Tax-Data-Card_20122013 (1)

7/29/2019 Tax-Data-Card_20122013 (1)

1/31

7/29/2019 Tax-Data-Card_20122013 (1)

2/31

Nigeria Tax Card PwC

2

TAX DATA CARD 2012/2013

IntroductionThis publication is a summary of the major tax laws in Nigeria preparedfor general purpose only. It is not a replacement for circumstance

based on the contents of the publication.

Except otherwise indicated, references to tax laws in this publicationare from the Laws of the Federation of Nigeria (LFN) 2004 as amended.

1. Companies Income Tax (CIT)

Company liable Any company doing business in Nigeria, whetherresident (registered in Nigeria) or non resident(foreign company registered outside Nigeria)

Taxable income A resident company is liable to tax on its

worldwide income being its profits accruing in,

A non resident company is liable to tax on itsattributable to its Nigerian operation.

Basis ofassessment

The basis of assessment for both resident and nonresident companies is preceding year basis. This

means tax is charged on profits for the accountingyear ending in the preceding year of assessment.to 31 December each year, in 2012 tax year, it

will be assessed to tax on the profits computedfor the accounting year ended 31 December 2011.Different rules apply during commencementof business, change of accounting date and

cessation.

7/29/2019 Tax-Data-Card_20122013 (1)

3/31


3

Due date forfiling incometax returns

year end. A new company must file its returnswithin 18 months from the date of incorporationthe following calendar year for companies withfinancial year end between January and 30 June.fiscal year.

Due date forpayment of CIT

2 months from the filing due date in case of alump sum payment or in such instalments as may

of payment of the first instalment must besubmitted along with the tax returns.

day of the following calendar year for companies

with financial year end date between January and

30 June.Companyincome tax rate

30%

Small companytax rate

20%.

Applicable to manufacturing companies andcompanies engaged wholly in exports, within

Minimum tax Minimum tax is imposed where a company hasno taxable profit or the tax payable is less than theminimum tax computed as follows:

The highest of:

7/29/2019 Tax-Data-Card_20122013 (1)

4/31


4

Minimum tax(continued)

Plus

Exemption fromminimum tax

A company is exempted from minimum tax if itmeets any of the following conditions: It is still within its first four calendar years

of business

imported equity It carries on agricultural trade or business

Excess dividendtax

which tax is not payable because: It has no taxable profit; or

paid;The company would be charged to tax on thethe total taxable profit of the company for the

Non-residentcompanies anddeemed profittax

Non-resident companies are liable to tax on thethe tax authority applies a deemed profit rate ofthen taxed at the corporation tax rate of 30%,

Statute oflimitation

The tax authority may carry out tax auditsand issue additional assessments within six

willful default or neglect by the company.

Tax Treaties Nigeria currently has in-force double tax treatyfor taxes on income and capital gains with

7/29/2019 Tax-Data-Card_20122013 (1)

5/31


5

Tax Treaties(continued)

There is a shipping and air transport doubletaxation agreement with Italy.

Nigeria has pending double tax treaties with

deduction for income tax suffered on foreignprofits.

Nigeria is a party to the following multilateraltreaties:

1931 League of Nations Motor Vehicle

Treaties

Added Tax (pending)

Commonwealthtax relief

commonwealth country which is also liable tocountry has a similar tax relief in place.

In respect of a Nigerian company, the relief to be

In respect of a nonresident company, the reliefotherwise the relief is the rate by which the

7/29/2019 Tax-Data-Card_20122013 (1)

6/31


6

Commonwealthtax relief(continued)

commonwealth tax rate.

*Commonwealth tax rate means the income taxrate applicable in the relevant commonwealthcountry to which the tax relief relates.

Capital allowancesCapital allowances are granted on tangible non-current assets in lieuintangible non-current assets are not regarded as qualifying capitalexpenditures for capital allowance purpose. The applicable rates onqualifying assets are stated below:

Qualifying Expenditure Initialrate (%)

Initialrate (%)

Buildings (Industrial & Non-Industrial) 10

Mining Nil

Plant: Agricultural Production

Nil

Furniture and Fittings 20

Mining Nil

Motor Vehicles Public transportation

Nil

Plantation Equipment Nil

30

Nil

Investment allowances

This is granted at the rate of 10% to companies that incur expenditure

7/29/2019 Tax-Data-Card_20122013 (1)

7/31


7

Gas Utilization incentivesCompanies engaged in gas utilization (downstream operations) are

Tax free period of 3 years which may be renewed for a further 2 Accelerated capital allowance after the tax free period. Tax deduction for interest payable on any loan obtained with the

Tax Waiver on Bonds1.

and Promissory Notes:2.

agencies;

3. Bonds issued by corporate and supra-nationals; and4.

Note: A bill to amend the infrastructure investment relief above isunderway.

