Yes, Company Income Tax (CIT) applies to foreign companies in 2026, but the "nexus" (the reason they are taxed) has been significantly expanded under the Nigeria Tax Act 2025.
Foreign companies (Non-Resident Companies or NRCs) are taxed only on the profit they derive from Nigerian sources. Here is how the 2026 rules break down:
1. The Three Ways a Foreign Company is Taxed
A foreign company falls into the Nigerian tax net if it meets any of these criteria:
- Permanent Establishment (PE): If it has a physical office, factory, or a "fixed base" in Nigeria.
- Significant Economic Presence (SEP): For foreign companies with a taxable presence, the tax payable cannot be less than the amount withheld at source. If the income is not subject to a specific deduction at source, the tax is set at a minimum of 4% of the total income generated from Nigeria.
- Income from Services: If it provides professional, management, technical, or consultancy services to a Nigerian resident, even if the work is done entirely outside Nigeria.
2. How the Tax is Collected
The method of collection depends on whether the foreign company has a physical presence:
- Withholding Tax (WHT) as Final Tax: For most foreign companies providing services from abroad (without a physical office), a 10% Withholding Tax is deducted by the Nigerian payer. In 2026, this 10% is usually the final tax, meaning the foreign company doesn't need to file a full CIT return.
- Deemed Profit (4% of Turnover): If a foreign company has a PE or SEP but its actual profit cannot be easily determined, the Nigeria Revenue Service (NRS) can charge a "Deemed Profit" tax. This is calculated as 4% of the total revenue generated from Nigeria.
- Full Assessment (30% CIT): If the foreign company has a physical office (PE), it must file full audited accounts and pay 30% on the profits attributable to that Nigerian office.
3. Expanded "Nigerian Company" Definition
A major change in 2026 is that a company registered in another country (e.g., Delaware or London) can be treated as a Nigerian Resident Company if its "effective place of management" is in Nigeria.
Example: If a tech startup is registered in the US but all the directors live in Lagos and hold board meetings there, the NRS will tax their worldwide income, not just their Nigerian sales.
4. Exemptions
Foreign companies are generally exempt from the new 4% Development Levy (which replaced the Education Tax), as that levy is primarily targeted at local Nigerian companies.