When it comes to taxation, a distinction exists between a Nigerian branch of a non-resident company and a Nigerian subsidiary of a non-resident company.


6/13/20222 min read


Quality, not quantity

We have made quality our habit. It’s not something that we just strive for – we live by this principle every day.


A company is defined in section 105 Companies Income Tax Act (CITA) as "any company or corporation (other than a corporation sole) established by or under any law in force in Nigeria or elsewhere”. The court analysed the implication of the definition by CITA in Offshore International v FBIR, where the plaintiff company incorporated in Panama subcontracted its drilling operations to a wholly-owned subsidiary incorporated in Nigeria and thus, sought a declaration that they were not liable to pay tax in Nigeria. The court held that no section of the operative law exempted or granted immunity to companies from paying tax because such companies were not incorporated in Nigeria.

When it comes to taxation, a distinction exists between a Nigerian branch of a non-resident company and a Nigerian subsidiary of a non-resident company. The former is considered a fixed base of the NRC under section 13(2) CITA or permanent establishment under tax treaties, while the latter is a resident of Nigeria and operates a separate legal entity from the parent. Accordingly, such subsidiaries are liable to tax in Nigeria as a resident and on its worldwide income.

Section 9 of the Companies Income Tax Act provides liability for both resident and nonresident companies in Nigeria. It provides as follows:

"Subject to the provisions of this Act, the tax shall, for each year of assessment, be payable at the rate specified in subsection (1) of section 40 of this Act upon the profits of company accruing in, derived from, brought into, or received in, Nigeria...".

This section establishes four approaches to taxation in Nigeria, to wit; ergo, profits accruing in, derived from, brought into or received in Nigeria are subject to tax. However, noticeably, the Act fails to define the concepts that form the basis of imposing tax liability on companies in Nigeria. In defining profit, section 13 distinguishes Nigerian companies' profits and profits from non-Nigerian companies.

Before the enactment of the Finance Act, 2019, profit of a company other than a Nigerian company was deemed to be derived from Nigeria where the taxable entity had the following:

  • a fixed base for business purpose;

  • operates through an authorised agent;

  • trades or engages in business involving a single contract for deliveries, installation or construction in Nigeria; or

  • where the trade or business is between the company and another person controlled by it.

The current applicable tax rates for Non-Resident Companies in Nigeria are as follows:

  • Companies Income Tax Act: 30% for companies with 100m naira annual turnover; 20% for companies with 25m to 100m naira; 0% for small companies with less than 25m turnovers

  • Capital Gains Tax, which is 10%

  • Value Added Tax, which is 7.5%

  • Dividend, Interest and Rent, which is 10%

  • Royalties, which is 10%

  • Tertiary Education Tax is not applicable to Non-Resident Companies

  • Nigerian Police Trust Fund Levy, which is 0.005%.

The Finance Act introduced the significant economic presence rule as an additional approach to determining the tax liability of non-resident companies. In essence, non-resident digital services companies and companies providing technical, professional, management or consultant nature services are subject to companies' income tax in Nigeria, where they meet the requirements of significant economic presence.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact



TEL: 08065553671, 08024230080