THE LEGAL FRAMEWORKS FOR THE TAXATION OF A LIMITED LIABILITY COMPANY IN NIGERIA: A TRIPATITE TAX RATE REGIME

Abstract

In Nigeria, there are various business organisations that one can venture into for the purposes of trading and benevolent activities. Basically, all limited liability companies are liable to Companies income tax (CIT). While the Companies Income Tax Act (CITA) 2007 provides for a single tax rate regime of 30 per cent, the Finance Acts 2019 to 2023 make provision for a tripartite tax rate regime with additional provisions to other elements necessary for the determination of tax liability of a limited liability company. This paper seeks to examine the legal frameworks set up for the taxation of limited liability companies in Nigeria as provided for under the new tripartite tax rate regime. In the course of doing this, doctrinal research methodology is adopted. The paper found out that, prior the enactment of the Finance Acts 2019 to 2023, Nigeria had a uniform company income tax rate, imposed on limited liability companies under CITA 2007. However, the Finance Act 2019 creates a tripartite CIT rate. In addition, the paper noted that prior the imposition of tax on the profit of a limited liability company, certain deductions are made from its gross profits in accordance with the provisions of the law, in order to arrive at the assessable profit of the company. Also, the paper noted that there are some companies that are liable to CIT, but pay no tax at all, or pay as low as 0.25 per cent while some profits and incomes are not liable to tax at all. The paper makes recommendations with the conclusion that, the tripartite CIT tax regime created under the Finance Acts is a welcome idea which will probably lessen tax evasion and increment of Government’s revenues and will aid the growth of companies and invariably aid the growth of Nigeria economy.