Tax Obligations for Foreign Corporations in Nigeria: Compliance Guide for 2025
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For foreign corporations conducting business in Nigeria, understanding and complying with local tax laws is crucial to avoiding penalties and ensuring smooth operations. The 2021 Finance Act and recent digital tax reforms have introduced changes that affect businesses operating remotely or through local partnerships.
This guide explains key tax obligations for foreign corporations, recent policy updates, and steps to maintain compliance with the Federal Inland Revenue Service (FIRS).
Who is Considered a Foreign Corporation in Nigeria?
A foreign corporation is any company incorporated outside Nigeria that earns revenue from Nigerian operations. According to Section 13(2) of the Companies Income Tax Act (CITA), a foreign company is taxable in Nigeria if it:
- Has a fixed base or physical presence in Nigeria.
- Operates through a local agent or distributor.
- Provides digital services with a Significant Economic Presence (SEP) (e.g., Google, Amazon, Netflix).
- Offers technical, management, or consulting services to Nigerian clients.
✅ Key Compliance Requirement: Foreign corporations must register with FIRS and obtain a Tax Identification Number (TIN) to fulfill tax obligations.
Key Tax Obligations for Foreign Corporations in Nigeria
1. Companies Income Tax (CIT) – 30% on Profits
Foreign corporations earning income from Nigeria must pay Companies Income Tax (CIT) at 30% on profits attributable to Nigerian operations.
🔹 Recent Reform: The 2021 Finance Act introduced a progressive CIT rate:
- 0% for small businesses (turnover below ₦25 million).
- 20% for medium businesses (₦25–100 million turnover).
- 30% for large companies (above ₦100 million turnover).
📌 Example: If a UK-based consulting firm earns ₦200 million from Nigerian clients, it is taxed at 30% on profits derived from Nigeria.
2. Value Added Tax (VAT) – 7.5% on Goods & Services
VAT is charged at 7.5% on the supply of goods and services, with businesses required to remit collected VAT by the 21st of the following month.
🔹 Recent Reform: The 2022 VAT Modification Order requires foreign digital service providers (e.g., Netflix, Apple Music, SaaS companies) to register for VAT in Nigeria, even without a local office.
📌 Example: A US-based software company selling subscriptions to Nigerian users must charge 7.5% VAT and ensure Nigerian customers remit it to FIRS.
3. Withholding Tax (WHT) – 5% to 10% on Payments
Withholding tax (WHT) serves as an advance tax deduction on payments for services such as:
✅ Consulting fees – 10%
✅ Royalties – 10%
✅ Dividends & interest payments – 10%
✅ Construction contracts – 5%
📌 Example: If a Nigerian company pays a UK-based software developer ₦5 million, it must deduct 10% (₦500,000) as WHT before payment and remit it to FIRS.
4. Capital Gains Tax (CGT) – 10% on Asset Sales
Foreign corporations selling assets in Nigeria (e.g., real estate, shares, digital assets) must pay Capital Gains Tax (CGT) at 10% on their profits.
🔹 Recent Reform: The 2021 Finance Act extended CGT to digital assets, including cryptocurrency and NFTs.
📌 Example: If a foreign company sells property in Lagos for ₦500 million (purchased for ₦300 million), it must pay 10% on the ₦200 million profit (₦20 million CGT).
Other Compliance Requirements for Foreign Corporations
✔ Tax Identification Number (TIN) – Required for all tax-related activities.
✔ Transfer Pricing Rules – Applies to transactions between related foreign and Nigerian entities.
✔ Electronic Money Transfer Levy (EMTL) – A ₦50 tax on foreign remittances above ₦10,000.
Penalties for Non-Compliance
Non-compliance with Nigerian tax laws can result in severe penalties:
❌ Late Filing of Tax Returns – ₦25,000 for the first month, ₦5,000 for each subsequent month.
❌ Failure to Register for VAT – ₦50,000 for the first month, ₦25,000 for subsequent months.
❌ Underreporting Income – 10% penalty + interest on unpaid tax.
How to Stay Compliant as a Foreign Corporation
To avoid legal risks and ensure smooth business operations in Nigeria, foreign corporations should:
✅ Register with FIRS and obtain a Tax Identification Number (TIN).
✅ Understand Nigerian tax laws and comply with VAT, WHT, and CGT requirements.
✅ Engage tax consultants or local advisors for regulatory compliance.
✅ File annual tax returns on time to avoid penalties.
Final Thoughts
Nigeria’s tax laws are evolving, with new reforms impacting foreign corporations in digital services, consultancy, and asset transactions. Compliance is essential to maintaining smooth business operations and avoiding legal risks.
By staying updated and ensuring proper tax registration and remittance, foreign businesses can establish long-term success in Nigeria’s growing market.
📌 Have questions about your tax obligations? Leave a comment or speak with an expert.
