Annual Returns and Company Taxation

Every company has two continuing duties to the State. Under company law it must report to the Corporate Affairs Commission (CAC) once a year, through the annual return. Under tax law it must keep proper books, register for tax, and file a return with the revenue authority.

The syllabus covers both, and its tax material is based on the Nigeria Tax Act 2025 (NTA) and the Nigeria Tax Administration Act 2025 (NTAA), which replaced the older tax statutes. The rules are made up of dates, amounts and percentages, so this topic sets each one out and then works through examples.

This topic covers the annual return, the certificates that private and small companies attach, the attributes of a small company, the rates and base of company tax, the incentives and exemptions, the duty to keep books and file tax returns, the penalties for default, and the returns of virtual asset service providers.

The annual return to the CAC

The duty and its timing

• A company must make and deliver to the CAC, once every year, a return containing the matters set out in section 418, 419 or 420 of CAMA, as applies to it.
• A newly incorporated company need not make and deliver an annual return in the year of its incorporation.
• The return must be completed within 42 days after the company’s annual general meeting for the year. A copy signed by both a director and the secretary must be sent to the CAC (section 421).
• Section 422 specifies the documents that must be annexed to the return. They include the certified balance sheet and profit and loss account laid before the AGM, the auditors’ report and the directors’ report.
• Filing fees, and a penalty for late filing, are payable to the CAC.

Why the return matters

The annual return is how the public record of a company is kept up to date. It tells anyone who searches the register who the members and directors are and how the company is doing. A company that does not file is in default. The CAC may charge penalties, and persistent default can lead to the company being struck off the register.

The link with the AGM

The 42 days run from the AGM, not from the end of the financial year. A company that has not held its AGM cannot properly complete its return, so a failure to hold the AGM leads to a failure to file the return. The topic on meetings explains the AGM rules.

Certificates that private and small companies attach

Private company

A private company must attach to its return a certificate, signed by a director and the secretary, that it has not invited members of the public to subscribe for its shares in the period covered by the return (section 423(1)). A private company may not invite the public to subscribe for its shares or debentures, or to deposit money, so the certificate confirms that it has kept to this rule.

Small company

A small company sends the certificate above and a second certificate, also signed by a director and the secretary, stating that:

1. it is a private company limited by shares;
2. its turnover is not more than ₦120,000,000, or such other sum as the CAC fixes;
3. it has no alien member;
4. it has no member that is a government, a government agent or its nominee; and
5. the directors among themselves hold at least 51% of the equity share capital (section 423).

The small company

The small company is a category created by section 394 of CAMA. It has been tested in the exam in several forms: the list of attributes, the maximum turnover, and the consequences of being small.

The attributes (section 394)

What being small means

Two definitions of small

The syllabus uses two tests, and they must not be mixed.

Examiners in May 2023, Nov 2023 and May 2024 asked for the CAMA test. If a question asks about the Companies and Allied Matters Act, use ₦120,000,000. If it asks about the 0% rate under the tax Acts, use the NTAA definition.

Company taxation under the Nigeria Tax Act 2025

Company taxation is done under the Nigeria Tax Act 2025 (NTA). The NTA repealed the Companies Income Tax Act and the Industrial Development (Income Tax Relief) Act, among others.

In whose name a company is taxed (section 5)

A company may be charged to tax:

1. in its own name;
2. in the name of any principal officer, attorney, factor, agent or representative of the company in Nigeria, in the same manner and amount that the company would have been charged; or
3. in the name of its receiver, liquidator or administrator, in the same manner and amount that the company would have been charged if no receiver, liquidator or administrator had been appointed.

The rates (section 56)

The syllabus quotes the definition of a small business from section 147 of the NTAA. It is a business that earns gross turnover of ₦100,000,000 or less per year, with total fixed assets of not more than ₦250,000,000, and a business providing professional services is never classified as small.

The tax base (section 27)

The total profits of a company for a year of assessment are its total assessable profits from all sources. The sources include chargeable gains. The total does not include a loss ascertained in accordance with section 27(6), or the capital allowances given by the First Schedule.

