Profits exempted from Companies Income Tax in Nigeria

Section 24(1) of the Companies Income Tax Act Cap C21 LFN 2004 (as amended) provides that:

There shall be exempt from the tax-

a. the profits of any company being a statutory or registered friendly society, in so far as such profits are not derived from a trade or business carried on by such society;

b. the profits of any company being a co-operative society registered under any enactment or law relating to co-operative societies, not being profits from any trade or business carried on by that company other than co-operative activities solely carried out with its members or from any share or other interest possessed by that company in a trade or business in Nigeria carried on by some other persons or authority;

c. the profits of any company engaged in ecclesiastical, charitable or educational activities of a public character in so far as such profits are not derived from a trade or business carried on by such company;

d. the profits of any company formed for the purpose of promoting sporting activities where such profits are wholly expendable for such purpose, subject to such conditions as the Board may prescribe;

e. the profits of any company being a trade union registered under the Trade Unions Act in so far as such profits are not derived from a trade or business carried on by such trade union;

f. dividend distributed by Unit Trust;

g. the profits of any company being a body corporate established by or under any Local Government Law or Edict in force in any State in Nigeria;

h. the profits of anybody corporate being a purchasing authority established by an enactment and empowered to acquire any commodity for export from Nigeria from the purchase and sale (whether for the purposes of export or otherwise) of that commodity;

i. the profits of any company or any corporation established by the law of a State for the purpose of fostering the economic development of that State, not being profits derived from any trade or business carried on by that corporation or from any share or other interest possessed by that corporation in a trade or business in Nigeria carried on by some other person or authority;

j. any profits of a company other than a Nigerian company which, but for this paragraph, would be chargeable to tax by reason solely of their being brought into or received in Nigeria;

k. dividend, interest, rent, or royalty derived by a company from a country outside Nigeria and brought into Nigeria through Government approved channels. For the purpose of this subsection, “Government approved channels”, means the Central Bank of Nigeria, any bank or other corporate body appointed by the Minister as authorized dealer under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act or any enactment replacing that Act;

l. the interest on deposit accounts of a foreign non-resident company:

Provided that the deposits into the account are transfers wholly of foreign currencies to Nigeria on or after I January 1990 through Government approved channels; [1991 No. 21.]

m. the interest on foreign currency domiciliary account in Nigeria accruing on or after 1 January 1990;

n. deleted (Finance Act, 2019)

o.  the profits of a small company in a relevant year of assessment, provided that:

  • Such company shall, without prejudice to this exemption comply with the tax registration and tax return filing stipulations of this Act and be subject to the provisions as regards time of filing, penalties for breach of statutory duties and all other provisions of this Act in all respects during the period which its profit are below the tax paying threshold, or
  • They are dividends received from small companies in the manufacturing sector in the first five years of their operations

p. dividend received from investments in wholly export-oriented businesses; 

q. the profits of any Nigerian company in respect of goods exported from Nigeria, if the proceeds of such exports are used for the purchase of raw materials, plant equipment and spare parts, provided that:

  • Tax shall accrue proportionately on the portion of such proceeds which are not utilized in the manner prescribed.

r. the profits of a company whose supplies are exclusively inputs to the manufacturing of products for export, provided that the exporter shall give a certificate of purchase of the inputs of the exportable goods to the seller of the supplies;

s. the dividend and rental income received by a real estate investment company on behalf of its shareholders provided that:

  • a minimum of 75% of dividend and rental income is distributed
  • such distribution is made within 12 months of the end of the financial year in which the dividend or rental income earned

t. the compensating payments, which qualify as dividends under section 9(1)(c) of this Act, received by a lender from its approved agent or a borrower in a Regulated Securities Lending Transaction, such payments are deemed to be franked investment income and shall not be subjected to further tax in the hands of the Lender;

u. the compensating payments, which qualify as dividends under section 9(1)(c) of this Act, received by an approved agent from a borrower on behalf of a lender or borrower in a Regulated Securities Lending Transaction.

The Finance Act, 2019 also introduced a new Section 23 (1)(C) which provides that:

Any company engaged in agricultural production shall be granted the following incentives in addition to other incentives in this Act:

  • an initial tax free period of five years which may be subject to satisfactory performance of agricultural production, be renewed for an additional maximum period of three years, and
  • such company cannot be granted similar incentive under any other Act in Nigeria

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