Overview
Taxation
1.
The Personal Income (Amendment) Tax Act 2011,
adopted in 2012, introduces key legislative reforms,
including:
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2.
Stricter regulation for income tax computation.
Widening taxation on foreign earnings.
Introducing a more inclusive taxation scheme.
Amalgamating former reliefs into one Consolidated Relief
Allowance.
Immigration formalities
A two-day visa option for foreign residents' permits.
The expediting of legal alien certification in Nigeria.
A new Combined Expatriate Residence Permit and Aliens
Card (CERPAC), which foreigners must have obtained no
later than 30 April 2014. The CERPAC is valid for two
years.
3.
Work Visa requirements
To be entitled to work in Nigeria, foreign employees must
obtain a work permit (see CERPAC above). There is also
a programme to enable foreign investors to obtain an
entry visa for Nigeria within 48 hours of submitting the
required documentation. A CERPAC must be obtained by
a foreign national wishing to live in Nigeria, and permits
residence and working in Nigeria for two years
(renewable for a two year period). The employer makes
the application to the Immigration Office when the
employee arrives in Nigeria. The application takes one to
three months to process.
4.
Legal system
The legal system is based on common law and the
country operates a federal system of government.
5.
Foreign investment
Generally there are no restrictions on foreign investment
in Nigeria. However, foreign investors (as well as Nigerian
investors) are precluded from investing in certain
businesses on the "negative list", such as those producing
arms, military and paramilitary wears, narcotic drugs and
psychotropic substances.
6.
Exchange Control
A Certificate of Capital Importation (CCI) must be issued
to a foreign investor for shares and other investments in
Nigeria (Foreign Exchange (Monitoring and Miscellaneous
Provisions) Act and FOREX Manual, issued by the
Central Bank of Nigeria). An authorised dealer (that is, a
licensed Nigerian bank) representing the capital
investment imported into the country must issue the CCI.
The CCI aids capital and profit repatriation out of Nigeria.
7.
Business vehicles
The most common forms of business vehicle are:
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Private companies.
Public companies.
Partnership.
8.
Company reporting requirements
The main requirements are:
 Submission of the proposed name(s) to the Corporate
Affairs Commission (CAC). If approved, the name is
reserved for 60 days.
 The memorandum and articles of association, as well as
CAC Incorporation Forms (obtainable from a CAC office
or downloaded from their website, www.cac.gov.ng) are
completed with the relevant details of the proposed
company, such as details of subscribers and directors,
and a proficiency certificate for companies undertaking
professional businesses such as consulting.
 Payment of stamp duties and CAC filing fees.
The registration process usually takes about 14 days,
with same-day registration at an extra cost (in practice,
this takes two to three days). The official cost of
registration under the standard procedure is NGN29,200,
while the same-day procedure costs NGN79,200.
The CAC website offers useful information and additional
registration information can be found in the CAC's
customer's guide at
www.cac.gov.ng/Pages/CAC%20Online%20External%20
Users%20Guide.pdf.
9.
Company Management Structure
Private limited companies must have at least two directors
(CAMA). In some regulated sectors such as banking, a
mix of executive and non-executive directors is mandatory
in accordance with the Code of Corporate Governance for
Banks and other Financial Institutions in Nigeria.
Taxes on employment
10.
An individual is subject to personal income tax (PIT) if he
is tax resident in Nigeria (that is, his employment duties
are wholly or partly performed in Nigeria).
However, the income of an employee is not liable to PIT,
where either:
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The duties are performed on behalf of an
employer who is not in Nigeria, and the
remuneration of the employee is not paid by a
fixed business base of an employer in Nigeria.
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The employee is not in Nigeria for a period or
periods amounting to 183 days or more
(including the employee's annual leave or
temporary periods of absence) in any 12 month
period.
Tax resident employees
11.
The pay as you earn (PAYE) system applies to the
payment of income tax by employees. PAYE is payable
on a graduated basis as follows:
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First NGN300,000 at 7%.
Next NGN300,000 at 11%.
Next NGN500,000 at 15%.
Next NGN500, 000 at 19%.
Next NGN1.6 million at 21%.
Above NGN3.2 million at 24%.
The PRA establishes a national contributory pension
scheme. Under this, employers employing five or more
employees must make minimum monthly contributions of
7.5% from each employee's monthly wage payments.
Employees must make a minimum monthly contribution
of 7.5% to the scheme.
12.
Tax on business vehicles.
Tax resident business
A business vehicle is tax resident if it is incorporated in
Nigeria.
Non-tax resident business
Non-tax resident businesses are taxed on their profits
deemed to be derived from Nigeria at 30% (the rate for
resident companies). In particular, a non-tax resident
business is liable to pay tax on any income or profit
legally connected to Nigeria, particularly if it has a fixed
base in Nigeria.
The main business taxes are:
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Corporate income tax payable by a company, at
30% of its global taxable income. Notably, all
non-resident companies that earn or derive
income from Nigeria are also liable to pay
companies' income tax on the income derived
from Nigeria. Companies must prepare and
submit annual self-assessment tax returns
accompanied by evidence of the payment.
