First Schedule: Capital allowance

Schedule 1 to the Nigeria Tax Act 2025, as published in the Official Gazette.

Referred to in Sections 18(4)(b), 27(1) and (2), 28, 39, 41, 43, 71, 81, 91, 181 and 189.

PART I – CAPITAL ALLOWANCE FOR COMPANIES

UNDER CHAPTER TWO OF THIS ACT

Interpretation

1. For the purposes of this Part —

"acquisition cost" includes all cost incurred in bringing an asset to its first use ;

"basis period" for an allowance means the basis period for assessable profit or income, provided that in the case of a trade or business —

(a)

where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment, then the interval shall be part of the second basis period ; or

(b)

where there is an interval between the end of the basis period for the year of assessment preceding that in which the trade or business permanently ceases to be carried on by a company or an individual and the basis period for the year in which it ceases, the interval shall form part of the first basis period ;

"concession" includes any right or lease in connection with exploration or exploitation of any mineral deposit of a wasting nature ;

"lease" includes an agreement for a lease where the term to be covered by the lease has begun, any tenancy and any agreement for the letting or hiring out of an asset, but does not include a mortgage, and the expression "leasehold interest" shall be construed accordingly and —

(a)

where, with the consent of the lessor, a lessee of an asset remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this part to continue so long as he remains in possession as aforesaid ; and

(b)

where, on the termination of a lease of an asset, a new lease of that asset is granted to the lessee, the provisions of this part shall have the effect as if the second lease were a continuation of the first lease ;

"mining operation" means the process of extracting valuable minerals, metals, ores, or other geological materials of a wasting nature from the earth's surface or beneath the ground and includes coal mines, metal mines, gemstone mines, salt mines, uranium mines, quarry mines, open pit mines, underground mines, subsea mines, placer mines, solution mines ;

"qualifying capital expenditure" means, subject to the express provisions of this part, expenditure incurred in a basis period for the acquisition, refurbishment and improvement of the value of the asset which is —

(a)

capital expenditure (qualifying plant and equipment expenditure), incurred on :

(i)

plant,

(ii)

machinery,

(iii)

manufacturing Industrial plant,

(iv)

construction plant, including plant, machinery and equipment in use in agricultural trade or business ;

(b)

capital expenditure (qualifying building expenditure) incurred on the construction of buildings, structures or works of a permanent nature, other than expenditure which is included in subparagraphs (a), (c) or (d) of this definition ;

(c)

capital expenditure (qualifying mast expenditure) incurred on tall upright pole erected on, or fastened to land or other structure ;

(d)

capital expenditure (qualifying mining expenditure), other than expenditure which is included in subparagraph (a) of this definition, incurred in connection with, or in preparation for, the working of a mine or other source of mineral deposits of a wasting nature, on the —

(i)

acquisition of deposits, or rights in or over the deposits, or on the purchase of information relating to the existence and extent of the deposit ;

(ii)

searching for or discovering and testing deposits, or winning access thereto ; or

(iii)

construction of any work or building which is likely to be of little or no value when the source is no longer worked or, where the source is worked under a concession, which is likely to become valueless when the concession comes to an end to the person working the source immediately before the concession comes to an end ;

(e)

capital expenditure (qualifying agriculture expenditure) incurred —

(i)

in connection with a plantation, on the clearing of land for planting, planting other than replanting, maintenance of the plantation and other pre-production expenses in connection with that plantation shall be qualifying agriculture expenditure, incurred on the first day on which the trade or business commences ;

(ii)

in respect of ranching on :

(A)

structures used primarily for ranching ;

(B)

raising herds of animals for the purpose of breeding, and does not include raising of animals for the purpose of sale ;

(C)

animals that function as apparatus with which a trade is carried on and the life expectancy is more than 5 years ;

(f)

capital expenditure (qualifying intangible assets expenditure), incurred in respect of research and development of —

(i)

equipment and facilities, patents, licences, secret formulas or process,

(ii)

information concerning the development of industrial, commercial or scientific process, technical feasibility or products or processes, or

(iii)

the discovery and testing of products or processes for future market use and such other similar costs which has brought into existence an asset ;

(g)

capital expenditure (qualifying motor vehicle expenditure), incurred on —

(i)

a fleet of buses of not less than three used for public transportation ,

(ii)

public transportation inter-city new mass transit coach of twentyfive seats and above operated by a private establishment, or

(iii)

other motor vehicles ;

(h)

capital expenditure (qualifying heavy transportation expenditure), incurred on —

(i)

aircraft engine and fuselages,

(ii)

pipeline and cables,

(iii)

vessels,

(iv)

ships engine,

(v)

train engine, railway carriages or train tracks and coaches ;

(i)

capital expenditure (qualifying software expenditure) incurred on the acquisition of software or other such capital outlays on electronic applications ;

(j)

capital expenditure (qualifying furniture and fittings expenditure), incurred on furniture and fittings including those used in vessels, ships, aircrafts, trains, plants, and buildings for the purposes of trade or business ;

"trade or business" under this part, means trade or business or that part of a trade or business, the profits of which are assessable under this Act.

