Understanding business tax in Nigeria is critical for both Nigerians and expats looking to start, run, or grow a business in Africa’s biggest economy. The tax landscape can seem complex—with various types, rates, and recent changes—but with the right guidance, compliance and strategic planning are within reach. This cornerstone Nigeria business tax guide explains all key aspects: tax types, rates, obligations, recent legislation, and practical compliance tips for local and foreign businesses operating in Nigeria.
Introduction to Business Taxation in Nigeria
Who Needs to Pay Business Taxes? (Residents, Non-Residents, Expats)
In Nigeria, business taxes apply to:
- Local Nigerian businesses and residents: Sole traders, partnerships, limited liability companies, and incorporated trustees.
- Non-resident companies: Foreign entities earning income in Nigeria or doing business through a branch/agent.
- Expats or foreign individuals: Those setting up Nigerian companies or running businesses remotely with significant Nigerian operations.
If you operate, earn, or derive profits in Nigeria, Nigerian law generally considers you liable for one or more business taxes, regardless of your nationality.
Why Understanding Business Tax in Nigeria Matters
Paying the right taxes ensures your business remains legal and competitive. Tax compliance avoids fines, reputational damage, and can even open opportunities—for example, government contracts or credit, which require tax clearance certificates. For expats and foreign investors, understanding Nigerian taxes also clarifies how to avoid double taxation and benefit from available incentives.
Key Business Taxes in Nigeria
Nigeria operates a multi-layered tax system covering federal, state, and local business taxes. Here’s a breakdown of the main ones:
Company Income Tax (CIT)
CIT is the primary tax on company profits (excluding partnerships and sole proprietorships).
- Rates by Company Size (2025 – Latest Update)
Small companies (≤₦25 million turnover): 0% (exempt)
Medium companies (>₦25 million and <₦100 million): 20%
Large companies (≥₦100 million): 30%
CIT Reference - FIRS Portal
Sectors with special CIT rules:
- Petroleum operations: Separate Petroleum Profits Tax (PPT) of 50-85% depending on JV agreements.
- Real Estate Investment Companies: CIT exemption on qualifying dividend/distribution income.
- Agriculture: Eligible for pioneer status incentives (tax holidays).
Value Added Tax (VAT)
VAT is charged on most goods and services at each stage of production/distribution.
- Current VAT Rate: 7.5% (since February 2020)
- Applicable to: Most goods/services supplied in Nigeria.
- Exemptions and Zero-rated Supplies:
- Basic food items, educational materials, medical products/services, exported goods.
Nigeria VAT info - FIRS VAT page
Withholding Tax (WHT)
A prepayment tax deducted at source on specific payments (e.g., contracts, rents, dividends).
- When is WHT applied?: On payments for services, dividends, interests, royalties, rent, contracts, etc.
- Typical Rates (as of 2025):
Dividends, interest, rent: 10%
Royalties: 10%
Contracts/supplies: 5% (companies), 5% (individuals)
See full WHT rates. - Compliance: Must be remitted within 21 days of deduction to the relevant tax authority.
Tertiary Education Trust Fund Tax
- What is it? An additional 2.5% tax on assessable profits of Nigerian companies (excluding small businesses and unincorporated entities).
- Purpose: Funding higher education development.
Capital Gains Tax (CGT)
- Rate: 10%
- Applicability: On gains from disposal/sale of chargeable assets (property, stocks, business assets).
- Exemptions: Gains from sale of shares; certain reorganizations.
Stamp Duties
- What is it? Tax on written instruments (agreements, contracts, share transfers).
- Rates: Fixed or ad valorem (varies by document type).
Other Relevant Levies
- IT Tax (National Information Technology Development Fund Levy): 1% of pre-tax profits for specific companies (banks, GSM, ICT, insurance).
- NITF Levy: For ICT sector players.
- Employee Compensation Scheme: Social security contribution (1% of payroll) paid to the Nigeria Social Insurance Trust Fund (NSITF).
Tax Administration and Compliance in Nigeria
Federal and State Tax Authorities
- Federal Inland Revenue Service (FIRS): Manages federal taxes (CIT, VAT, WHT, Education Tax, Stamp Duties).
- FIRS Official Website
- State Boards of Internal Revenue (SBIRs): Handle state taxes (Personal income tax, business premises levy, etc.)
Tax Registration Process for Businesses
1. Incorporate your company: See how to set up a company in Nigeria
2. Register for tax:
- Obtain a Tax Identification Number (TIN) online via Joint Tax Board TIN portal.
- Register with FIRS/state board for CIT, VAT, and other relevant taxes.
3. Enroll for e-filing (more below).
Tax Filing Deadlines and Payment Methods
- CIT: File & pay by 6 months after company's financial year-end (plus 18 months for newly incorporated companies).
- VAT & WHT: Monthly, by the 21st of the following month.
- Education Tax: Simultaneous with CIT.
