Income tax vs company income tax in Nigeria: what every business owner must know
Personal income tax and company income tax are two separate obligations in Nigeria. Understanding which applies to your business prevents penalties and double-filing mistakes.
One of the most common points of confusion among Nigerian entrepreneurs is whether their business pays personal income tax or company income tax. The answer depends entirely on how your business is structured, and getting it wrong can lead to double taxation, penalties, or missed filing obligations. This article explains the difference clearly.
Personal income tax in Nigeria
Personal income tax, governed by the Personal Income Tax Act (PITA), applies to individuals. This includes sole traders, freelancers, and self-employed persons who run their businesses in their own name without incorporating a separate legal entity.
If you run a business as a sole proprietorship under your own name or a business name registered at CAC but not as a limited company, your business income is treated as your personal income. You pay tax on a graduated scale based on total income after allowable deductions.
Personal income tax in Nigeria is administered by the State Internal Revenue Services (SIRS) in the state where you reside or where your business is located. You file an annual return and make monthly PAYE deductions if you have employees.
| Annual taxable income | Tax rate |
|---|---|
| First ₦300,000 | 7% |
| Next ₦300,000 | 11% |
| Next ₦500,000 | 15% |
| Next ₦500,000 | 19% |
| Next ₦1,600,000 | 21% |
| Above ₦3,200,000 | 24% |
A Consolidated Relief Allowance of ₦200,000 plus 20 percent of gross income is deducted before applying these rates.
Company income tax in Nigeria
Company income tax, governed by the Companies Income Tax Act (CITA), applies to limited liability companies incorporated under the Companies and Allied Matters Act (CAMA). When you register a limited company at CAC, that company becomes a separate legal entity from you as an individual, and it pays tax on its own profits.
Company income tax in Nigeria is administered by NRS (formerly the Federal Inland Revenue Service). You file an annual CIT return within six months of your company's financial year end.
| Company size | Annual turnover | CIT rate |
|---|---|---|
| Small company | Below ₦25 million | 0% |
| Medium company | ₦25 million to ₦100 million | 20% |
| Large company | Above ₦100 million | 30% |
Good news for small companies
As of the Finance Act 2019, companies with annual turnover below ₦25 million pay zero company income tax. This was introduced to encourage small business formalisation. You still need to file returns even if your tax liability is zero.
Key differences side by side
| Factor | Personal income tax | Company income tax |
|---|---|---|
| Who pays | Individuals and sole traders | Incorporated companies |
| Governing law | PITA | CITA |
| Administered by | State Internal Revenue Service | NRS (formerly FIRS) |
| Tax base | Total personal income | Company taxable profit |
| Filing deadline | March 31 annually | 6 months after year end |
Which applies to you?
Start here
Is your business an incorporated Ltd company at CAC?
Personal Income Tax (PITA)
- • Files to State Internal Revenue Service
- • Graduated rates 7%–24%
- • Annual return by 31 March
Company Income Tax (CITA)
- • Files to NRS (federal)
- • 0% / 20% / 30% by turnover
- • Within 6 months of year-end
- + you still file personal tax on your salary
If you registered a business name at CAC but did not incorporate a limited company, you pay personal income tax to your state revenue service. If you incorporated a limited liability company, the company pays company income tax to NRS, and you personally pay income tax on any salary or dividends you take from the company.
Many Nigerian entrepreneurs are surprised to learn they have two separate tax obligations once they incorporate: their personal income tax on their salary, and the company's income tax on its profits. This is not double taxation in the legal sense. It is two separate taxpayers, the individual and the company, each paying tax on their respective income.
Common mistake
Many directors of small Nigerian companies do not file their personal income tax returns because they assume the company's tax covers them. It does not. You are a separate taxpayer from your company and must file personal returns with your state revenue service every year.
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