Application of capital allowance to assets acquired under hire-purchase or finance lease agreement

2. This part shall apply in relation to any asset acquired by any hirer or lessee under a hire-purchase or finance lease agreement subject to the following modifications –

(a)

the qualifying capital expenditure in any basis period shall, in relation to any asset so acquired under that agreement, be limited to the amount of the instalments paid by the hirer or lessee up to that basis period, excluding any interest paid under the agreement ;

(b)

the "owner" of the asset shall be construed to be the hirer or lessee under the hire-purchase or finance lease agreement ; and

(c)

the person letting the asset to the hirer or lessee under the agreement shall not be entitled to an allowance under sections 27 and 28 of this Act.

Provisions relating to mining expenditure

3. Under this part, qualifying mining expenditure in respect of mining operation is the amount incurred for the purchase of information relating to the existence and extent of mineral deposits, searching for or discovering and testing deposits or winning access in a relevant basis period notwithstanding that the expenditure has not brought into existence an asset, provided that the mining operations consist of the working of a mine.

Relevant Interest

(1)

Under this part, where an asset consists of a building, structure or works, the owner shall be taken to be the owner of the relevant interest in the building, structure or works.

(2)

The expression "relevant interest" under this part means, in relation to an expenditure incurred on the construction of a building, structure or works, the interest in that building, structure or works which the person who incurred the expenditure was entitled.

(3)

Where qualifying building or mining expenditure on the construction of a building, structure or works has been incurred, the owner is entitled to two or more interests therein, and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this part.

Qualifying building expenditure

5. Under this Schedule, "qualifying building expenditure" means expenditure incurred on the construction of buildings, structures or works of a permanent nature, in regular use for the purpose of trade or business and includes a building, structure or works used —

(a)

as a mill, factory, warehouse, workshop, or other similar building ;

(b)

as a structure used in connection with any such buildings ;

(c)

as a housing estate ;

(d)

as a dock, port, wharf, pier, jetty or other similar building structure ;

(e)

for the operation of a railway, or for the supply of water or electricity ; and

(f)

for the running of a plantation or for the working of a mine or other source of mineral deposits of a wasting nature.

Capital allowance

6. In a basis period for a year of assessment, a person has incurred qualifying expenditure wholly and exclusively for the purposes of its trade or business, there shall be made to the person for each year of assessment in the basis period for which that asset was used for the purposes of that trade or business, an allowance (capital allowance) at the rate specified in Table I of this part:

Provided that —

(a)

there shall be recorded in the capital allowance computation schedule for statistical purposes 1% of qualifying capital expenditure until the asset is disposed which being a notional amount, shall not increase or reduce the amount of capital allowance claimable ; and

(b)

where the basis period for any year of assessment is a period of less than one year, the allowance for that year of assessment shall be granted proportionately.

Asset to be in use at end of basis period

7. A capital allowance in respect of qualifying expenditure incurred in respect of an asset shall be made to a person for a year of assessment if at the end of a basis period, the person —

(a)

is the owner of the asset ; and

(b)

used the asset for the purposes of its trade or business.

Residue

(1)

The residue of a qualifying expenditure, in respect of an asset, at any date, is the total qualifying expenditure incurred on or before the date, in respect of that asset, less the total of capital allowance made, in respect of that asset, before that date.

(2)

For the purpose of this paragraph, capital allowance shall only be made for an asset that is in use for the purpose of the trade or business at the end of the basis period of the year of assessment.

Disposal under qualifying expenditure

9. Under this part —

(a)

a building, structure or works of a permanent nature is disposed where the :

(i)

relevant interest therein is sold,

(ii)

interest, being an interest depending on the duration of a concession comes to an end, on the coming to an end of that concession,

(iii)

leasehold interest terminates without the person who holds it acquiring the reversionary interest, which is the right of the owner of the underlying title to possess the land when the leasehold scheme expires, or

(iv)

building, structure or works of a permanent nature is demolished or destroyed or without being demolished or destroyed, ceases to be used for the purposes of a trade or business carried on by the owner ;

(b)

plant, machinery or fixture is disposed, if it is sold, discarded or ceases to be used for the purposes of a trade or business carried on by the owner ; and

(c)

an asset in respect of which qualifying mining expenditure is incurred is disposed, if it is sold or ceases to be used for the purposes of the mining operation of the person.

Value of an asset

10.

(1)

The value of an asset at the date of its disposal shall be the proceeds of the sale of the asset or the relevant interest, or if it was disposed without being sold, the amount which, in the opinion of the relevant tax authority, the asset or the relevant interest may realise in the open market at that date.

(2)

For the purpose of this paragraph, where an asset is disposed in such circumstances that insurance or compensation monies are received by the owner, the asset or the relevant interest, shall be treated as having been sold, and as if the net proceeds of the insurance or compensation monies were the net proceeds of the sale.

(3)

Subparagraph (2) of this paragraph shall not apply where the compensation monies received by the owner is used for the replacement of the asset lost or destroyed, and the allowances to be granted under this Schedule, in respect of the new asset, shall where the compensation received together with the residual or scrap value of the old asset, where applicable, is —

(a)

greater than the cost of the new asset acquired, be limited to the residue of the old asset ; and

(b)

lower than the cost of the new asset, be :

(i)

the amount claimable in respect of the residue of the old asset, and

(ii)

full allowance in respect of the additional asset acquired, being the amount with which the cost of that new asset acquired exceeds the compensation together with the residual or scrap value.

