Company Income Tax

Manage your Company Income Tax (CIT) obligations in compliance with Nigerian tax regulations. Access CIT management at https://accounting.digit-tally.io/company-income-tax.

[SCREENSHOT: Company Income Tax interface at accounting.digit-tally.io/company-income-tax]

What is Company Income Tax?

Company Income Tax (CIT) is the tax imposed on the profits of companies operating in Nigeria. It is governed by the Companies Income Tax Act (CITA) and administered by the Federal Inland Revenue Service (FIRS).

Key Benefits

• Tax Planning - Calculate estimated CIT for planning
• Compliance - Ensure timely filing and payment
• Credit Tracking - Monitor WHT and other credits
• Record Keeping - Maintain tax documentation

Understanding Nigerian CIT

CIT Rate

The standard CIT rate in Nigeria is 30% of assessable profit.

Small Company Rate:

• Companies with gross turnover less than NGN 25 million: 20%
• Companies with gross turnover between NGN 25 million and NGN 100 million: Graduated rates

Tax Year

• Accounting Year - Your company's financial year (e.g., January-December)
• Tax Year - Year of assessment (year following accounting year)
• Filing Deadline - Within 6 months after accounting year end

Example:

• Accounting year: January 1 - December 31, 2023
• Tax year: 2024
• Filing deadline: June 30, 2024

How CIT is Calculated

Basic CIT Formula

Assessable Profit = Accounting Profit + Disallowable Expenses - Tax-Exempt Income
CIT = Assessable Profit × 30%
Tax Payable = CIT - Tax Credits (WHT, TCC, etc.)

Step-by-Step Calculation

Step 1: Start with Accounting Profit

• Use Profit & Loss Statement from Digit Tally
• Net profit before tax

Step 2: Add Back Disallowable Expenses

• Depreciation (use capital allowances instead)
• Entertainment expenses
• Donations (beyond allowable limits)
• Penalties and fines
• Excessive salaries/bonuses
• Non-business expenses

Step 3: Deduct Tax-Exempt Income

• Dividends from Nigerian companies
• Interest on government securities (in some cases)
• Export profits (subject to conditions)

Step 4: Apply Tax Rate (30%)

Step 5: Deduct Tax Credits

• Withholding Tax (WHT) suffered
• Tax Clearance Certificates (TCC)
• Advance tax payments

[SCREENSHOT: CIT calculation breakdown]

Preparing CIT Returns

Self-Assessment Returns

Nigeria operates a self-assessment system for CIT:

What This Means:

• You calculate your own tax liability
• You file returns with FIRS
• You pay the tax due
• FIRS may conduct audits to verify

Documents Required

To file CIT returns, you need:

Document	Description
Audited Financial Statements	Balance Sheet, P&L, Cash Flow, Notes
Tax Computation	Reconciliation of accounting to assessable profit
CIT Return Forms	FIRS Forms 1, 2, 3, etc.
WHT Certificates	All WHT suffered during the year
Capital Allowance Schedule	Depreciation computation
Related Party Transactions	Transfer pricing documentation (if applicable)

[SCREENSHOT: CIT return documents checklist]

Filing Process

Step 1: Prepare audited financial statements

Step 2: Calculate assessable profit and CIT

Step 3: Complete FIRS return forms:

• Form 1 - Company particulars
• Form 2 - Computation of assessable profit
• Form 3 - Summary of tax and payment

Step 4: File returns online through FIRS portal or approved agent

Step 5: Pay CIT due within filing deadline

Step 6: Obtain Tax Clearance Certificate (TCC)

[SCREENSHOT: CIT filing process flowchart]

Capital Allowances

What are Capital Allowances?

Capital allowances are tax deductions for capital expenditure on qualifying assets. They replace accounting depreciation for tax purposes.

Capital Allowance Rates

Asset Class	Initial Allowance	Annual Allowance
Building (Industrial)	15%	10%
Building (Non-Industrial)	15%	10%
Plant & Machinery	50%	25%
Furniture & Fittings	25%	20%
Motor Vehicles	50%	25%
Research & Development	100%	-

How to Apply Capital Allowances

Step 1: Identify qualifying capital expenditure

Step 2: Calculate allowances using FIRS rates

Step 3: Claim in tax computation

Example:

• Purchase plant: NGN 10,000,000
• Initial allowance (50%): NGN 5,000,000
• Annual allowance (25% of balance): NGN 1,250,000
• Total Year 1: NGN 6,250,000 deductible

[SCREENSHOT: Capital allowance calculation example]

Learn more: Fixed Asset Register

Tax Credits and Offsets

Withholding Tax (WHT) Credit

WHT suffered on your income can be offset against CIT:

