a final tax for companies; ignoring the 66⅔% restriction; using book profit instead of adjusted profit; planning without substance.