(4)

Where the relevant interest in an asset is disposed not by way of bargain made at arm's length or where the sale is between connected persons, the value of the asset shall be determined by reference to the arm's length price of the asset.

Apportionment

11.

(1)

Where a qualifying asset is disposed, sold, or purchased together with a non-qualifying asset, the proportion of the value of the asset, on a just apportionment, attributable to the qualifying asset shall, for the purposes of this part, be the value of or the price paid for the asset.

(2)

For the purposes of subparagraph (1) of this paragraph, assets purchased or disposed in one bargain shall be deemed to be purchased or disposed together, notwithstanding that separate prices are or purport to be agreed for each of the assets, or that there are or purport to be separate purchases or disposals of the assets.

(3)

The provisions of subparagraph (1) shall apply, with any necessary modifications, to the sale or purchase of the relevant interest in an asset together with any other asset or relevant interest in any other asset.

Reference to asset to include part of an asset

12. Any reference in this part to an asset shall be construed, whenever necessary, to include reference to a part of an asset or an undivided part of the asset in the case of joint interests, and when so construed, any necessary apportionment shall be made as may, in the opinion of the relevant tax authority, be just and reasonable.

Extension of application of "in use"

13.

(1)

For the purpose of this part, an asset shall be deemed to be in use during a period of temporary disuse.

(2)

For the purpose of paragraphs 6 and 7 of this part where an asset acquired for the purposes of a trade or business has not been used for the trade or business carried on by the owner, the asset shall be deemed to be in use, for the purposes of that trade or business on the date on which the expenditure was incurred, provided that where an allowance has been made in consequence of this subparagraph and the first use to which the asset is put is not for the trade or business, additional assessments shall be made to counteract the benefit obtained from the giving of the allowance.

(3)

The approval of the relevant tax authority shall be obtained for the purpose of subparagraph (2) of this paragraph.

Exclusion of certain expenditure

14. Under this part, the following shall not be treated as qualifying expenditure —

(a)

expenditure allowed for deduction under section 20 of this Act ; and

(b)

excess amount incurred on assets acquired in foreign currency and paid for with foreign currency obtained from the unofficial foreign exchange market at a rate above the prevailing official market rate on the date of the acquisition.

Application to leases

15.

(1)

Where in a basis period, the owner of an asset leases the asset to another person under an operating lease, the provisions of this part shall apply, as though such expenditure were incurred for the purpose of a trade or business carried on by the owner or lessor.

(2)

Where an asset is acquired for use by a hirer or lessee under a hire purchase or finance lease contract for the purpose of a trade or business carried on by such hirer or lessee, the hirer or lessee shall be deemed to be the owner of the asset and the provisions of this part shall apply to the hirer or lessee, to the exclusion of the hiree or lessor under the contract.

(3)

For the purposes of this paragraph in relation to the trade or business, the basis period for any year of assessment shall be taken to be the year immediately preceding that year of assessment.

Asset used or expenditure incurred partly for the purposes of a trade or business

16.

(1)

Where the owner of an asset partly uses the asset for a trade or business, the allowance computed in accordance with the provisions of this part, shall, as may be reasonable, be apportioned to the trade or business.

(2)

Where the relevant tax authority is of the opinion that the basis of apportionment is not just and reasonable, having regard to all the circumstances and to the provisions of this part of this Schedule, the relevant tax authority shall make necessary adjustments as may be deemed fit.

Disposal without change of ownership

17. Where an asset in respect of which qualifying expenditure has been incurred is disposed in such circumstances that the owner retains ownership, for the purposes of determining the amount of capital allowance, the owner shall be deemed to have bought the asset immediately after the disposal for a price equal to the residue of the qualifying expenditure at the date of the disposal.

Application of this Schedule to professions and vocations

18. In this part of this Schedule, references to a trade or business include references to a profession or vocation.

Partnerships

19.

(1)

Where a trade or business is carried on by persons in a partnership, the trade or business of the partnership is treated as a single enterprise and any allowance that applies to the individual partners are computed as if the single enterprise conducted all the trade or business activities performed by the individual partners involved in that trade or business during the period.

(2)

Where a partner joins or leaves the partnership during a basis period, it shall be treated as if the business ceased at that time and recommenced immediately thereafter, and the provisions of paragraph (17) of this part shall apply in respect of the assets transferred to the new business.

(3)

Capital allowances related to assets shall be apportioned among the partners in their profit-sharing ratio at the end of the basis period.

(4)

Where capital allowance is required to be recomputed as a result of the application of subparagraph (2) of this paragraph, all such additional assessments or repayments of tax shall be made as may be necessary to give effect to the provisions of this paragraph.

(5)

Where the application of this paragraph is inconsistent with any of the provisions of the other paragraphs of this part, the provisions shall apply with such modifications as the relevant tax authority may consider necessary and prescribe rules embodying those modifications.

Allowance made

20. Any reference in this part to an allowance made includes a reference to an allowance which would have been made but for an insufficiency of assessable profit or income against which to make it.

Claims for allowance

21.

