Company Income Tax (CIT) is a tax paid by companies in Nigeria based on the profit they make from business operations within a financial year. It is one of the major sources of revenue for government, and it is collected by the Federal Inland Revenue Service (FIRS).
It applies to both Nigerian companies and foreign companies operating in Nigeria or earning income from Nigeria.
It is not a tax on revenue.
It is not a tax on sales.
It is a tax on net profit after allowable expenses have been deducted.
So if a company makes profit from business activities, the government expects a portion of that profit to be given back in the form of Company Income Tax.
The Legal Framework for Company Income Tax in Nigeria
CIT is governed by the Company Income Tax Act (CITA), first introduced in 1961 and now codified as Cap C21, Laws of the Federation 2004. It has been amended many times, including through the Finance Acts of recent years which updated rates, compliance rules and exemptions.
How Company Income Tax Works
Every company prepares financial accounts annually.
After preparing accounts, the company calculates Profit Before Tax (PBT).
That profit becomes the basis for computing Company Income Tax.
Then CIT is charged on the profit at the applicable tax rate.
Company Income Tax Rates in Nigeria
One important feature of CIT is that Nigeria uses a tiered system based on company size. According to the updated Finance Act structure, here is how it works:
| Company Category | Annual Turnover | CIT Rate |
|---|---|---|
| Small Company | ₦0 – ₦100 million | 0% |
| Medium Company | Above ₦100m | 30% |
| Large Company | Above ₦100m | 30% |
So if a business is newly registered and still small, and its annual gross turnover is less than ₦100 million, it pays zero Company Income Tax.
But once it grows into the medium or large bracket, it begins to pay at the appropriate rate.
Taxable Profit vs Allowable Expenses
When computing CIT, companies are allowed to deduct legitimate business expenses before arriving at taxable profit, but only expenses that are necessary for earning income.
Examples of allowable expenses:
- Salaries and employee costs
- Rent for business premises
- Cost of raw materials
- Marketing and advertising costs
- Utility bills used for operations
- Professional fees (legal, audit, etc.)
- Repairs and maintenance necessary for operations
However, not every expense is allowed. Personal expenses, fines, penalties, or non-business spending cannot be deducted.
This means proper bookkeeping affects the amount of tax a company eventually pays.
Companies Covered Under Company Income Tax
CIT applies to:
- Nigerian resident companies (on worldwide income)
- Non-resident (foreign) companies (on income derived from Nigeria)
- Companies limited by shares
- Companies limited by guarantee (if they earn taxable profit)
- Banks, hospitals, tech companies, manufacturers, traders, transport firms, contractors, etc.
Basically, any business that is registered under the Companies and Allied Matters Act (CAMA) and earns income is subject to CIT unless specifically exempted.
When Is Company Income Tax Paid
CIT is paid every year after preparing the financial statements.
The deadline is:
- Six months after the end of the accounting year
OR - 30th of June (if the company uses calendar year basis)
Whichever applies based on fiscal calendar.
Late payment attracts penalties and interest, and delays tax clearance certificate issuance.
Why Government Collects Company Income Tax
The revenue from CIT is used to fund national infrastructure such as:
- Roads and transport projects
- Education and public universities
- Health sector and hospitals
- Security and military spending
- Public institutions and services
Tax from companies forms a huge part of Nigeria’s non-oil revenue, especially as the country tries to diversify beyond petroleum.
CIT and Foreign Companies
Foreign companies that operate remotely, for example, digital companies that receive revenue from Nigeria, can also be taxed on the Nigerian portion of their profit.
This is how Netflix, Facebook Ads revenue, Google, foreign airlines, shipping companies etc. become taxable when they earn from the Nigerian market.
Conclusion
Company Income Tax is a tax on the profit of companies operating within Nigeria. The rate depends on the company’s annual turnover.
Profits must first be determined through proper accounting before the tax is applied. It is one of the most important taxes collected by FIRS and it supports national development.
So in summary, once a company is registered and begins earning income, it needs to understand the CIT structure, keep proper records, determine its profit clearly, and pay the correct percentage based on its turnover size.
