Taxation: Nigerian Tax Computations and Administration
Taxation at CAP-II covers the Nigerian tax system: companies income tax, personal income tax, VAT, capital gains tax, withholding tax, stamp duty and petroleum profits tax, plus administration by FIRS and state revenue authorities.
Core rules
- CIT applies at 30% for large companies, 20% for medium companies and 0% for small companies within the statutory turnover and fixed-asset thresholds. Tertiary education tax is 3% of assessable profit; NASENI and Police Trust Fund levies apply to specified companies.
- Capital expenditure is relieved through capital allowances, not as an immediate deduction.
- VAT is 7.5% on taxable supplies; input VAT is recoverable only on goods and services used in taxable supplies, with restrictions.
- PIT uses consolidated relief allowance (higher of NGN 200,000 or 1% of gross income, plus 20% of gross income) and progressive bands.
- WHT is generally an advance payment, not a final tax, except where the law says so; obtain credit notes.
Worked example
Gross employment income is NGN 6m. CRA = NGN 200,000 + 20% x NGN 6m = NGN 1.4m. Taxable income = NGN 4.6m. Tax:
- First NGN 300,000 x 7% = NGN 21,000
- Next NGN 300,000 x 11% = NGN 33,000
- Next NGN 500,000 x 15% = NGN 75,000
- Next NGN 500,000 x 19% = NGN 95,000
- Next NGN 1.6m x 21% = NGN 336,000
- Balance NGN 1.4m x 24% = NGN 336,000 Total = NGN 896,000. The effective rate on taxable income is about 19.5%, not the top 24% rate.
Traps
Deducting capital purchases instead of claiming allowances; applying VAT to exempt or zero-rated items; omitting WHT credits; treating every WHT deduction as final tax; and using gross income rather than taxable profit for CIT.