Example:

• CIT computed: NGN 5,000,000
• WHT suffered (from certificates): NGN 800,000
• CIT payable: NGN 4,200,000

Learn more: Withholding Tax

Tertiary Education Tax (TET)

In addition to CIT, companies pay TET at 2.5% of assessable profit:

• Calculated on same profit as CIT
• Separate payment and filing
• Not deductible from CIT

Minimum Tax

If your CIT computation results in zero or very low tax, you may be subject to minimum tax:

Minimum Tax Rate: Higher of:

1. 0.5% of gross turnover, OR
2. 0.5% of net assets, OR
3. 0.25% of paid-up capital + reserves

When It Applies:

• When computed CIT is less than minimum tax
• You pay the higher amount

Example:

• Computed CIT: NGN 200,000
• Minimum tax (0.5% of NGN 100m turnover): NGN 500,000
• Tax Payable: NGN 500,000

Minimum Tax

Even loss-making companies must pay minimum tax (subject to certain exemptions).

Viewing CIT Summary in Digit Tally

Step 1: Access CIT Management

1. Log in to your Digit Tally account
2. Navigate to the Accounting app
3. Go to https://accounting.digit-tally.io/company-income-tax

[SCREENSHOT: CIT management dashboard]

Step 2: Review CIT Components

The CIT dashboard shows:

Section	What It Shows
Accounting Profit	Net profit from P&L statement
Add: Disallowable Expenses	Items to add back
Less: Tax-Exempt Income	Items to deduct
Assessable Profit	Taxable profit
CIT @ 30%	Computed tax
Less: Tax Credits	WHT and other credits
CIT Payable	Net amount due to FIRS

[SCREENSHOT: CIT computation summary]

Step 3: Export CIT Data

Export CIT computation for:

• Filing with FIRS
• Audit purposes
• Tax planning
• Financial records

Formats:

• PDF (for printing)
• Excel (for manipulation)
• CSV (for import)

[SCREENSHOT: CIT export options]

Common CIT Scenarios

Scenario 1: Profitable Company with WHT

Company Details:

• Accounting profit: NGN 20,000,000
• Disallowable expenses: NGN 2,000,000
• Capital allowances: NGN 3,000,000
• WHT suffered: NGN 800,000

CIT Calculation:

1. Accounting profit: NGN 20,000,000
2. Add: Disallowable: NGN 2,000,000
3. Less: Capital allowances: (NGN 3,000,000)
4. Assessable profit: NGN 19,000,000
5. CIT @ 30%: NGN 5,700,000
6. Less: WHT credit: (NGN 800,000)
7. CIT Payable: NGN 4,900,000

[SCREENSHOT: Profitable company CIT scenario]

Scenario 2: Loss-Making Company (Minimum Tax)

Company Details:

• Accounting loss: (NGN 5,000,000)
• Gross turnover: NGN 100,000,000
• Computed CIT: NGN 0

Minimum Tax Calculation:

• 0.5% of turnover: NGN 100,000,000 × 0.5% = NGN 500,000
• Minimum Tax Payable: NGN 500,000

Even with a loss, the company pays NGN 500,000.

Scenario 3: Small Company

Company Details:

• Gross turnover: NGN 20,000,000
• Assessable profit: NGN 5,000,000

CIT Calculation:

• Small company rate: 20% (turnover < NGN 25m)
• CIT: NGN 5,000,000 × 20% = NGN 1,000,000

Scenario 4: Excess WHT Credit

Company Details:

• CIT computed: NGN 2,000,000
• WHT suffered: NGN 3,000,000

Result:

• CIT Payable: NGN 0
• Excess WHT: NGN 1,000,000
• Options: Carry forward to next year OR apply for refund

CIT Payment Options

One-Time Payment

Pay full CIT amount before or on filing deadline.

Advantage: Simple, no installments Disadvantage: Large one-time cash outflow

Installment Payments

FIRS may allow payment in installments by arrangement.

Typical Terms:

• Initial deposit (e.g., 50%)
• Balance in monthly installments
• Subject to FIRS approval

Advance Payments

Some companies make advance payments during the year:

• Based on estimated profit
• Credited against final CIT due
• Reduces filing-time payment burden

Tax Clearance Certificate (TCC)

What is a TCC?

A Tax Clearance Certificate confirms you have filed returns and paid all taxes due for a period.