- Methods: E-filing, bank transfers, online FIRS e-Tax system.
- Practical compliance checklist:
Regular bookkeeping
Remit all deductions promptly
Obtain and keep tax clearance certificates
Penalties for Non-compliance and Late Payment
- Late filing: ₦25,000 for first month, ₦5,000 for each subsequent month (CIT).
- Late VAT/WHT returns: ₦50,000 first month, ₦25,000 after.
- Criminal prosecution for repeated or serious breaches.
Digital/E-filing Systems and Recent Tech Use
The FIRS has digitized processes—businesses now register, file, and pay taxes online via FIRS e-Services. Learn about digital onboarding here.
Special Issues for Expats, Foreign Companies & Cross-Border Taxation
Corporate Residence Rules in Nigeria
- Companies “resident” in Nigeria are taxed on global income if they are:
Incorporated in Nigeria, or
Controlled/managed in Nigeria, or
Have “significant economic presence” (for digital services). - Foreign/non-resident companies: Taxed only on Nigerian-source income.
Double Taxation Treaties and Reliefs
Nigeria has double taxation agreements (DTAs) with many countries (e.g., UK, France, Netherlands, several others). DTAs:
- Reduce withholding rates on dividends, interest, royalties.
- Allow foreign tax credits.
FIRS Double Taxation Relief Guide
Transfer Pricing and Related Rules
- Nigeria enforces rigorous transfer pricing rules for transactions between related parties, especially multinationals.
- Obligations include documentation, filing TP returns, and benchmarking.
Permanent Establishment Triggers
- Foreign businesses are liable for Nigerian tax if they operate a fixed place of business, a dependent agent, or have significant presence (esp. for digital businesses).
Tax Rates, Trends, and Recent Updates (2025)
Current Corporate Tax Rate (30%: Historical and Trend)
- The standard corporate tax rate remains at 30% for large companies; lower for SMEs (20%/0%) to encourage small business growth.
- Nigeria’s CIT rate is comparable to regional peers.
Recent Legislative Changes Affecting Business Tax
- 2023-2024 Finance Act: Enhanced digital tax, stricter enforcement, clarified VAT on online services.
- 2025: Emphasis on e-filing, expansion of exemptions/CIT breaks for small businesses, tech-driven audits.
Minimum Tax Rule and Alternative Taxes
- If a company declares no/inadequate profit, minimum tax (0.5% of gross turnover) applies (not for small companies/first 4 years or agriculture).
Tax Incentives and Reliefs for Businesses
Available Credits and Exemptions
- Pioneer status (tax holiday up to 5 years) for qualifying sectors (agro, manufacturing, mining, ICT).
- Export Expansion Grant (EEG).
- Investment allowances for CAPEX in priority sectors.
Incentives for SMEs and Startups
- New and small businesses (≤₦25m turnover): No CIT, no minimum tax.
- Accelerated capital allowances.
- Specialized innovation grants.
Sectoral Tax Breaks (Agriculture, Technology, etc.)
- Agriculture: Up to 5 years CIT waiver.
- Tech/Fintech: Tax holidays, R&D deductions.
- Oil/gas: Investment tax credits, export incentives.
More on Nigerian tax incentives: PwC Nigerian Tax Guide 2024
Frequently Asked Questions About Business Taxes in Nigeria
1. How do I pay business tax in Nigeria?
- Register for TIN, file returns on the FIRS e-Tax Portal, use approved bank payments or online platforms.
2. What happens if I file late or make mistakes?
- Penalties apply: File as soon as possible, and consult a tax professional for corrections.
3. Are all businesses required to pay VAT?
- Yes, unless your business deals exclusively in VAT-exempt goods/services (e.g., basic groceries, certain education/healthcare).
4. Can I do all tax registration and payment processes online?
- Yes. The FIRS has digitized processes for ease and compliance.
5. What is the penalty for not having a TIN?
- Your business cannot open a corporate account or engage in several statutory processes without a TIN.
For more FAQs, see the FIRS FAQs page.
Resources and Where to Get Help
Key Nigerian Tax Authority Links
Professional Support for Tax Compliance
- Consult licensed chartered accountants, tax consultants, or recognized law firms.
- Major firms: PwC Nigeria, KPMG Nigeria, Legal 500: Tax Nigeria
Related Internal Resources
Final Thoughts
Nigeria’s business tax scene is evolving, with more digital tools, new incentives for SMEs, and careful enforcement. Whether you’re a local entrepreneur or an expat investor, staying compliant with business tax Nigeria rules not only keeps your operations smooth but can also unlock growth incentives. Always use verified portals, consult experts, and keep up-to-date on reforms.
Note: All tax rates, deadlines, and legislation references are accurate as of the most recent updates for 2025. For personalized or sector-specific advice, always consult a licensed tax professional or the Federal Inland Revenue Service (FIRS).
This article is for information purposes and does not constitute legal or tax advice.