1. What is Corporate Income Tax?
Corporate Income Tax (CIT) is a tax paid by companies on the profits they make from business operations in Nigeria. It applies to all limited liability companies—whether Nigerian or foreign—so long as they earn income from Nigeria.
2. Who Pays CIT?
Companies that must pay CIT include:
- Private limited companies (Ltd)
- Public limited companies (Plc)
- Foreign companies earning income from Nigeria
- NGOs with taxable income (e.g., commercial ventures)
- Joint ventures and partnerships treated as companies for tax purposes
Business names and sole proprietorships do not pay CIT; they pay Personal Income Tax.
3. What Has Changed Under the 2025 CIT Law?
a. Mandatory Proper Accounting Records
All companies must keep:
- Books of account
- Sales and expense records
- Bank statements
- Receipts and invoices
- Payroll records
- Annual financial statements
Failure attracts penalties.
b. Digital Filing and Reconciliation
Companies must now file CIT returns electronically, including:
- Audited financial statements
- Capital allowance schedule
- Tax computations
- Transfer pricing documentation (if applicable)
C. Updated CIT Rates (3-Tier System)
The 2025 law still recognizes SME categories but has adjusted thresholds for inflation:
- Small Companies (turnover ≤ ₦25m): 0% CIT
- You file your returns as normal, but your tax liability is 0%. This allows you to reinvest your profits into growing your business.
- Medium Companies (turnover ₦25m – ₦100m): 20% CIT
- Large Companies (turnover ≥ ₦100m): 30% CIT
d. Stricter Rules on Expenses
Only wholly, reasonably, exclusively, and necessarily incurred expenses are deductible.
Personal expenses wrongly claimed now attract fines.
e. Penalties for Non-Compliance
The 2025 reform strengthened penalties, including:
- Heavy fines for late filing
- Interest on unpaid taxes
- Denial of Tax Clearance Certificate (TCC)
- Business disruption or sealing by FIRS
4. The New “Development Levy” (4%)
This is a major change. The government has scrapped multiple confusing levies (like the Tertiary Education Tax, NITDA Levy, and NASENI Levy) and replaced them with a single 4% Development Levy.
- Who pays? Only companies that are not small companies.
- The Base: It is charged on your “assessable profits” (profit before tax).
- The Benefit: instead of calculating and filing 3 or 4 different levies with different agencies, you now pay this single consolidated levy.
5. The “Top-Up” Tax for Giants
To stop tax evasion by huge corporations, the law introduces a minimum effective tax rate of 15%.
- Who this hits: Multinational groups or Nigerian companies with turnover above ₦50 Billion.
- How it works: If a company uses too many incentives and loopholes to drive their effective tax rate below 15%, they must pay a “top-up” tax to reach that 15% floor.
6. What Companies Must Do Now
- Keep proper financial records
- File returns annually
- Deduct and remit PAYE, VAT, and WHT
- Maintain TIN and updated company information
- Hire a tax adviser if needed
CONCLUSION
The 2025 CIT reform focuses on digital processes, transparency, and ensuring that every company contributes fairly to national revenue. Good record-keeping is now non-negotiable.