Let me be straight with you. Tax season in Nigeria stresses out even business owners who have been doing this for years. But here’s the thing – it doesn’t have to be a nightmare.
If you just registered your business with CAC and you’re starting to make money, you probably have questions. How much should you pay? When is the deadline? What happens if you get it wrong?
This guide walks you through exactly what you need to know. No confusing legal language. No fluff. Just the steps to calculate, file, and pay your Company Income Tax correctly.
Do You Even Need To Pay Company Income Tax?
First, let’s clear this up. Not every small business in Nigeria pays CIT.
You pay Company Income Tax if your business is registered as a limited liability company. That means your business name ends with “Ltd” or “Limited”.
If you registered as a business name (sole proprietorship), you don’t pay CIT. You pay Personal Income Tax instead. Different rules, different forms.
So check your CAC certificate. If it says “Private Company Limited by Shares” or anything with Limited, keep reading.
What Is Company Income Tax (CIT)?
Company Income Tax is a 30% tax on your company’s profit. The government takes this to fund infrastructure, education, health, and everything else.
The key word there is profit, not revenue. If you made ₦10 million but spent ₦8 million to run the business, you only pay tax on the remaining ₦2 million.
That’s important. Many new business owners get scared thinking they owe tax on every naira that enters their account. You don’t.
How To Calculate What You Owe
Let me walk you through the actual calculation. It’s simple math once you understand the pieces.
1. Find Your Total Revenue
Add up everything your business earned during the year. Sales, services, consulting fees, commissions – everything.
2. Subtract Allowable Expenses
This is where you save money. You can deduct expenses that are “wholly, reasonably, exclusively, and necessarily” incurred for your business.
What counts?
- Rent for your office or shop
- Staff salaries
- Electricity and internet bills
- Raw materials
- Marketing and advertising costs
- Repairs and maintenance
- Interest on business loans
- Depreciation of assets (computers, furniture, vehicles)
What does NOT count?
- Personal expenses (even if you paid from your business account)
- Capital withdrawals
- Fines and penalties
- Income tax payments
Keep receipts for everything. When FIRS asks questions, receipts are your best friend.
3. Apply Capital Allowances
This is a tax break most new business owners miss. You can deduct a percentage of the cost of assets you bought – laptops, generators, furniture, machinery.
For most assets, you claim 50% of the cost in the first year, then 25% annually after that. It reduces your taxable profit.
4. Calculate Taxable Profit
Taxable Profit = Total Revenue – Allowable Expenses – Capital Allowances
5. Apply the 30% Rate
Tax Payable = Taxable Profit × 30%
Example:
- Revenue: ₦15,000,000
- Expenses: ₦9,000,000
- Capital allowances: ₦500,000
- Taxable profit: ₦5,500,000
- Tax at 30%: ₦1,650,000
That’s what you owe for the year.
Important Deadlines You Cannot Miss
FIRS gives you specific dates. Miss them and you pay penalties plus interest.
For companies using December 31 year-end:
- File your self-assessment return by March 31 (3 months after year-end)
- Pay the tax by April 30 (4 months after year-end)
For new companies:
- Your first filing is due within 18 months of incorporation or 6 months after your first accounting year ends – whichever comes first.
Mark these dates on your phone. Set reminders for two weeks before each one.
Step-By-Step Filing Process
Here is exactly how to file your CIT. Follow these steps in order.
1. Register With FIRS
If you haven’t already, get your Tax Identification Number (TIN) from the Federal Inland Revenue Service. You can do this online at the FIRS portal or visit any tax office.
2. Prepare Your Financial Statements
You need three documents:
- Profit and Loss statement (shows your revenue and expenses)
- Balance sheet (shows your assets and liabilities)
- Notes to the accounts (explains the numbers)
If you’re not an accountant, hire one. A good accountant costs between ₦50,000 to ₦150,000 for a small company’s annual returns. Worth every kobo.
3. Fill The CIT Form (Form CT1)
Log into the FIRS e-filing portal at efiling.firs.gov.ng. Select Company Income Tax Form CT1. Enter your numbers from your financial statements.
The system calculates your tax automatically. Double-check everything.
4. Upload Your Documents
Attach your financial statements, schedule of fixed assets, schedule of capital allowances, and proof of any payments already made.
5. Submit And Get Your Acknowledgment
After submission, FIRS issues an acknowledgment slip. Download and save it. This is your proof of filing.
6. Pay The Tax
You can pay through:
- FIRS portal using your bank card
- Any commercial bank using your TIN as a reference
- Remita (the government payment platform)
After payment, download your receipt and tax clearance certificate.
Common Mistakes New Business Owners Make
Mixing personal and business money.
When you pay personal expenses from your business account, those are not deductible. Keep separate accounts.
Missing the minimum tax rule.
Even if your company makes a loss or very low profit, you still pay Minimum Tax – 0.5% of gross turnover. It’s small but you must pay it.
Filing late.
Penalties start at ₦50,000 for the first month plus 10% of the tax due, then 2% per additional month. It adds up fast.
Ignoring WHT already deducted.
If clients deducted Withholding Tax from payments to you, that counts as tax already paid. Credit it against your CIT so you don’t pay twice.
Do You Need An Accountant?
You can file CIT yourself if your business is small and your numbers are simple. The FIRS portal is user-friendly enough.
But once your revenue passes ₦25 million annually, hire a professional. A good accountant or tax consultant knows deductions you would miss. They also handle correspondence with FIRS so you don’t have to.
Expect to pay between ₦100,000 to ₦300,000 yearly for a small business accountant. Compare that to the cost of penalties or overpaying tax – it’s cheap protection.
What Happens If You Don’t File Or Pay?
FIRS is more aggressive now than five years ago. They can:
- Freeze your business bank accounts
- Seize assets from your office or home
- Prosecute directors (which carries jail time)
- Shut down your business operations
I am not saying this to scare you. I am saying it because I have seen it happen to business owners who thought “nothing will happen to me.”
File on time. Pay what you owe. Sleep well at night.
Frequently Asked Questions
Do I pay tax on money I took from my business for personal use?
No. That is a drawing or dividend. It does not affect your company’s profit. But if you declared it as a dividend, you pay Withholding Tax on it separately.
What if my business made no money in a year?
You still file a nil return. Log into the portal, declare zero income, and submit. Doing nothing is not an option.
Can I pay my CIT in installments?
Yes. Many companies pay quarterly estimated tax throughout the year, then balance up after filing. This is actually encouraged by FIRS.
What receipts do I need to keep?
Keep everything for 6 years. Digital copies are fine. Scan paper receipts and store them on Google Drive or Dropbox.
My client deducted WHT. How does that affect my CIT?
That WHT is a credit. When you calculate your CIT, you subtract the WHT amount from what you owe. Only pay the difference.
Final Thoughts
Tax is not punishment. It is the price of operating in a country with roads, security, and public services. Paying correctly and on time keeps your business out of trouble and builds a clean record you can use when applying for loans or government contracts.
The process seems heavy the first time. By your second year, it becomes routine. Get organized, mark your calendar, and do not wait until March 31 to start gathering documents.
What part of calculating or filing your company income tax still feels unclear to you? Drop your question below and I will walk you through it.
