In Nigeria, the Company Income Tax Act allows businesses to deduct certain expenses from their taxable income. Here are some tax-deductible expenses for businesses:
- Employee Salaries and Wages: This includes the salaries, wages, bonuses, and allowances paid to employees. It also includes contributions made to pension funds and group life insurance.
- Rent: Rent paid for business premises is deductible as a business expense. This includes rent paid for an office, warehouse, or any other business premises.
- Travel Expenses: Business-related travel expenses such as airfare, accommodation, and meals are deductible. This includes both domestic and international travel.
- Repairs and Maintenance: Expenses incurred to repair and maintain business property and equipment are deductible. This includes routine repairs and maintenance, as well as major repairs.
- Insurance: Insurance premiums paid for business purposes are tax deductible. This includes fire insurance, liability insurance, and business interruption insurance.
- Advertising and Promotion: Expenses incurred on advertising and promotion of the business are deductible. This includes the cost of creating and distributing promotional materials, as well as the cost of advertising in various media.
- Professional Fees: Fees paid to lawyers, accountants, and other professionals for business purposes are deductible.
- Bad Debts: Businesses can deduct bad debts that are not recoverable. This includes debts that are written off as uncollectible.
- Charitable Contributions: Charitable contributions made by businesses are tax deductible. This includes donations to qualified charitable organizations. This is subject to the provision of the Company Income Tax Act.
- Interest on Business Loans: The interest paid on loans taken out for business purposes is tax deductible. This includes loans used to purchase equipment, fund operations, or for any other business-related purpose. This is also subject to the provision of the law.
- Telephone and Internet Expenses: The cost of telephone and internet services used for business purposes is deductible. This includes the cost of landlines, mobile phones, and internet service.
- Office Supplies and Consumables: Expenses incurred on office supplies such as stationery, toner, ink cartridges, and other consumables are deductible.
- Business Use of Vehicle: If a business owns a vehicle that is used for business purposes, the expenses related to the vehicle are tax deductible. This includes fuel, maintenance, repairs, and insurance.
- Travel Expenses of Directors: If a company reimburses directors for business-related travel expenses, those expenses are tax deductible.
- Utilities and Cleaning Services for Business Premises: In addition to rent, expenses incurred on utilities such as electricity, water, and gas, and cleaning services for business premises are deductible.
- Training and Development Expenses: Expenses incurred on training and development programs for employees are deductible. This includes the cost of attending conferences and workshops.
- Royalties: Royalties paid to third parties for the use of intellectual property, such as patents or copyrights, are deductible.
- Research and Development Expenses: Expenses incurred on research and development activities are tax deductible. This includes the cost of developing new products or improving existing ones.
- Depreciation: The cost of fixed assets used in the business can be depreciated over their useful life. This depreciation expense is tax deductible. In Nigeria, capital allowance rates are used to calculate tax deductions for the depreciation of qualifying assets used in a trade or business. The rates of the capital allowance are set by the Federal Inland Revenue Services (FIRS) Find the capital allowance rates in the table below:
| Qualifying Expenditure | Initial Allowance (%) | Annual Allowance (%) |
| Building (industrial and non-industrial) | 15 | 10 |
| Furniture and fittings | 25 | 20 |
| Plants used in agricultural production | 95 | 0 |
| Plant (others) | 50 | 25 |
| Mining expenditure | 95 | 0 |
| Plantation equipment | 95 | 0 |
| Motor vehicle used for public transportation* | 95 | 0 |
| Motor vehicle (others) | 50 | 25 |
| Ranching and plantation expenditure | 30 | 50 |
| Housing estate expenditure | 50 | 25 |
| Research and development (R&D) | 95 | 0 |
*Subject to a fleet of at least three buses
Conclusion
It’s important to note that the tax law regarding business expenses is subject to change, and businesses should consult with a tax professional to ensure that they are taking advantage of all available tax deductions.