(1)

An allowance shall not be made to a person for a year of assessment unless it is claimed by the person for that year or where the relevant tax authority is of the opinion that it would be just to the taxpayer and reasonable to do so.

(2)

Where an allowance is not claimed in the year of assessment in the basis period for which that asset was used for the purposes of that trade or business, it shall be carried forward to subsequent period(s).

Manner of making allowance

22.

(1)

An allowance to be made to a person under the provisions of this Part shall be subtracted from the remainder of the assessable profits or income for the relevant year of assessment.

(2)

For the purpose of this paragraph, the remainder of the assessable profits or income of a person for a year of assessment shall be determined by giving full effect to the provisions of section 27 of this Act in the case of a company, and section 28 of this Act in the case of an individual, as it relates to the deduction of a loss.

(3)

Where a deduction under subparagraph (2) cannot be fully made for a year of assessment due to no remainder or insufficient remainder of assessable profit or income, the deduction, or the part not yet made, shall be treated as a deduction for the next year, and for succeeding years until fully utilised.

Table I (paragraph 6): Capital allowance

Class	Rate	Qualifying capital expenditure
1	10%	Building expenditure Agricultural expenditure Mast expenditure Intangible assets expenditure Heavy transportation expenditure
2	20%	Plant expenditure Agricultural equipment expenditure Furniture and fittings expenditure Mining expenditure Other equipment expenditure
3	25%	Motor vehicle expenditure Software expenditure Other capital expenditure

Transitional rules for capital allowances

23.

(1)

Where a capital allowance has been granted in respect of an asset before the commencement of this Act, the remaining basis periods in which allowance may be made under this Part, shall be the number of years of assessment for which allowance is to be made under this Part less the number of years of assessment for which allowance has previously been made.

(2)

Where capital allowances were granted, in respect of an asset before the commencement of this Act, for years of assessment equal to or greater than the number of years allowable under this Act, a single allowance shall be granted for the residue upon the commencement of this Act provided that there shall be recorded in the capital allowance computation schedule for statistical purposes, 1% of the qualifying capital expenditure until the asset is disposed which being a notional amount shall not increase or reduce the amount of capital allowance claimable under this Act.

(3)

In respect of qualifying capital expenditure on which capital allowance has been fully granted before the coming into effect of this Act, capital allowance shall not be granted under this Act on the amount required to be retained in the books under the repealed enactment.

PART II – CAPITAL ALLOWANCE FOR UPSTREAM PETROLEUM OPERATION

UNDER THE PETROLEUM INDUSTRY ACT

Interpretation

(1)

For the purpose of this Part —

(a)

"concession" includes a petroleum exploration licence, petroleum prospecting licence, petroleum mining lease, any right, title or interest in or to petroleum in the ground and any option of acquiring any such right, title or interest ;

(b)

"lease" includes an agreement for a lease where the term to be covered by the lease has begun, any tenancy and any agreement for the letting or hiring out of an asset, but does not include a mortgage, and all cognate expressions, including "Leasehold Interest", shall be construed accordingly and where:

(i)

with the consent of the lessor, a lessee of any asset remains in possession after the termination of the lease without a new lease being granted, that lease shall be deemed for the purpose of this Part to continue so long as the lessee remains in possession, and

(ii)

on the termination of a lease of any asset, a new lease of that asset is granted to the lessee, the provisions of this Part shall have effect as if the second lease were a continuation of the first lease ;

(c)

"qualifying expenditure" means, expenditure incurred for the purpose of hydrocarbon tax in an accounting period, which is capital expenditure, referred to as —

(i)

"qualifying plant expenditure" incurred on plant, machinery and fixtures directly for upstream petroleum operations applicable to crude oil for petroleum mining leases or petroleum prospecting licences,

(ii)

"qualifying pipeline and storage expenditure" including floating production systems incurred directly or gathering pipelines for upstream petroleum operations applicable to crude oil for petroleum mining leases or petroleum prospecting licences,

(iii)

"qualifying building expenditure" other than expenditure, which is included in subparagraph (c)(i), (ii) or (iv) of this paragraph, incurred directly on the construction of buildings, structures or works of a permanent nature for upstream petroleum operations applicable to crude oil for petroleum mining leases or petroleum prospecting licences, or

(iv)

"qualifying drilling expenditure", tangible and intangible, other than expenditure which is included in subparagraph (1)(c)(i) or (ii) of this paragraph, incurred directly in connection with upstream petroleum operations for petroleum mining leases or petroleum prospecting licences, in view of searching for or discovering and testing petroleum deposits, or winning access, or the construction of any works or buildings which are likely to be of little or no value when the upstream petroleum operations for which they were constructed ceased :

Provided that qualifying expenditure shall not include any sum which may be deducted under section 68 of this Act or have benefited from capital allowance under any other provisions of this Act or prior to the acquisition of the asset by another entity ;

(2)

Expenditure incurred by a company before its first accounting period, ascertained without the qualification for being deductable under section 68 of this Act, shall be deemed to be qualifying expenditure incurred by it on the first day of its first accounting period.

(3)

Where the asset referred to in subparagraph (d) has been disposed by the company before the beginning of its first accounting period, any loss incurred by the company on the disposal of such asset shall not be allowed on commencement of its accounting period and any profit realised by the company on such disposal shall be liable to income tax in its first accounting period.

