Exempt Tax Items and Reliefs for Companies in Nigeria
In Nigeria, certain companies and organizations are eligible for exemptions, incentives, or reduced corporate income tax (CIT) under existing laws and regulations. These provisions are aimed at supporting specific sectors, encouraging investment, and promoting economic development. Key categories include:
1. Non-Profit and Public Interest Organizations
- Companies engaged in ecclesiastical, charitable, or educational activities of a public character, provided they do not carry on trade or business.
- Non-governmental organizations (NGOs) limited by guarantee and not profit-oriented.
- Trade unions and registered friendly societies.
- Statutory or registered building societies.
- Local government councils.
2. Pension, Provident, and Retirement Funds
- Approved pension, provident, and retirement benefit funds are generally exempt from taxation.
3. Investment and Industry Incentives
- Companies granted Pioneer Status Incentive (PSI) under the Nigerian Investment Promotion framework, which may include a tax holiday period.
- Companies operating in Export Processing Zones (EPZs) and Free Trade Zones (FTZs) on approved activities.
- Profits of companies engaged in agricultural production, subject to tax holiday eligibility, typically up to five years, with possible renewal.
- Profits from solid minerals mining, subject to applicable incentives.
- Companies operating in approved infrastructure sectors (e.g., power generation, roads) may qualify for tax incentives upon approval.
4. Income and Investment Exemptions
- Dividend income received by a Nigerian company from another Nigerian company, referred to as franked investment income.
- Profits from exports of goods produced in Nigeria, subject to compliance with regulatory conditions.
- Interest income from Nigerian government securities, including Treasury Bills and Bonds.
- Profits of approved venture capital companies derived from investments in small and medium enterprises.
- Income from unit trusts and mutual funds, subject to conditions.
- Gains from investment in labelled startups by venture capitalists, private equity funds, accelerators, or incubators, subject to applicable provisions.
5. Allowable Deductions and Reliefs
- Research and development (R&D) expenses may be treated as allowable deductions to reduce taxable profits.
- Rural investment allowance is available to companies operating in underserved areas.
- Employment-related deductions for salary increases or new hires may apply under current finance provisions.
6. Small and Medium Enterprises
- Small companies with turnover of up to ₦25 million are generally subject to a 0% CIT rate.
- Medium-sized companies with turnover above ₦25 million but below ₦100 million may qualify for a reduced CIT rate of 20%.
- Small companies and companies without taxable profits may be exempt from minimum tax, in accordance with applicable rules.
- Development levy exemptions may apply to small companies, exempting them from tertiary education tax obligations.
7. Reinvestment and Tax Relief Provisions
- Profits reinvested in qualifying business expansions may benefit from specific incentives under existing regulations.
- Dividends distributed from franked investment income are not subject to additional taxation in the hands of the recipient company.
- Companies operating in Free Trade Zones may be exempt from federal, state, and local taxes on approved activities.
This overview is intended to provide factual information on corporate tax exemptions and reliefs in Nigeria. Companies should consult with qualified tax professionals or advisors to determine eligibility and ensure compliance with the provisions of the Companies Income Tax Act (CITA), relevant Finance Acts, and other regulatory requirements.
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