TAX – Nov 2018 – L2 – SC – Q5b – Companies Income Tax (CIT)

State the categories of companies exempted from minimum tax liability.

Question

State the categories of companies that are exempted from minimum tax liability.

Answer

Companies Engaged in Agricultural Trade or Business:
Companies involved in agriculture, such as crop farming, livestock farming, or fishing, are exempted from paying minimum tax, as the government aims to encourage agricultural development.
Companies with at Least 25% Imported Equity Capital:
Companies with significant foreign ownership (i.e., companies where at least 25% of their equity capital is held by foreigners) are exempt from minimum tax. This exemption is to promote foreign investment in Nigeria.
Companies Within the First Four Calendar Years of Operation:
New companies that have been in operation for less than four years are exempt from minimum tax liability during this period to help ease the financial burden on startups and encourage new business formation.
Companies Engaged in Petroleum Operations:
Companies operating in the petroleum sector and subject to petroleum profits tax (PPT) are not required to pay minimum tax under CITA, as they fall under a different tax regime.