The development levy (section 59(1))

A development levy of 4% is charged on the assessable profits of all companies chargeable under Chapters Two and Three of the Act, other than small companies and non-resident companies.

Special trades

Companies in specialised trades, including insurance, gaming, lottery, mutual funds or collective investment schemes, and petroleum operations, are taxed under separate provisions of the NTA.

Economic development incentives (section 165)

The NTA gives tax incentives to companies in priority sectors, for the periods listed against them in the Tenth Schedule. The President may amend the list by order if:

• a sector is not operating on a scale suitable to the economic needs of Nigeria, or there are favourable prospects of further development;
• it is expedient in the public interest to encourage the development or establishment of a sector in Nigeria in order to generate employment, attract foreign direct investment, diversify the economy or stimulate growth in certain localities; or
• a sector, product or service is considered to have developed enough to be removed from the list.

Exemptions (section 162(1))

• income of companies in agricultural businesses, including crop production, livestock, aquaculture, forestry and dairy, for the first five years from commencement of business;
• dividends from investments in wholly export-oriented businesses;
• profits of a company engaged in sporting activities;
• dividend, interest, rent or royalty derived from outside Nigeria and brought into Nigeria through approved channels; and
• gains on the disposal of assets by an angel investor, venture capitalist, private equity fund, accelerator or incubator in respect of a labelled start-up, if the assets have been held in Nigeria for at least 24 months.

The duty to keep books and accounts

Section 31 of the NTAA provides that:

1. every company, including a company granted exemption from incorporation, must maintain books or records of accounts, whether or not it is liable to pay tax;
2. the books must contain enough information on all relevant transactions to work out the company’s tax liability;
3. they must be in English and, for tax purposes, in the format that the tax authority may prescribe;
4. if they are kept in another language, the company must produce, at its own expense and on demand, a translation into English certified by a sworn translator; and
5. the company must keep the books for not less than six years after the year of assessment to which the income relates.

Penalty (section 102). A taxable person who fails to keep accounts, books and records, or fails to provide a record when the tax authority asks for it, pays an administrative penalty of ₦10,000 if the person is not a company and ₦50,000 if it is a company.

Tax returns and the penalties for default

The duty to file (section 11(1) NTAA)

Every company, including a company granted exemption from incorporation, must file a self-assessment return with the revenue service in the prescribed form at least once a year. It must do so whether or not it is liable to pay tax, and with or without notice from the service. The return must contain:

1. a completed self-assessment form;
2. the audited financial statements, and the tax and capital allowance computations, for the year of assessment;
3. evidence of payment of the tax due;
4. a computation of the effective tax rate and any additional tax payable; and
5. an attestation of the information in the return, signed by a principal officer of the company.

The return of a small company may contain a statement of accounts attested by the taxpayer instead of audited financial statements.

Penalties in the NTAA

Digital assets and virtual asset service providers

The NTAA treats virtual or digital assets, including cryptocurrencies and other tokenised assets, as chargeable assets. This brings them within the tax net, discourages evasion and illegal capital flows (including money laundering), and aligns Nigeria with global practice. A virtual asset service provider (VASP) offers to the investing public, on behalf of issuers, exchange, custody, transfer or management services for digital assets.

Under section 25 of the NTAA, a company that is a VASP must, in addition to its ordinary returns under sections 11 and 13, file monthly returns, with or without notice. Each return contains:

• a description of the virtual asset service provided in the month, such as exchange, sale or transfer;
• the date of each transaction;
• the type and value of the virtual assets involved, and the sales value;
• the name, address, telephone number, email address and tax ID of the customer, including the national identification number if he is an individual;
• the name, address, telephone number and email address of any counterparty; and
• other particulars the tax authority prescribes.

Penalty (section 109). A VASP that fails to comply pays an administrative penalty of ₦10,000,000 in the first month of default, plus ₦1,000,000 for each subsequent month of default, or the Securities and Exchange Commission may suspend or revoke its operating licence.