Provisions relating to pre-production expenditure

2. For the purpose of this Part, where —

(a)

expenditure has been incurred before the first accounting period and the expenditure would have been treated as a qualifying expenditure in any of the classes of qualifying expenditures stated in subparagraph (1)(c), then it shall be so classified ; and

(b)

the expenditure before the first accounting date ought to have been treated as allowable deduction in an accounting period, it shall be allowed but fully amortised over a period of five years.

Relevant interest

(1)

Under this Part, where an asset consists of a building, structure or works, the owner shall be taken to be the owner of the relevant interest in such building, structure or works.

(2)

The relevant interest under this Part means, in relation to any expenditure incurred on the construction of a building, structure or works, the interest in such building, structure or works to which the company which incurred the expenditure was entitled.

(3)

Where a company incurs qualifying building expenditure or qualifying drilling expenditure on the construction of a building, structure or works, the company is entitled to two or more interests, and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purpose of this Part.

(4)

Where the owner of the relevant interest is not the licensee or lessee, the qualifying capital expenditure and the capital allowance accruing therefrom shall be to the benefit of the holder of the licence or lease.

Capital Allowance

(1)

Where in any accounting period, a company has incurred qualifying expenditure wholly and exclusively for the purpose of upstream petroleum operations applicable to crude oil carried on by it, there shall be due to that company as from the accounting period in which the expenditure was incurred, an allowance at the appropriate rate specified in the table to this Part.

(2)

Notwithstanding the provisions of subparagraph (1) of this paragraph, there shall be recorded in the capital allowance computation schedule for statistical purposes until the asset is disposed, 1% of the qualifying capital expenditure, which being a notional amount, shall not increase or reduce the amount of capital allowance claimable under this Part.

(3)

Any asset or part of it in respect of which capital allowance has been granted, shall not be disposed, except on the authority of a certificate of disposal issued by the Commission.

Asset to be in use

5. Subject to paragraph 15 of this Part, a capital allowance in respect of qualifying expenditure incurred on an asset shall be due to a company for any accounting period if at the end of the accounting period it was the owner of that asset and the asset was in use for the purpose of the upstream petroleum operations applicable to crude oil carried on by it.

Residue

6. The residue of a qualifying expenditure, in respect of an asset, at any date, is the total qualifying expenditure incurred on or before the date, by the owner, in respect of that asset, less the total of any capital allowance made, in respect of that asset, before that date.

Disposal of qualifying capital expenditure

7. Under this Part —

(a)

a building, structure or works of a permanent nature is disposed where any of the following events occur —

(i)

the relevant interest is sold,

(ii)

that interest, being an interest depending on the duration of a concession, comes to an end at the end of that concession,

(iii)

that interest, being a leasehold interest, comes to an end and the possession of the building, structure or works of a permanent nature reverts to the holder of the reversionary interest, or

(iv)

the building, structure or works of a permanent nature are demolished, destroyed or, without being demolished or destroyed, cease to be used for the purpose of upstream petroleum operations applicable to crude oil carried on by the owner ;

(b)

plant, machinery or fixtures are disposed if they are sold, discarded or cease to be used for the purposes of upstream petroleum operations applicable to crude oil carried on by the owner ; and

(c)

assets in respect of which qualifying drilling expenditure is incurred are disposed if they are sold or cease to be used for the purpose of the upstream petroleum operations applicable to crude oil of the company incurring the expenditure, either on the company ceasing to carry on the operations, or on such company receiving insurance or compensation money therefrom.

Value of an asset or interest in a petroleum prospecting licence or petroleum mining lease

(1)

The value of an asset or interest in a petroleum prospecting licence or petroleum mining lease at the date of its disposal shall be the net proceeds of the sale of the asset or of the relevant interest, or, where it was disposed without being sold, the amount which, in the opinion of the Service, the asset or the relevant interest may realise in the open market at that date, less the amount of expenses which the owner might reasonably be expected to incur if the asset were so sold.

(2)

For the purpose of this paragraph, where an asset is disposed of in the circumstances that insurance or compensation money are received by the owner, the asset or the relevant interest shall be treated as having been sold and as if the net proceeds of the insurance or compensation money were the net proceeds of the sale.

(3)

Subparagraph (2) of this paragraph shall not apply where the compensation monies received by the owner is used for the replacement of the asset lost or destroyed, and the allowance to be granted under this part, in respect of the new asset, shall where the compensation received together with the residual or scrap value of the old asset, where applicable, is —

(a)

greater than the cost of the new asset acquired, be limited to the residue of the old asset ; and

(b)

lower than the cost of the new asset, be —

(i)

the amount claimable in respect of the residue of the old asset, and

(ii)

full allowance in respect of the additional asset acquired, being the amount with which the cost of that new asset acquired exceeds the compensation together with the residual or scrap value.

Part of an asset

9. Any reference in this part to any asset shall be construed whenever necessary, to include a reference to a part of an asset or an undivided part of the asset in the case of joint interests, and when so construed, any necessary apportionment shall be made in a manner, which in the opinion of the Service, is just and reasonable.

