Business and company tax

Part 2 taxed people. This part taxes companies, and the first rule is the one that prevents the most damage: companies income tax is charged on PROFIT, never on revenue. A company that turned over two hundred million naira and made nothing owes no CIT. The computation is a three-line story: revenue, minus the allowable expenses of earning it, minus capital allowances, equals the profit the rate applies to.

Allowable expenses are the genuine costs of the trade: stock, staff, business premises rent, transport, professional fees. The test is whether the cost was incurred wholly and exclusively for the business. The owner's living costs never qualify, and neither do fines. Capital purchases, the van, the machinery, the building, are different again: they are not expensed in the year of purchase but relieved through capital allowances, the tax system's version of depreciation, spread over the assets' useful life on prescribed rates.

The rate structure is now beautifully simple. Large companies pay 30% of taxable profit. A small company, one with annual turnover at or below ₦100,000,000 and total fixed assets within ₦250,000,000, pays 0%: it is exempt from CIT, and the exemption extends to capital gains tax and the Development Levy. The policy intent is explicit, letting small businesses formalise without being taxed out of existence, and it makes the small-company test one of the most valuable checks an agent performs. The part works both sides of the line: a trader on ₦180,000,000 turnover with ₦40,000,000 of profit pays ₦12,000,000 of CIT plus ₦1,600,000 of levy, ₦13,600,000 in all, while a small company with ₦15,000,000 of profit on ₦80,000,000 turnover pays nothing.

The Development Levy itself is the 2025 reform's consolidation move: one 4% charge on the assessable profits of larger companies, replacing the old scatter of education tax and technology and industry levies that used to be computed separately.

VAT gets a full treatment because every trading client meets it. The rate stays at 7.5%, charged on taxable supplies. A registered business charges output VAT on sales, recovers input VAT on purchases, and remits the difference monthly, with the return due by the 21st of the following month. The 2025 reform widened the zero-rated list of essentials, basic food, medical and educational items, and zero-rating is better than exemption because input VAT remains recoverable. Most usefully for your clients: a small business under the ₦100,000,000 threshold generally does not have to charge or remit VAT at all, an exemption many small traders still do not know they have. E-invoicing and fiscalisation are the direction of travel for VAT compliance, so build clients' invoicing habits early.

Withholding tax runs in both directions for a company. On payments out, rent, professional fees, dividends, the company must deduct WHT and remit it; failing to is the company's liability, not the payee's. On income in, WHT suffered is an advance, credited against the final CIT bill, provided the credit notes are kept. Dividends carry 10%. And under the 2025 Act, capital gains made by companies are taxed at 30%, aligned with the income rate, with small companies exempt here too.

The part closes with the company as employer and the compliance calendar: PAYE deducted and remitted by the 10th of the following month, the employer's annual return by 31 January, VAT monthly by the 21st, and the CIT return due within six months of the company's financial year end. Books and records must be kept for at least six years. On HopperTax, preparing a company return is free, exactly as it is for an individual; filing one costs ₦50,000, ten times the individual price, and Part 5 walks the product track that produces the return.