Working through the figures

Dating the annual return

A company holds its AGM on 20 June. The return must be completed within 42 days. Counting 30 days from 20 June to 20 July, and 12 more days, the last day is 1 August. If the AGM is on 12 May, the last day is 23 June. The company signs the copy by a director and the secretary and annexes the documents laid before the AGM.

A tax illustration

Assume that a company that is not small has assessable profits of ₦150,000,000 for the year, and that for the purpose of the illustration its total profits are the same figure.

If the rate is reduced to 25% by presidential order, the tax is ₦37,500,000 and the total is ₦43,500,000. A genuine small company pays 0% and is outside the levy. A real computation also adjusts for losses and capital allowances, as section 27 says, but the exam focuses on the rate and the levy.

Counting the monthly penalties

Classifying three companies

How the annual return and the tax return differ

Worked problems

Problem 1: a company that did not file

1. The annual return. The return had to be completed within 42 days after the AGM, that is, by 23 June. A copy signed by a director and the secretary had to go to the CAC with the documents laid before the AGM and the certificate that the company had not invited the public to subscribe for its shares. The company is late and will pay the filing fee and the penalty for late filing.
2. Books. Every company must keep books and records, in English, for at least six years, whether or not it pays tax. Failure to keep them attracts a penalty of ₦50,000 for a company (section 102).
3. The unregistered supplier. A company that awards a contract to an unregistered person is liable to an administrative penalty of ₦5,000,000 (section 100(2)).
4. Advice. File the return at once with the fees and penalty, rebuild the records, ensure that suppliers are registered for tax, and file the self-assessment return with the revenue service.

Problem 2: a trading company

1. The test. A small company is a private company with turnover of not more than ₦120,000,000, net assets of not more than ₦60,000,000, no alien member, no government member, and directors holding at least 51% of the equity.
2. The application. Bola Ltd is private, and its turnover and net assets are inside the limits. But a government agency is a member, and the directors hold only 40%.
3. Advice. Bola Ltd is not a small company. It must hold an AGM, have at least two directors, and be audited.

Questions that have been asked on this topic, and how to answer them

Common mistakes in the exam

• Saying the 42 days run from the end of the financial year. They run from the AGM.
• Saying a newly incorporated company must file in its first year. It need not.
• Mixing the two small company tests. CAMA: ₦120m turnover and ₦60m net assets. NTAA: ₦100m turnover and ₦250m fixed assets.
• Saying a small company pays a 30% rate. It pays 0%.
• Forgetting the 4% development levy, or applying it to small and non-resident companies. It does not apply to them.
• Naming the Companies Income Tax Act as the current law. The NTA 2025 repealed it.
• Saying the duty to keep books applies only to companies that pay tax. It applies whether or not the company is liable to tax.
• Mixing up the penalty amounts for registering and filing, or forgetting that the monthly sum applies after the first month.

Quick revision

• Annual return: yearly, within 42 days after AGM, signed by a director and the secretary, with section 422 documents. No return in the year of incorporation.
• Private company: certificate that it has not invited the public. Small company: second certificate with five statements.
• Small company (CAMA section 394): private; turnover ≤ ₦120m; net assets ≤ ₦60m; no alien or government member; directors hold ≥ 51%.
• NTA 2025: tax charged in own name, or in the name of an agent, or of a receiver, liquidator or administrator. Rates 0% (small) and 30% (25% by order). Development levy 4%.
• Books: all companies, English, six years. Penalty ₦50,000 for a company.
• Tax return: self-assessment, at least yearly. Penalties: registration ₦50,000 plus ₦25,000 a month; contract to an unregistered person ₦5m; filing ₦100,000 plus ₦50,000 a month.
• VASP: monthly returns; penalty ₦10m plus ₦1m a month, or licence suspension or revocation.

Practice questions

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.

Section A style: multiple choice

Section B style: written questions

Model answers

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