Nigeria Tax Act 2025 Mandates Global Profit Taxation for Nigerian Companies
Nigerian companies are now subject to taxation on their worldwide profits, irrespective of the income’s origin or whether it has been repatriated to Nigeria. This significant shift is established under Section 6(1) of the Nigeria Tax Act (NTA) 2025, which became effective on January 1, 2026. The legislation stipulates that the profits of a Nigerian company are conclusively deemed to accrue in Nigeria, regardless of where they arise or if they have been physically brought into the country.
This provision, as reported by Tribune Business, means that profits derived from foreign investments, overseas operations, international business transactions, and other activities conducted outside Nigeria remain fully liable to Nigerian taxation. The geographical location of profit generation or the specific foreign bank account holding the proceeds will not, in itself, exempt a Nigerian company from its tax obligations. The Act’s emphasis is firmly placed on the company’s tax residence status to define the scope of its taxable profits.
A company is classified as Nigerian under the Act if it is incorporated or registered within Nigeria, or if its central or effective place of management and control is situated in the country. The legislation also extends its reach to address the profits of foreign companies controlled by Nigerian entities. Specifically, Section 6(2) empowers tax authorities to treat undistributed profits of a controlled foreign company as distributed and taxable in the hands of the Nigerian parent company, provided such distribution could have been made without detriment to the foreign company’s business operations.
Furthermore, Section 6(3) tackles scenarios where a non-resident subsidiary or a member of a Nigerian company’s multinational group pays income tax below a minimum effective rate prescribed by the Act. In such instances, the Nigerian parent company is obligated to remit an amount to ensure the subsidiary’s tax liability meets the stipulated minimum effective rate. These provisions underscore Nigeria’s commitment to taxing the global income of its resident companies and to counteracting profit-shifting arrangements aimed at lower-tax jurisdictions.
The practical application of these rules necessitates careful consideration of allowable expenses, foreign tax credits, and existing double taxation agreements to accurately determine the final tax liability for affected companies. The implications are substantial for Nigerian businesses with international footprints, particularly multinational groups, holding companies, and firms deriving significant revenue from foreign markets.