No facilities at all 100%

No electricity

No water 30%

infrastructure costs at the rates shown below:

7/29/2019 Tax-Data-Card_20122013 (1)

8/31


8

Rates under a Joint Venture (JV) arrangement withthe Nigerian National Petroleum Corporation

years during which the company has not fullyamortised all pre-production capitalisedexpenditure

Returns Tax is payable on actual year basis

Estimated tax returns must be filed within

two months of the fiscal year (which runsfrom January 1st to December 31st)

Actual tax returns must be filed withinperiod, that is, not later than 31 May

Due date forpayment of PPT

Payable in 12 equal monthly installmentswith a final 13th installment (if there is anunderpayment). The first installment for the yearis due by the end of March

Penalties Late submission of returns: Initial penalty ofN10,000 and N2,000 for each day such failurecontinues

Late payment of tax:

passage of the Petroleum Industry Bill.

7/29/2019 Tax-Data-Card_20122013 (1)

9/31


9

Royalties This is usually in form of monthly cash payments atthe prescribed rate or by way of royalty oil.

The rates are: In respect of JV Operations

Area

20

water depth

water depth

In respect of PSCsThe royalty rates applicable are graduated accordingto the depth of water from which the oil is mined.These are:

Area

12

8

From 801 to 1,000 metres water depth 4

In excess of 1,000 metres water depth 0

Investmentallowance

PIA rates are applicable to companies in JV operation:

7/29/2019 Tax-Data-Card_20122013 (1)

10/31


10

Investmentallowance(continued)

depth Between 100m and 200m water

depth Beyond 200m water depth

10

20

from July 1998.

Annual

allowance

Annual Allowance is granted in addition to PIA, in

lieu of depreciation. The current rates are 20% forin the fifth year. The balance of 1% is retained in the

TaxIncentives

from withholding tax. to encourage offshore production

Education tax is treated as a tax deductibleexpense for E&P companies

Statute ofLimitation

The tax authority may carry out tax audit and issueadditional assessment within six years from the

by the company.

PetroleumIndustryLegislation

petroleum laws into a single document called theand Company Income Tax.

7/29/2019 Tax-Data-Card_20122013 (1)

11/31


11

LocalContent Act

contract awarded to any operator, contractor,subcontractor, alliance partner or any other entitytransaction in the upstream sector of the Nigeria oiland gas industry.

3. Education Tax

Rate 2%

Exemption Non resident companies and all unincorporatedentities are exempted from education tax.

Due date forfiling EducationTax Returns

in practice, the tax is self assessed and filedtogether with company income tax.

Due date forpayment ofEducation Tax

required to issue assessments for the tax whichnotice of assessment. In practice, the tax is self

year end date.

Penalty for noncompliance

assessment notice.

company, the failure to pay still continues, the

7/29/2019 Tax-Data-Card_20122013 (1)

12/31


12

Penalty for noncompliance(continued)

following additional penalties shall apply: First offenders N10,000 or imprisonment

for a term of 3 years;

both.


neglect by the company, the statute of limitation

will not apply.

4. Information technology (IT) Tax

purposes.

Rates 1% of Profit Before Tax

Entities liable telecommunications companies;

Pension managers and pension related

companies;

Insurance companies.

Returns andPayment

assessment.


2% of the tax payable.

7/29/2019 Tax-Data-Card_20122013 (1)

13/31


13

5. Capital Gains Tax (CGT)

Rates 10%Chargeableassets

generally

Any currency other than Nigeria currency Any form of property created by the person

disposing of it , or otherwise coming to beowned without being acquired

Copyrights Buildings Chattels etc

Exempt assetsand gains

These include gains from disposal of shareslife assurance policies, main residence or

Allowabledeductions

Initial cost of the asset;

Expenditure incurred in establishing,

Incidental expenses for the purpose ofacquiring or disposing of the assets, suchas fees, commission or remuneration paid

7/29/2019 Tax-Data-Card_20122013 (1)

14/31


14

Allowabledeductions(continued)

buyer during disposal.

Non Allowabledeductions

Premiums paid under a policy of insuranceinjury to, or depreciation of or loss of anasset.

