July 8th 2015 NIGERIAN TAX SYSTEM Tax July 2015 Strictly Private and Confidential

Agenda 1 Companies Income Tax Act 2 Double Tax Treaties 3 Pioneer Tax Incentive 4 Personal Income Tax 5 Petroleum Profits Tax 6 VAT 7 Transfer Pricing Page

PwC July 2015 Draft CITA = legal basis for taxation of profits of companies. Rate: companies are taxed at a rate of 30% of taxable profits Nigerian companies are liable to tax on their global or worldwide income. Excess dividend tax: 30% tax on paid out dividends where no tax is payable due to no taxable profits or the taxable profit is less than the dividend paid out. Companies Income Tax Act 1 Nigerian tax system July 8th 2015 Section 1 – Companies Income Tax Act

PwC July 2015 Draft Countries where tax treaties has been ratified Belgium, Canada, China, Czech Republic, France, Netherlands Pakistan, Philippines, Romania, Slovakia, Spain South Africa and the United Kingdom Double Tax Treaties 2 Nigerian tax system July 8th 2015 Section 2 – Double Tax Treaties

PwC July 2015 Draft Higher threshold to trigger a taxable presence for non – resident companies a lower withholding tax rate of 7.5% on dividends, royalties and interest payable to a resident in a treaty country. Double Tax Treaties 3 Nigerian tax system July 8th 2015 Section 2 – Double Tax Treaties Tax advantages to resident companies in Treaty Country

PwC July 2015 Draft Upon satisfaction of certain conditions, pioneer status is granted to companies in an industry that is categorized as a pioneer industry and these companies qualify for a tax holiday for 5 years. There are special rules on computing the profits of the company that will be exempt from tax. The updated list of industries/products which qualify for pioneer status can be obtained from the NIPC website: Nigeria.org/. Pioneer Tax Incentive 4 Nigerian tax system July 8th 2015 Section 3 – Pioneer Tax Incentive

PwC July 2015 Draft Personal Income Tax 5 Nigerian tax system July 8th 2015 Section 4 – Personal Income Tax Personal Income Tax Act (PITA) = legal basis for the imposition of personal income tax in Nigeria. The Act requires an employer to deduct and remit its employees’ income tax under the Pay-As-You-Earn (PAYE) scheme and grants certain allowances and reliefs to individuals to reduce their tax payable. Individuals liable to personal income tax in Nigeria are taxed on their worldwide income Personal income tax rate is applied on a graduated scale on taxable annual income (7- 24%). As a result of reliefs and tax free allowances, the marginal tax rate is 19.2%.

PwC July 2015 Draft The Petroleum Profits Tax regulate the imposition of tax on the profits of companies engaged in upstream petroleum operations for their own account. The taxable income of a petroleum company is subject to tax at 85% which is lowered to 65.75% during the first 5 years of operation. Petroleum Profits Tax 6 Nigerian tax system July 8th 2015 Section 5 – Petroleum Profits Tax

PwC July 2015 Draft VAT 7 Nigerian tax system July 8th 2015 Section 6 – VAT VAT is charged at a flat rate of 5% on the supply of goods and services except those expressly exempted or zero rated under the Act. A non-resident company carrying on business in Nigeria only need to register for VAT using the address of its local counter party and include the tax on its invoice. The local company is required to remit the VAT directly to the FIRS rather than pay it over to the non-resident company.

PwC July 2015 Draft The Income Tax Regulations N° 1, 2012 was introduced to provide rules for taxation of intercompany transactions Provisions are made for connected tax payers to enter into Advance Pricing Agreements (APA’s) either with the IFRS alone or jointly with the competent authority of the taxpayer’s country of residence if there is an applicable treaty providing for a MAP agreement with a minimum transaction value of NGN 250 million) Nigeria TP regulations specifically require tax payers to maintain relevant documentation which will allow the FIRS to verify that the pricing of controlled transactions is consistent with the arm’s length principle. Transfer Pricing 8 Nigerian tax system July 8th 2015 Section 7 – Transfer Pricing

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