Apportionment

10.

(1)

Any reference in this part to the disposal, sale or purchase of any asset or interest includes a reference to the disposal, sale or purchase of that asset, together with any associated asset, whether or not qualifying expenditure has been incurred on such associated asset.

(2)

Where an asset is disposed, sold, or purchased together with another asset, the proportion of the value of the assets, on a just apportionment, attributable to the first mentioned asset shall, for the purposes of this part, be the value of, or the price paid for the assets.

(3)

For the purpose of subparagraph (2) of this paragraph, assets or interest purchased or disposed in one bargain shall be deemed to be purchased or disposed together, notwithstanding that separate prices are or purport to be agreed for each of the assets, or that there are or purport to be separate purchases or disposals of the assets.

(4)

The provisions of subparagraph (2) of this paragraph shall apply, with modifications, to the sale or purchase of the relevant interest in any asset together with any other asset or relevant interest in that other asset provided that the provisions for apportionment in this paragraph shall not apply in the sale or disposal of concessions or interest in a part of the asset.

Exclusion of certain expenditure

11. Where any company has incurred expenditure which is allowed to be deducted under any provision of this Act, other than a provision of this part, such expenditure shall not be treated as qualifying expenditure.

Asset used or expenditure incurred partly for the purpose of petroleum operations

12.

(1)

The following provisions of this paragraph shall apply where either or both of the following conditions apply with respect to any asset, the –

(a)

owner of the asset has incurred in respect of the asset a qualifying expenditure partly for the purpose of upstream petroleum operations applicable to crude oil carried on by him and partly for other purposes ; or

(b)

asset in respect of which the owner has incurred qualifying expenditure is used partly for the purpose of upstream petroleum operations applicable to crude oil carried on by such owner and partly for other purposes.

(2)

Any allowance which would be due if both expenditures were incurred wholly and exclusively for the purposes of the upstream petroleum operations applicable to crude oil and if the asset were used wholly and exclusively for the purposes of such operations, shall be computed in accordance with the provisions of this part.

(3)

The allowances computed in accordance with subparagraph (2) shall be treated, as in the opinion of the Service is, just and reasonable having regard to all circumstances and to the provisions of this part.

Disposal without change of ownership

13.

(1)

Where an asset in respect of which qualifying expenditure has been incurred is disposed in such circumstances that the owner retains the ownership, for the purposes of determining the amount of capital allowance, the owner shall be deemed to have bought the asset immediately after the disposal for a price equal to the residue of the qualifying expenditure at the date of the disposal.

(2)

Capital allowance shall be for the computation of hydrocarbon tax and not for cost recovery purposes in production sharing contracts, which shall have their own provisions under the model contract.

Capital allowance rates

14.

(1)

Qualifying expenditure shall be subject to the rates below –

Qualifying capital expenditure	1st	2nd	3rd	4th	5th
Qualifying plant expenditure	20%	20%	20%	20%	20%
Qualifying pipeline expenditure	20%	20%	20%	20%	20%
Qualifying building expenditure	20%	20%	20%	20%	20%
Qualifying drilling expenditure	20%	20%	20%	20%	20%

(2)

Exploration expenditure and the first two appraisal wells expenditure in the same field are to be treated as deductible costs 100% in the year incurred, while for additional exploration expenditures and appraisal expenditures in the same field relating to pre-production period are to be amortised and deducted on commencement of accounting period at a capital allowance of 20% per annum.

Extension of application of "in use"

15.

(1)

For the purpose of this part, an asset shall be deemed to be in use during a period of temporary disuse.

(2)

For the purpose of paragraphs 4 and 5 of this part, where an asset acquired for the purpose of petroleum operations has not been used for the petroleum operations carried on by the owner, the asset shall be deemed to be in use for the purposes of that petroleum operations on the date on which such expenditure was incurred, provided that where an allowance has been given in consequence of this subparagraph and the first use to which the asset is put is not for the petroleum operations, or it is not put to use within five years from the date the expenditure was incurred, capital allowance claimed on such assets shall be withdrawn and the amount assessed to tax.

PART III — CAPITAL ALLOWANCE FOR PETROLEUM OPERATIONS UNDER

PETROLEUM PROFITS TAX AND DEEP OFFSHORE AND INLAND BASIN PRODUCTION

SHARING CONTRACTS

Sections 91,94,95,189 Interpretation

(1)

For the purposes of this Part —

"concession" includes an oil exploration licence, an oil prospecting licence, an oil mining lease, any right, title or interest in or to petroleum oil in the ground and any option of acquiring any such right, title or interest ;

"lease" includes an agreement for a lease where the term to be covered by the lease has begun, any tenancy and any agreement for the letting or hiring out of an asset, but does not include a mortgage, and all cognate expressions, including "leasehold interest", shall be construed accordingly and —

(a)

where, with the consent of the lessor, a lessee of any asset remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this part to continue so long as he remains in possession as aforesaid ; and

(b)

where, on the termination of a lease of any asset, a new lease of that asset is granted to the lessee, the provisions of this Part shall have effect as if the second lease were a continuation of the first lease ;

"qualifying expenditure" means, expenditure incurred in an accounting period which is —