Why You Need a TCC

Required for:

• Bidding for government contracts
• Obtaining loans from banks
• Company registration renewals (CAC)
• Foreign exchange transactions
• Import/export activities
• Opening Letters of Credit

How to Obtain TCC

Step 1: File all outstanding tax returns (CIT, TET, VAT, WHT, PAYE)

Step 2: Pay all outstanding taxes

Step 3: Apply through FIRS portal or tax office

Step 4: Provide required documents:

• Evidence of tax payments
• Filed returns
• Company registration documents
• Request letter

Step 5: FIRS reviews and issues TCC (if compliant)

Validity: Typically 12 months from date of issue

[SCREENSHOT: Sample Tax Clearance Certificate]

CIT Compliance Calendar

Annual Timeline

Period	Activity
During the Year	Make advance tax payments (optional)
Year End	Close books, prepare financial statements
Month 1-3 After Year End	Audit financial statements
Month 4-5	Prepare tax computation and returns
Month 6	File returns and pay CIT
Throughout	Maintain records, track WHT credits

Key Deadlines

• CIT Returns: 6 months after year end
• TET Returns: 6 months after year end
• Payment: At time of filing or by arrangement
• TCC Application: After filing and payment

Compliance Tip

File returns early (don't wait until last day) to allow time for FIRS queries and TCC processing.

CIT Penalties and Interest

Late Filing

• Penalty: NGN 25,000 for first month + NGN 5,000 for each subsequent month
• Maximum: NGN 100,000

Late Payment

• Interest: 10% per annum on unpaid tax
• Plus: 5% penalty on outstanding tax

Non-Filing

• Penalty: Up to NGN 500,000
• Plus: FIRS may estimate tax and issue arbitrary assessment

Understatement of Tax

• Penalty: 10% of understated tax (unintentional)
• Criminal Prosecution: For intentional tax evasion

Avoid Penalties

Always file and pay on time. If you can't pay in full, file returns and request payment plan from FIRS.

CIT Reports and Analysis

Available Reports

Report	Purpose
CIT Computation	Full tax calculation
Tax Reconciliation	Accounting profit to taxable profit
Capital Allowance Schedule	Depreciation for tax purposes
WHT Credit Summary	Credits available for offset
Multi-Year Comparison	Compare CIT across years
Effective Tax Rate	Actual tax rate vs statutory

[SCREENSHOT: CIT reports menu]

Tax Planning Analysis

Use CIT data for:

• Budgeting: Estimate next year's tax
• Cash Flow Planning: Schedule tax payments
• Investment Decisions: Assess after-tax returns
• Capital Expenditure: Time purchases for allowances
• Profit Distribution: Plan dividends considering tax

Troubleshooting CIT Issues

Issue: CIT Seems Too High

Check:

• Are all allowable deductions claimed?
• Have you applied capital allowances correctly?
• Are all WHT credits included?
• Is accounting profit accurately stated?

Issue: Cannot Find WHT Certificates

Solution:

• Request reissuance from customers who deducted WHT
• Check all bank accounts for WHT on interest
• Review all major contracts and payments received

Issue: Minimum Tax Applies Despite Genuine Loss

Solution:

• This is expected under Nigerian law
• Some exemptions exist (e.g., first 4 years of operation)
• Consult tax advisor for relief options
• Minimum tax paid can be offset against future CIT (in some cases)

Frequently Asked Questions

When is my CIT return due?

Six months after your accounting year end. For example, if year end is December 31, 2023, file by June 30, 2024.

Can I change my accounting year end?

Yes, but requires FIRS approval. Submit request with valid business reasons.

What if I file late?

You'll face penalties (NGN 25,000+) and interest on unpaid tax (10% per annum). File as soon as possible to minimize penalties.

Can I offset previous years' losses against current profit?

Yes. Tax losses can be carried forward for up to 4 years to offset future profits (subject to conditions).

Do I pay CIT if I made a loss?

You may still pay minimum tax (0.5% of turnover or net assets, whichever is higher), unless exempted.

How do I claim refund for excess WHT?

Include all WHT certificates with your return. If CIT is less than WHT, you can request refund (processing can take 6-12+ months) or carry forward the credit.

Do I need an auditor?

Yes. Nigerian law requires most companies to have audited financial statements before filing CIT returns.

Related Topics

• Profit & Loss Statement - Source of accounting profit
• Withholding Tax - Understanding WHT credits
• Fixed Asset Register - Capital allowances
• Trial Balance - Financial data for CIT

Need Help?

Support

For CIT-related questions:

• Email: support@digit-tally.io
• Always consult with your tax advisor or accountant - CIT is complex and this guide is for general information only
• Refer to FIRS guidelines for latest regulations
• FIRS Contact Centre: taxinfo@firs.gov.ng
• FIRS Website: www.firs.gov.ng

What's Next?

• PAYE Management - Manage employee income tax
• VAT Management - VAT compliance
• Withholding Tax - Track WHT obligations
• Financial Reports - View all accounting reports