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Withholding tax may apply to certain income,
including interest, royalties, rent and dividends,
at a rate ranging from 10% to 15%.
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Petroleum profits tax on the profit of oil
producing companies, at 85%.
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Value added tax (VAT), payable on the
consumption of goods and services in Nigeria,
at 10%. This is due on a monthly basis not later
than the 21ST day of each month. Taxpayers
must submit monthly VAT returns accompanied
by evidence of payment.
13.
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Education tax, payable on the assessable profit
of a company, at 2%. Filings are made along
with income tax returns.
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Capital gains tax, payable on profit realised on
the disposal of assets, at 10%.
Dividends, Interest & Royalties
Dividends
Withholding tax is deducted at the rate of 10% on
dividends paid to all shareholders, including foreign
corporate shareholders. This rate may be reduced to
7.5% if the foreign company is resident in a country with
which Nigeria has a double tax treaty.
Dividends derived from foreign companies and brought
into Nigeria through government approved channels (that
is, the Central Bank of Nigeria, a bank or other authorised
dealer) are exempt from tax.
IP royalties paid
Withholding tax is payable on IP royalties paid to all
corporate shareholders (domestic or foreign), at the rate
of 15%.
Loans
10% withholding tax is payable on interest on all loans,
including loans made by foreign companies. This rate
may be reduced to 7.5% if the foreign company is
resident in a country that has a double tax treaty with
Nigeria.
There are generally no restrictions on the ability of a
Nigerian entity to procure foreign loans. Interest paid by a
Nigerian company on a loan from a foreign affiliate is
generally a deductible expense, provided the interest rate
agreed between the Nigerian company and its foreign
affiliate is not unreasonable. If, in the opinion of the tax
authority, the interest rate is unrealistic, the tax authority
can adjust the Nigerian company's taxable profit to reflect
an arm's length transaction.
Transfer Pricing
The Federal Inland Revenue Service (FIRS) introduced
the Income Tax (Transfer Pricing) Regulations No. 1,
2012, effective since 2 October 2012. These Regulations
apply to transactions between connected taxable persons
carried on in a manner not consistent with the arm's
length principle. They are aimed at preventing tax
evasion through over- or under-pricing of transactions.
14.
Customs Duties
Import duties range between 0% and 35% of the value of
the imports, while export duties have been abolished on
most manufactured products.
Excise duties at between 5% and 20% are payable on
alcohol, fermented beverages, sparkling wines, spirits and
tobacco and its substitutes, and sheets of polymers of
vinyl chloride.
15.
Double Tax Treaties
Nigeria has double tax treaties with a number of nations,
including the UK, South Africa, Romania, the Philippines,
Pakistan, The Netherlands, France, Canada and Belgium.
16.
Competition.
Competition authority
The following have provisions aimed at ensuring
competition in the market:
 Investments and Securities Act 2007 (ISA);
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Securities and Exchange Commission Rules and
Regulations (SEC Rules).
There is a Federal Competition and Consumer Protection
Bill pending before the Federal Executive Council, which
seeks to set up a competition authority with the mandate
to enforce competition rules.
Restrictive agreements and practices
The SEC Rules prohibit entry into agreements with other
companies having as their object the prevention,
restriction or distortion of competition in the Nigerian
market.
Unilateral conduct
The SEC Rules prohibit single firm conduct that impedes
competition, and equivalent provisions exist in the
Nigerian Communications Act. Generally, the ISA gives
the SEC the power to order the break-up of a company
whose business practices restrict competition.
17.
Advertising
The Advertising Practitioner's (Registration, etc) Act
regulates advertising. The stages in the advertising
process include:
 Vetting. This requires submission of advertising materials
for thorough examination by Advertising Standards Panel
(ASP).
 Approval or clearance for publication, airing or printing
through an Advertising Practitioner Council of Nigeria
certified agent.
The vetting and approval/clearance stage can take
between eight hours to two weeks.
It is an offence to cause to be aired or published in print,
adverts that have not been approved by the ASP.
18.
Product Liability
The National Agency for Food and Drug Administration
and Control (NAFDAC) regulates and controls the import,
export, manufacture, advertising, distribution, sale and
use of:
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Food.
Drugs.
Cosmetics.
Medical devices.
Bottled water.
Chemicals and consumable goods.
Regulated products.
NAFDAC has regulatory oversight over the quality and
safety of these and is empowered to, after appropriate
analysis, make rulings or prescriptions on how any
identified shortcomings may be addressed. It issues
regulations on products which, among others, impose
liability for breach and require certification of regulated
products before they can be sold to the general public.
The Standards Council is responsible for ensuring
product safety by setting out Nigerian industrial standards
and conducting tests to ensure compliance with product
standards (Standards Organisation of Nigeria Act). In
addition, the Standards Organisation of Nigeria regulates
the quality of products manufactured in Nigeria.
19.