(a)

capital expenditure (qualifying plant expenditure) incurred on plant, machinery or fixtures ;

(b)

capital expenditure (qualifying pipeline and storage expenditure) incurred on pipelines and storage tanks ;

(c)

capital expenditure (qualifying building expenditure), other than expenditure which is included in paragraphs (a), (b) or (d), of this paragraph incurred on the construction of buildings, structures or works of a permanent nature ; or

(d)

capital expenditure (qualifying drilling expenditure) other than expenditure which is included in paragraph (a), (b) or (c) of this Paragraph, incurred in connection with, or with petroleum operations in view of —

(i)

the acquisition of petroleum deposits, or rights in or over the petroleum deposits,

(ii)

searching for or discovering and testing petroleum deposits, or winning access thereto, or

(iii)

the construction of any works or buildings which are likely to be of little or no value when the petroleum operations for which they were constructed cease to be carried on:

Provided that, for the purposes of this definition qualifying expenditure shall not include any sum which may be deducted under the provisions of section 91 of this Act.

(2)

For the purpose of this Paragraph —

(a)

expenditure incurred by a company before its first accounting period, ascertained without the qualification contained in the subparagraph (1)(d) of this paragraph shall be deemed to be qualifying expenditure incurred by it on the first day of its first accounting period ; and

(b)

where the asset referred to in subparagraph (a) has been disposed by the company before the beginning of its first accounting period, any loss incurred by the company on the disposal of such asset shall be deemed to be qualifying petroleum expenditure incurred by the company on that day and be deemed to have brought into existence an asset owned by the company, in use for the purposes of its petroleum operations, and any profit realised by the company on such disposal shall be treated as income of the company under section 90(1)(d) of this Act in its first accounting period.

Provisions relating to qualifying petroleum expenditure

(1)

For the purpose of this part where —

(a)

a company has incurred expenditure before its first accounting period and the expenditure would have been treated as such qualifying petroleum expenditure, ascertained without the qualification contained in subparagraph (1)(d) of paragraph 1, if it had been incurred in the first accounting period ; and

(b)

such expenditure has not brought into existence an asset such expenditure, ascertained in the case of sub-paragraph (1)(a) of this paragraph without such qualification, shall be deemed to have brought into existence an asset owned by the company incurring the expenditure and in use for the purposes of such petroleum operations.

(2)

For the purposes of this part, an asset in respect of which qualifying drilling expenditure has been incurred by a company for the purposes of petroleum operations carried on by it during any accounting period of the company, and which has not been disposed, shall be deemed not to cease to be used for the purposes of such operations where such company continues to carry on such operations.

Relevant interest

(1)

Under this part, where an asset consists of a building, structure or works, the owner shall be taken to be the owner of the relevant interest in such building, structure or works.

(2)

"The relevant interest" under this part, means, in relation to any expenditure incurred on the construction of a building, structure or works, the interest in such building, structure or works to which the company which incurred such expenditure was entitled.

(3)

Where, a company incurs qualifying building expenditure or qualifying drilling expenditure on the construction of a building, structure or works, the company is entitled to two or more interests, and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this part.

Petroleum investment allowance

(1)

For the purposes of Part III of Chapter Three of this Act and subject to the provisions of this part, where a company has incurred any qualifying capital expenditure wholly and exclusively for the purposes of petroleum operations carried on by it, there shall be due to that company, for the accounting period in which that asset was first used for the purposes of such operations, an allowance, in this part called "Petroleum Investment Allowance", at the appropriate rate set forth in Table I of this part.

(2)

For the purpose of Part III of Chapter Three of this Act, the Petroleum Investment Allowance shall be added to the capital allowance computed under paragraph 5 of this part and shall be subject to the same rules under Part III of Chapter Three of this Act.

Capital Allowance

(1)

Where in any accounting period, a company owning an asset has incurred qualifying expenditure wholly and exclusively for the purposes of petroleum operations carried on by it, there shall be due to the company as from the accounting period in which such expenditure was incurred, an allowance at the appropriate rate specified in Table II of this part.

(2)

(3)

Any asset or part thereof in respect of which capital allowance have been granted shall not be disposed except on the authority of a Certificate of Disposal issued by the Commission.

Asset to be in use at end of accounting period

6. A capital allowance in respect of qualifying expenditure incurred on an asset shall be due to a company for any accounting period, if at the end of the accounting period it was the owner of that asset and the asset was in use for the purposes of the petroleum operations carried on by it.

Residue

7. The residue of qualifying expenditure, in respect of an asset, at any date, is the total qualifying expenditure incurred on or before that date, in respect of the asset, less the total of any capital allowance made, in respect of that asset, before that date.

Disposal of qualifying expenditure

8. Under this Part —

(a)

a building, structure or works of a permanent nature is disposed where —

(i)

the relevant interest therein is sold, or

(ii)

that interest, being an interest depending on the duration of a concession comes to an end, on the coming to an end of that concession, or

(iii)

that leasehold interest terminates without the person who holds it acquiring the reversionary interest, which is the right of the owner of the underlying title to possess the land when the leasehold scheme expires, or

(iv)

the building, structure or works of a permanent nature are demolished or destroyed or, without being demolished or destroyed, cease to be used for the purposes of petroleum operations carried on by the owner ;

(b)

plant, machinery or fixtures are disposed if sold, discarded or cease to be used for the purposes of petroleum operations carried on by the owner ; and

(c)

assets in respect of which qualifying drilling expenditure is incurred are disposed if they are sold or cease to be used for the petroleum operations of the company incurring the expenditure either on such company ceasing to carry on all such operations or on such company receiving insurance or compensation monies therefrom.

