Introduction

For most companies and business owners, the tax regime in Nigeria appears complex due to the maze of laws and regulations. Companies run the risk of penalties where they fail to comply. We have set out below a table of applicable taxes to technology companies and startups.

  Tax Tax rate and filing date Principal law Scope of tax Incentive/exceptions
1 Companies Income Tax (CIT) 30% of the taxable profit

To be filed on or before June 30 of the next year.

 Companies Income Tax Act This tax is payable by any company with significant economic presence, that generates income from Nigeria.

Further to the Significant Economic Presence Order 2020, a non-resident company providing digital service will be deemed to have significant economic presence where it: (i) derives a gross turnover or income exceeding N25 million; (ii)uses a Nigerian domain name or registers a website in Nigeria; or (iii) has a purposeful and sustained interaction with persons in Nigeria by customizing its platform to target persons in Nigeria.

 ·Small companies (turnover of less than N25 million) and Medium size companies (turnover between N20 – 100 million) may pay 0% and 20% respectively.

·Companies that fall under Pioneer status may obtain tax holiday of up to 5 years. Please click here to read our article on Pioneer Status.
2 Tertiary Education Tax (TET) 2.5% of the taxable profit

There is no specific date but in practice, it is usually filed with the CIT.

 Tertiary Education Trust Fund Act This tax is payable by every company registered in Nigeria. "Non-resident companies are exempted.

"Small companies (as defined above) are also exempted.
3 National Information Technology Development Fund (NITDF) Levy or Information Technology Tax 1% of profit before tax

Payable within 60 days of the notice of assessment by the Federal Inland Revenue Service (FIRS). Though in practice, it is self-assessed and paid along side the CIT.

 National Information Technology Development Agency Act This levy is payable by companies with over 100 million turnover in the following sectors:

Telcos; cyber and internet service providers; pension companies; financial institutions; and insurance companies.

 Companies with turnover less than N100 million are exempted
4 Police Trust Fund 0.005% of the net profit.

To be filed on or before June 30 of the next year.

 Nigerian Police Trust Fund Act This levy is imposed on all companies operating in Nigeria. –
5 National Agency for Science and Engineering Infrastructure Levy 0.25% of the profit before tax.

There is no specific filing date but in practice, it is usually filed with the CIT.

 National Agency for Science and Engineering Infrastructure Act This imposes a levy on companies with turnover of over N100 million in banking, ICT, aviation, maritime, or oil and gas sector Companies with turnover less than N100 million are exempt.
6 Value Added Tax 7.5%

To be filed on or before the 21st of the following month.

 Value Added Tax Act This is a tax imposed on good and services produced or imported into Nigeria. To read the list of the goods and services exempted from VAT, please click here.
7 Withholding Tax (WHT) Dividends, Interest, rents (10%)

Royalties (10% – Companies' 5% – individuals)

Commission, technical or service fees (10% – Companies' 5% – individuals)

Contracts outside the usual business of the company (5%)

Director fees (10%)

Filing should be done within 21 days (when withheld from companies) or 30 days (when withheld from individuals) after the withholding tax obligation arises.

 Companies Income Tax Act; and Personal Income Tax Act This mandates companies to withhold a percentage of the fees payable as dividends, commission etc, and remit same to the tax authority. –

Conclusion

It is important to note that the list above is not exhaustive. In addition to the taxes above, certain sector specific levies may apply depending on the technology company's sector of operation. Technology companies and startups may also be required to make social security contributions (such as Employee Compensation Scheme, Industrial Training Fund Contributions, etc) and also pay other levies imposed by state or local government authorities.

Furthermore, technology companies processing personal data are required to engage a licensed Data Protection Compliance Organisation (DPCO); submit to a data protection audit; and file the audit report with the Nigeria Data Protection Bureau on or before March 15 of the next year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.