• 1. Freight tax

Freight tax

Companies Income Tax: 30% of profits derived from international transport activities of non-residential shipowners and/or operators arising from the carriage of passengers, mails, livestock or goods from Nigeria for each year of assessment (tax year).

Exemptions

Residents of the following countries may benefit from double taxation agreements which reduce or waive the income tax.

Country Reduction Date of entry into force Date of effect
Belgium 1 See Note   01/01/1990
Canada 100% 16/11/1999 01/01/2000
China 2 100% 21/03/2009 01/01/2010
Czech Republic   02/12/1990 01/01/1991
France 1 See Note   01/01/1991
Netherlands 1 See Note   01/01/1994
Pakistan 1 See Note 10/01/1990 01/01/1991
Philippines 3 See Note    
Romania 100%   01/01/1994
Slovakia    02/12/1990 01/01/1991
South Africa 1 See Note 05/07/2008 01/01/2009
United Kingdom 100% 27/12/1987 01/01/1988
Limited Treaties (Air and/or Sea)
Italy      
Comprehensive treaty negotiations currently in progress
Signed but not ratified
Korea, Republic of   Signed 06/11/2006  
Mauritius   Signed 10/08/2012  
Poland 1 See Note Signed 15/02/1999  
Spain   Signed 23/06/2009  
Sweden   Signed 18/11/2004  

 Notes

  1. 100% exemption, except if it is deemed that only one of the Contracting states is engaged in international traffic with the other. In which case the tax charged shall not exceed 1% of the earnings derived from Nigeria.
  2. This treaty does not apply to residents of Hong Kong, SAR; Macau, SAR or the province of Taiwan.
  3. The treaty states that "... profits may also be taxed in the other State, but only in so far as such profits are derived from the other State, the tax so charged shall not exceed the less of:
  1. the rate of 1½ per cent applied on the gross revenue derived from that other State; or
  2. the lowest rate of Philippine tax applied on such profits derived by an enterprise of a third State."

Remarks

When assessing the tax due, the Nigerian Tax Board will consider the owner's/operator's worldwide annual income, compared with the income derived from trading to Nigeria. Where such comparisons cannot, for any reason, be satisfactorily applied, the profits to be deemed to be derived from Nigeria may be computed on a fair percentage on the full sum receivable in respect of the carriage of passengers, etc., shipped out of Nigeria. When this occurs the company has within six years to claim that its liability be re-computed on the basis of the company's annual worldwide performance. 

An Education Tax is payable by all Nigerian companies at the rate of 2% on assessable profit. Non resident companies are exempted.

Extract from the Companies Income Tax Act, CITA

"Section 14. Companies engaged in shipping or air transport.

(1) Where a company other than a Nigeria company carries on the business of transport by sea or air, and any ship or aircraft owned or chartered by it calls at any port or airport in Nigeria, its profits or loss to be deemed to be derived from Nigeria shall be the full profits or loss arising from the carriage of passenger, mails, livestock or goods shipped, or loaded into an aircraft, in Nigeria:

Provided that this subsection shall not apply to passengers, mails livestock or goods which are brought to Nigeria solely for transshipment or for transfer from one aircraft to another or in either direction between an aircraft and a ship.

(2) For the purposes of the preceding subsection, where the Board is satisfied that the taxation authority of any other country computes and assesses on a basis not materially different from that prescribed by this Act the profits of a company which operates ships or aircraft, and that authority certifies-

(a) the ratio of profits or loss, before any allowance by way of depreciation, of an accounting period to the total sums receivable in respect of the carriage of passengers, mails, livestock or goods; and

(b) the ratio of allowances by way of depreciation for the period to that same total, then the full profits or loss of that period shall be taken to be that proportion of the total sums receivable in respect of the carriage of passengers, mails, livestock or goods shipped or loaded in Nigeria which is produced by applying the first-mentioned ratio to that total, and in place of any allowances to be given under the amount produced by applying the second-mention ratio to that same total.

(3) Where at time of assessment, the provisions of subsection (2) of this section cannot for any reason be satisfactorily applied, the profits to be deemed to be derived from Nigeria may be computed on a fair percentage on the full sum receivable in respect of the carriage of passengers, mails, livestock and goods shipped or loaded in Nigeria:

Provided that where any company has been assessed for any year by reference to such percentage, it shall be entitled to claim at any time within six years after the end of such year that its liability for that year be-computed on the basis provided by subsection (2) of this section; and where such claim has been made and a certificate has been produced to the satisfaction of the Board as provided in that subsection, such repayment of tax shall be made as may be necessary to give effect to this proviso, save that, if the company fails to agree with the Board as to the amount of the tax to be so recomputed and re-paid, the Board shall give notice to the company of refusal to admit the claim and the provisions of this Act with respect to objections and appeals shall apply accordingly with any necessary medications.

(4) For the purposes of this section, the tax payable be any company for any year of assessment shall not be less than two per cent of the full sum receivable in respect of the carriage of passengers, mails, livestock or goods shipped or loaded into an aircraft in Nigeria."

 

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