Expenses that are deductible underCompanies Income Tax Act or PersonalIncome Tax Act

Relief disposal are used to purchase a new asset of thesame class as the disposed asset. The new assetmust be acquired (or an unconditional contractold asset.

The classes of the assets eligible for relief are asfollows:

Class 1:1A - (i) Building (ii) Land1B - Plant or Machinery which does not form part

of the building

Class 3: Aircraft


default or neglect has been committed by thetaxpayer.

7/29/2019 Tax-Data-Card_20122013 (1)

15/31


15

6. Withholding Tax (WHT)

liability.

RatesTransactions Companies

10% 10%

10%

machinery

10% 10%

Commission, consultancy,technical and managementfees, legal fees, audit fees,and other professional fees

10%

Construction

All types of contracts and

agency arrangements,other than sales in theordinary course of business

N/A 10%

treaty country.

Due datefor filingWHT

Returns

arose.

7/29/2019 Tax-Data-Card_20122013 (1)

16/31


16

Due datefor filingWHT

Returns

For FIRS WHT, the schedule of WHT deducted must besubmitted in electronic form and must contain specif icinformation such as the Tax Identification Number (TIN)of the various suppliers from whom the tax has beendeducted.

Penalties Failure to remit WHT due to the FIRS: a penalty of 10% oftax due and interest at commercial rate (currently up to21%).

Failure to remit WHT due to SIRS:

(currently up to 21%).

7. Value Added Tax (VAT)

Standard rate Registration Residents: Immediately on commencement of

business

Non-Residents: A non-resident company thatcarries on business in Nigeria is required tousing the address of the Nigerian customer with

whom it has a subsisting contract.

Due date forfiling VATReturns

21st day of the month following the month oftransaction

VAT deductionat source

The following are required to deduct VAT on their

companies

7/29/2019 Tax-Data-Card_20122013 (1)

17/31


17

VAT deductionat source(continued)

departments

with non residents

Zero RatedGoods &Services

Non-oil exports

funded projects

ExemptedGoods

Medical and pharmaceutical products Basic food items Baby products Plant, machinery and goods imported for

use in the export processing zone or freetrade zones

Plant, machinery and equipment purchasedfor utilization of gas in downstreampetroleum operations

Transactions, ploughs and agriculturalimplements purchased for agriculturalpurposes

Exempt Services

mortgage institutions Plays and performances by educational

institutions as part of learning

Exemption byPolicy

Additional exemption granted by the Minister ofFinance through Fiscal Policy Measures in line

with section 34 (b) of the VAT Act: Locally manufactured biscuits Plant, machinery and equipment (including

steel structures) for the manufacture of

cement and allied products

7/29/2019 Tax-Data-Card_20122013 (1)

18/31


18

Exemptionby Policy(continued)

Vegetable oil

spare parts

(10 years from 2 January 2012)

RecoverableInput VAT

Allowable input tax is restricted to goodspurchased or imported directly for resale anddirect production of any new product on whichthe output VAT is charged.

VAT on fixed assets/capital items, overhead,

service and general administration expenses arenot claimable as input VAT. Rather they should becapitalised or expensed as the case may be.

VAT refund/carry forward

Excess input VAT may be carried forward as creditsubject to appropriate tax audit.

Penalties Failure to register for VAT: N10,000 for themonth in which the default continues.

Failure to issue tax invoice:

Failure to collect VAT:

Failure to submit returns:

Failure to remit VAT: amount of tax not remitted plus interest at

Failure to keep proper records: N2,000 for

7/29/2019 Tax-Data-Card_20122013 (1)

19/31


19

8. Personal Income Tax ( PIT)

Trusts are liable to tax under the PIT Act

Basis ofliability The principal basis of liability to tax under the PIT Actis residency. A person is considered resident if he isphysically in Nigeria for at least 183 days (including

worldwide income.

In the case of employment, a non resident person isliable to tax in Nigeria if the duties of his employmentare wholly or partly performed in Nigeria, unless: the duties are performed on behalf of an

employer who is in a country other than Nigeria; the remuneration of the employee in not borne

by a fixed base of the employer in Nigeria; and the remuneration of the employee is liable to tax

other country.

Rate PIT rate is applied on a graduated scale on taxableannual income as set out below:

First N300,000 7%

Next N300,000 11%

19%

21%

24%

Note: Earners of above N20m, will be subject to topmarginal tax rate of 18.96% for non-routine payments

7/29/2019 Tax-Data-Card_20122013 (1)

20/31


20

Rate(continued)

(e.g. bonus and 13th-month) as only 79% of incomeis taxed at 24% while the top marginal tax rate fornon-routine payments for earners of less than N20m is19.2% (see reliefs and allowances below).

