Nigerian companies are required to pay tax on their worldwide profits, irrespective of where the income is generated or whether the proceeds are brought into the country, under the Nigeria Tax Act (NTA) 2025, which took effect on January 1, 2026.

The provision, contained in Section 6(1) of the Nigeria Tax Act 2025, establishes that the profits of a Nigerian company are deemed to accrue in Nigeria wherever they arise and whether or not they have been brought into or received in Nigeria.

The provision means that Nigerian companies earning income from foreign investments, overseas operations, international business transactions and other activities outside the country remain liable to Nigerian taxation on their profits.

In effect, the geographical location where the profits are generated or the foreign account in which the proceeds are held does not, in itself, exempt a Nigerian company from its Nigerian tax obligations.

The law places emphasis on the company’s tax residence status in determining the scope of its taxable profits.

Under the Act, a company is regarded as Nigerian if it is incorporated or registered in Nigeria, or its central or effective place of management or control is in the country.

The legislation also contains provisions addressing profits of foreign companies controlled by Nigerian companies.

Specifically, Section 6(2) provides that where a foreign company controlled by a Nigerian company fails to distribute its profits in a particular year, the portion attributable to the Nigerian company that could have been distributed without detriment to the foreign company’s business may be treated as distributed and included in the Nigerian company’s profits for tax purposes.

Furthermore, Section 6(3) addresses situations where the income tax paid by a non-resident subsidiary of a Nigerian company or a member of its multinational group falls below the minimum effective tax rate prescribed by the Act.

In such circumstances, the Nigerian parent company is required to pay an amount to bring the subsidiary’s tax up to the prescribed minimum effective rate.

The provisions reinforce Nigeria’s approach to taxing the global income of resident companies while addressing arrangements that could be used to shift profits to lower-tax jurisdictions.

However, the application of the rules must be considered alongside relevant provisions on allowable expenses, foreign tax credits and double taxation agreements to determine the actual tax liability of affected companies.

The changes have significant implications for Nigerian businesses with international operations, particularly multinational groups, holding companies and firms earning substantial income from foreign markets. (Nigerian Tribune)