other like operations or process, not including refining at a refinery. Therefore ancillary businesses in the industry would not be within the remit of the PPTA. In line with PPTA, the revenue from the petroleumwon and sold is reduced by tax depreciation (capital allowances) and genuine business expenses (allowable deductions) and the resulting profit is taxed at the applicable PPT rate. The applicable rate is 65.75% for a company liable to pay PPT in its first five accounting periods of production and sales. Thereafter, the PPT rate is 85%. In addition, holders of oil prospecting licences or oil mining leases are required to pay royalties to the government when production begins. The Petroleum Drilling & Production Regulations made pursuant to PPTA requires companies that undertake onshore production to pay royalties to the government. The royalty rates are: • 20% (onshore production) • 18.50% (production in areas up to 100 meters water depth) • 16.5% (in areas up to 200 meters water depth) • 12.5% (in areas of production beyond 201 and 500 meters water depth) • 8% (in areas of production between 501 and 800 meters water depth) • 4% (in areas of production between 802 and 1,000 meters water depth). Beyond 1000 meters, there is no obligation to pay royalties. Tertiary Education Tax Tertiary education tax is imposed on every Nigerian- registered company at 2% of assessable profit. Personal Income Tax The rates for personal income tax are progressive. The effective rates are:
Value Added Tax Generally, value added tax is chargeable on the supply of taxable goods and services except items specifically stated to be exempt or zero rated in the Value Added Tax (Amendment) Act 2007. VAT is computed at 5% of the value of all goods and services except (i) non-oil exports, (ii) goods and services purchased by diplomats and (iii) goods purchased for use in humanitarian donor funded projects. Witholding Tax Withholding Tax ( WHT ) is payable by both individuals at the rate of 5% and companies at the rate of 10% on interest, dividends, rent, royalty, management fees, consultancy and technical services and commission. WHT is deductible at source from the person making the payment. All WHT deducted on payments to foreigners is the final income tax chargeable on such payments. The law provides for WHT relief to foreign companies incorporated in any of the countries with which Nigeria has a double taxation treaty (in the form of a reduced WHT rate of 7.5%). Stamp Duties Generally, stamp duty is a form tax payable to the government on documents and is governed by the Stamp Duties Act ( SDA ). The SDA provides that unstamped or insufficiently stamped instruments may be stamped within 40 days, save for instruments chargeable by ad-valorem duty which must be stamped within 30 days. The rates payable under SDA may be either nominal or ad- valorem depending on the nature of the instrument. Where any instrument or document is not stamped within the time limit as provided under the Act, the defaulting party is liable, to pay a penalty of twenty naira in addition to the unpaid duty. Further, where the unpaid duty exceeds twenty naira, interest on such duty at 10% per annum shall be payable by the defaulting party. In addition to the foregoing, an unstamped instrument would not be admissible in evidence by the Nigeria courts. Information Technology Tax Information technology tax ( ITT ) is payable by companies with a turnover of NGN100million and above. It is generally provided for under the National Information Technology Development Act 2007 ( NITDA ). NITDA expressly lists the entities liable to pay ITT. This includes GSM service providers and telecommunication companies, cyber companies and internet providers, pension managers and pension related companies, banks
Taxable Income (NGN)
Tax Rate
0 – 300,000 (USD 0 – 1,000)
7%
300,001 – 600,000 ( USD 1,000 – 2,000)
11%
600,001 – 1,100,00 (USD 2000 – 3,600)
15%
1,100,101 – 1,600,000 (USD 3,600 – 5,200)
19%
1,600,001 – 3,200,000 (USD 5,200 – 10,400)
21%
3,200,000 and above (USD 10,400 and above)
24%
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