Value of an asset

(1)

The value of an asset at the date of its disposal shall be the net proceeds of the sale thereof or of the relevant interest, or, if it was disposed without being sold, the amount which, in the opinion of the Service, such asset or the relevant interest may realise in the open market at that date, less the amount of expenses which the owner might reasonably be expected to incur if the asset were so sold.

(2)

For the purposes of this paragraph, if an asset is disposed of in such circumstances that insurance or compensation monies are received by the owner, the asset or the relevant interest, shall be treated as having been sold and as if the net proceeds of the insurance or compensation monies were the net proceeds of the sale.

(3)

Subparagraph (2) of this paragraph shall not apply where the compensation monies received by the owner is used for the replacement of the asset lost or destroyed, and the allowance to be granted under this part, in respect of the new asset, shall where the compensation received together with the residual or scrap value of the old asset, where applicable, is —

(a)

greater than the cost of the new asset acquired, be limited to the residue of the old asset ; and

(b)

lower than the cost of the new asset, be —

(i)

the amount claimable in respect of the residue of the old asset, and

(ii)

full allowance in respect of the additional asset acquired, being the amount with which the cost of that new asset acquired exceeds the compensation together with the residual or scrap value.

Part of an asset

10. Any reference in this Part to any asset shall be construed whenever necessary to include a reference to a part of an asset or, an undivided part of the asset in the case of joint interests, and when so construed any necessary, apportionment shall be made as may, in the opinion of the Service, be just and reasonable.

Apportionment

11.

(1)

Where a qualifying asset is disposed, sold, or purchased together with a non-qualifying asset, the proportion of the value of the assets as, on a just apportionment, attributable to the qualifying asset shall, for the purposes of this part, be the value of or the price paid for the assets.

(2)

For the purposes of subparagraph (1) of this paragraph, assets purchased or disposed in one bargain shall be deemed to be purchased or disposed together, notwithstanding that separate prices are or purport to be agreed for each of the assets or that there are or purport to be separate purchases or disposals of the assets.

(3)

The provisions of subparagraph (1) of this paragraph shall apply, with any necessary modifications, to the sale or purchase of the relevant interest in an asset together with any other asset or relevant interest in any other asset.

Extension of application of "in use"

12.

(1)

For the purposes of this part, an asset shall be deemed to be in use during a period of temporary disuse.

(2)

For the purposes of paragraphs 4, 5 and 6 of this part where an asset acquired for the purposes of petroleum operations has not been used for the petroleum operations carried on by the owner, the asset shall be deemed to be in use for the purposes of that petroleum operations on the date on which the expenditure was incurred, provided that where an allowance has been made in consequence of this subparagraph and the first use to which the asset is put is not for the petroleum operations, additional assessments shall be made to counteract the benefit obtained from the giving of the allowance.

(3)

The approval of the Service shall be obtained for the purpose of subparagraph (2) of this paragraph.

Exclusion of certain expenditure

13.

(1)

Where any company has incurred expenditure which is allowed to be deducted under any provision of this Act, other than a provision of this part, such expenditure shall not be treated as qualifying expenditure.

(2)

Where any company has incurred expenditure on any ocean-going oil tanker plying between Nigeria and any other territory, that expenditure shall not be treated as qualifying expenditure for the purpose of this part Asset used or expenditure incurred partly for the purpose of petroleum operations

14.

(1)

The following provisions of this paragraph shall apply where, either or both of the following conditions apply with respect to any asset —

(a)

the owner of the asset has incurred in respect thereof qualifying expenditure partly for the purposes of petroleum operations carried on by him and partly for other purposes ;

(b)

the asset in respect of which qualifying expenditure has been incurred by the owner is used partly for the purposes of petroleum operations carried on by such owner and partly for other purposes.

(2)

(3)

Disposal without change of ownership

15. Where an asset in respect of which qualifying expenditure has been incurred is disposed in such circumstances that the owner retains the ownership, for the purposes of determining the amount of capital allowance, the owner shall be deemed to have bought the asset immediately after the disposal for a price equal to the residue of the qualifying expenditure at the date of the disposal.

Table I: Petroleum investment allowance

Qualifying expenditure in respect of	Rate per centum
Onshore operations	5
Operations in territorial waters and continental shelf areas up to and including 100 metres of water depth	10
Operations in territorial waters and continental shelf areas in water depth between 100 and 200 metres of water depth	15
Operations in territorial waters and continental shelf areas beyond 200 metres of water depth	20

Table II: Capital allowance

Capital allowance	Rate per centum
1st year	20
2nd year	20
3rd year	20
4th year	20
5th year	20

All Schedules

Source: Nigeria Tax Act, 2025 (Act No. 7 of 2025), Official Gazette No. 117, Lagos, 26 June 2025. General information, not tax or legal advice.