YBTC NEWS—The rationale for taxing companies seem quite obvious enough – at least if not for anything but for the money companies make with social facilities. Nevertheless, it will be worthwhile to unwrap what the taxation of companies really entails.
What is Companies Income Tax?
Companies income tax in simple terms refer to the assessment levied on the profits of companies. It is commonly referred to as corporate tax. And just like individuals, companies owing to the distinct legal status they have under the Nigerian law equally pay taxes. The tax imposed on companies in Nigeria encompasses both resident and non-resident companies. The company income tax paid by resident companies is based on their global income while non-residents companies pay theirs based on their Nigerian sourced income. The Companies Income Tax is regulated by a Nigerian legislation and in this regard, we have the Companies Income Tax, cap C21 Laws of THE Federation of Nigeria, 2004.
Rate of Companies Income Tax
Currently, the rate of Companies Income Tax in Nigeria is pegged at 30% and it is assessed on a preceding year basis. What this means is that the profit for the accounting year ending in the year preceding the assessment is what would be taxed as Companies Income Tax.
However, in line with the principle of tax convenience, small companies in the manufacturing industry and companies that are totally export oriented companies with turnover not exceeding one million naira are taxed at 20% rate in the first five calendar years of operation.
Administration of Companies Income Tax In consonance with provisions of section 3 of the Companies Income Tax Act cap 21, LFN2004, the administration of the corporate tax in Nigeria is done by the Federal Inland Revenue Service otherwise referred to as the board in this respect.
Primarily, it is the duty of the board to do all such things as may be deemed necessary and expedient for the assessment and collection of the tax and to equally account for all amounts so collected. Likewise, the board can function to enforce tax penalties on defaulting companies. These among other things as contained in section 3 of the Act forms the administrative basis of the companies’ income tax in Nigeria.
The board is in the exercise of the powers and duties as provided for under the Act is however subject to the authority, direction and control of the Minister of Finance provided the minister does not give such direction, order or instruction in respect of any particular person which would increase or decrease the assessment of a person or any penalty imposed or to be imposed upon or any relief given or to be given to or to defer the collection of any tax, penalty or judgment debt due by such person, or which would have the effect of altering the normal course of any proceedings, whether civil or criminal, relating either to the recovery of any tax or penalty or to any offence relating to tax.
Next week, we’ll channel our discussion towards PERSONAL INCOME TAX. Till then, we look forward to your comments, questions and contributions. – Remember they help us Improve the content we give you.
Enjoy the rest of your week.
Kindly, Share this article with your family and friends
Follow us on Twitter@YBTC NEWS