Due datefor filingReturns

emoluments paid to his employees not later than 31sthis employment in the preceding year.

In addition, a return in respect of the current yearmust be filed within 90 days of the fiscal year i.e. notlater than 31 March

EmployersObligations

Employers are required to deduct and accountfor personal income tax on the employmentincome of their employees through the Pay-As-

You-Earn (PAYE) system. PAYE tax must be remitted on or before the

10th day of the month following the paymentof salary (e.g. PAYE tax deducted from Januarysalary should be remitted by 10th of February).

Reliefs &Deductions

Consolidatedreliefallowance

Childallowance

a maximum of four children,

the child is in a recognized school,under artisanship or learning atrade.

Dependent

7/29/2019 Tax-Data-Card_20122013 (1)

21/31


21

Reliefs &Deductions(continued)

Deductionsallowed

Assurance Premium, National

Expenses incurred in theperformance of employmentduties from which it is notintended that the employee

Interest and

Interest income earned fromdebt instruments including

treasury bills and corporatebonds now fully exempt while

withholding tax at 10% is the

* gross emoluments means wages salariesallowances (including benefits in kind), gratuities,

superannuation, and any other income derived solely byreason of employment

Benefits inkind (BIK)

such as official cars, accommodation, etc areannum of the cost where the asset is owned by

the employer or the actual rent paid where theasset is leased by the employer.

purposes of local rates or as determined by theactual rent paid.

7/29/2019 Tax-Data-Card_20122013 (1)

22/31


22

Penaltyfor nonpayment oftax

10% per annum of the amount plus interest on annual21% is applied).


or neglect by the taxable person in which case there isno limitation.

9. Pension Contribution

Rate ofContribution

contribution.

EmployersObligation

emoluments and remit to the Pension FundPension Fund Administrator (PFA) not later

Expatriates Expatriate employees are not expressly

exempted from pension contribution under theArrangements issued by the Pension Commissionspecifically states that it is not compulsory forexpatriates to join the Nigerian pension schemebut such employees may join at their discretionand with the agreement of their employers.

7/29/2019 Tax-Data-Card_20122013 (1)

23/31


23

Penalty Failure by an employer to remit contributionswithin the stipulated time attracts a penalty of2% of the total contribution outstanding.

Life Insurance

The sum assured should be three times eachcost is to be borne solely by the employer.

and transport.

10. Industrial Training Fund (ITF) Contribution

Rate

Due date for

Payment

Not later than 1st April of the following year

Refund contributions made if adequate (documented)

Penaltyfor noncompliance

or part of a month after the date on which payment

Statute oflimitation

years from the due date.

*Payroll

entitlements payable within and outside Nigeria to any employee in an

establishment, public or private.

**Employees mean all persons whether or not they are Nigerians employed

in any establishment in return for salary, wages or other consideration,

and whether employed full-time or part-time and includes temporaryemployees who work for periods of not less than 30 days in a year.

7/29/2019 Tax-Data-Card_20122013 (1)

24/31


24

11. Employee Compensation Scheme

for employees for any death, injury, disease or disability arising from orin the course of employment.

Scope

Contributions day of the month.

Rate 1% of total monthly payroll or amount assessedthe employer not exceeding 133% of the ordinaryassessment for the year.

Returns Employers are required to file statements ofactual earnings of their employees for thepreceding year and budgeted earnings for the

year.

An employer who has just commenced a business,recommences or ceases to be an employer is

of commencement, recommencement or cessationas the case may be.

Penalty Penalty and interest for default are to be charged

*Employee - means a person employed by an employer under oralor written contract of employment whether continuous, part-time,temporary, apprenticeship or casual basis and includes a domestic servantwho is not a member of the family of the employer.

7/29/2019 Tax-Data-Card_20122013 (1)

25/31


25

12. National Housing Fund Contribution

Applicable to Nigerian employees earning a minimum of N3,000 perannum

13. Customs and Excise Duties

Rate EmployersObligations

The employer is required to deduct thecontribution from the salary of its employees and

within one month of the deduction.


years imprisonment.

