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Tax is payable for each
year of assessment on the profits of any company accruing in, derived from,
brought into or received in Nigeria in respect of all kinds of income: that
is income derived from a trade, business or investments. Thus, the tax
holiday of companies in Nigeria is primarily on species of income having
their source or deemed sourced within the country as well as on remittances.
From 1996 the rate of companies income tax in Nigeria has been 30 per cent.
A company paying dividends
to its shareholders is first of all obliged to pay tax on its profits at the
companies tax rate before paying dividends to its shareholders. As a general
rule, any dividend or other company distribution whether or not of a capital
nature made by a Nigerian company is liable to a withholding tax at source
of 10 per cent. However, any dividend paid by a company in the form of
bonus/scrip share issue is not taxable in the hands of individual
shareholders and is excluded from the profits of any other company that is a
shareholder in such company.
In the last few years,
Nigeria has entered into double taxation agreements with a number of
countries. These agreements are entered into with a view to affording relief
from double taxation in relation to taxes imposed on profit taxable in
Nigeria and any taxes of similar character imposed by the laws of the
country concerned.
The method of relief from
double taxation under Nigeria 's tax treaties is by way of a tax credit”.
The mechanism of the tax credit is such that the tax payable in Nigeria on
profits of a Nigerian company being remitted into the country is reduced by
the amount of “foreign tax” paid abroad. The converse position is equally
true where an overseas company receives profits from Nigeria that have
already been taxed in Nigeria . Back
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