These obligations range from jobs, electricity, education, transportation and even up to food, but can only be possible when they have some sufficient funds available in their budget. From the time immemorial, the government has been deriving a good percentage of these funds from the revenue of crude oil sales, however the price of crude oil has bow downturned and the need to get another source of revenue comes in. This is when we begin to talk about the computation of company income tax in Nigeria.
The most reliable source of internal revenue for any government is the TAX. Taxation no doubt seems like the most working way of generating revenue for the government. The government imposes taxes on incomes and profits, whether for individuals or corporate bodies, organizations that engage in both internal and external trades and even more.
As time went on, some individuals in their bid to escape or evade tax payments established companies, and the government imposed the taxes on the corporate bodies also. There are also a lot of established laws helping to stop people evading laws and to participate in some things like contesting of a public/political position, you would need to present an evidence of constant participation in tax payment for some certain duration of time. These policies were established because of some cases where individuals have different identities with their organizations and companies, in a bid to escape the payment of taxes. When the corporate bodies are made to pay too, then there surely would be no way to evade the responsibilities.
The minimum tax computation for companies in Nigeria and the company income tax rate in Nigeria have been kept in place by the government. The companies income tax is computed by the Company Income Tax Act (CITA). According to Section 9 of the of the Companies Income Tax, the companies are to be charged based on their net income or general profit. There are also some well defined guides on the history of company income tax in Nigeria from which you will get to know of the advantages of participating in the tax. To help you determine your companies net income, you will first need to get your trading receipt and from it deduct your trading expenditures.
You should also take note of the fact that not all the expenditures or receipts are permitted to be brought into the trading accounts which will be for the taxing purposes. In subsequent posts on taxing we will talk about how to calculate personal income tax in Nigeria. Taxable income computing is essential for the determination of the tax liability by the tax payers. You may also seek to reduce your tax liability by making claims of an item under your expenditure. However, the tax authority will also be making efforts to reduce the tax payers deductible expenditure so as to enable them maximize the national tax yield.
This therefore makes the computation of tax payable by the companies and other bodies very essential. In the computation of the chargeable profit for the companies' income tax under the CITA, you will first attempt to calculate the aggregate gross profit. You can do this by summing all the income which you derived from business, trade, interest, royalty, rent and other sources. Please take note that not all income generated by companies are liable for the taxation and you can see that in the section 23 of the CITA.
Some of them include:
- The profit of all co-operative societies which have been registered under any laws which relate to the co-operative societies.
- The profit of any companies which engage in educational activities or any ecclesiastical charity of a public character.
- The profit of any companies which were formed for the promotion of sporting activities.
*The profit of any companies being registered friendly or statutory.
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