Rates

Some Goodsexempted fromCustoms duty

Aircrafts or airlines registered in Nigeria and

Films, film-strips, microfilms, newsreel,material of educational, scientific orNations, any of its specialized agencies or an

Fuel, lubricants and similar products, whichthe Minister is satisfied are necessary forand will be used solely in the operation ofan aircraft of the armed forces of a foreignpower; or an aircraft registered in anyrecognized country;

Commander-in-Chief of the Armed Forces;

7/29/2019 Tax-Data-Card_20122013 (1)

26/31


26

Some Goodsexempted fromCustoms duty(continued)

from international donors; Passengers baggage; Arms and Ammunition imported by the

Nigeria Police Force.

Other rates &charges

calculated on the customs duty

calculated on customs duty (where import is

Value Added Tax (VAT) calculated at the

Some goodsprohibited fromimportation

Beef & beef products Fresh or dried fruits, fruit juice in retail

Detergent Toothpaste Vegetable oil (excluding linseed and castor

bottles)

All sort of foot wears, bags of leather andplastics and briefcase (excluding safety andsports wears)

Telephone recharge cards

year of manufacture

7/29/2019 Tax-Data-Card_20122013 (1)

27/31


27

Some goodsprohibited fromimportation(continued)

Biscuits Beer Certain medicaments Bagged cement Bird eggs Mosquitoes repellent coils, Ball point pen

Goods liable toExcise duty

Cigarettes and Tobacco

Manufactured and sold in NigeriaECOWAS TradeLiberalisationScheme (ETLS)

duties in the destination countries.

used.

7/29/2019 Tax-Data-Card_20122013 (1)

28/31


28

2012 Budget Fiscal Policies

Excise Tariffs to correct anomalies andintroduce policies that will encourageindustialisation.

machinery and specific equipment for use inthe agricultural sector to attract zero importduty.

All equipment for processing of high qualityto be duty free.

From 1 July 2012, wheat flour to attractimport duty of 100%, wheat grain 20%,

domestic production and milling of rice.

for rice and wheat production.

Introduction of import prohibition for Equipment and machinery in the power

sector will attract zero duty.

promotion of exports.

*Note - The Ministry of Finance reviews Customs and ImportationGuidelines & Policies from time to time. Sometimes, the practice is notconsistent with the law and policies. It is therefore recommended that youkeep abreast of developments in this area and seek professional advice

where necessary.

7/29/2019 Tax-Data-Card_20122013 (1)

29/31


29

14. Stamp Duty

persons.

Instrumentsliable toStamp Duty

All instruments relating to an act to be performed inNigeria must be stamped, except such instrument isspecifically exempted.

When toStamp

Instruments which are required to be stamped underof first execution.

Rate

consideration) depending on the class of instrument.

Penalty The penalty for late stamping of instruments is N20;but where the unpaid duty exceeds N20, there is afurther penalty in the form of interest on the stampduty payable at the rate of 10% per annum subject to amaximum of the unpaid duty.

Also, unstamped documents are generally not

7/29/2019 Tax-Data-Card_20122013 (1)

30/31


30

PwC is a global market leader for tax services. We assist businesses,individuals and organisations with tax strategy, planning, andcompliance, whilst also delivering a wide range of business advisoryservices with 23,000 dedicated tax professionals in over 140 countries.This means that we can support you both locally and globally, wherever

you require our services.

We take a holistic view, combining industry insight with the technicalin-house resources as necessary, to develop comprehensive integratedsolutions.

We have experience of working with an expansive and diverse client-base

comprising all types of businesses multinationals, local companies,privately-owned organisations, entrepreneurs, family businesses, trusts,partnerships and private individuals.

According to Global Tax Monitor PwC is the leading provider of taxservices worldwide. Our reputation as global market leader extends tothe various tax service areas, where we have a very strong lead over thecompetition in domestic and cross-border tax compliance, domestic andinternational corporate tax planning, indirect tax/VAT, M&A, transfertax function effectiveness and expatriate tax planning and compliance.

Contacts:

Kenneth Aitken

Head, Tax & Corporate

Nigeria

Email:

com

Telephone:

27112700 ext 3101

Russell Eastaugh

Tax Director, Tax &

Email:

ng.pwc.com

Telephone:

27112700 ext 3102

Taiwo Oyedele

Tax Partner / Director,

Tax & Corporate

Nigeria

Email:

com

Telephone:

27112700 ext 3100

7/29/2019 Tax-Data-Card_20122013 (1)

31/31

Caveat

not accept responsibility for any errors or inaccuracies containedwww.pwc.com/ng

Documents

Tax-Data-Card_20122013 (1)