The Federal Inland Revenue Service (FIRS) on 14 August 2023, issued an Information Circular to provide guidance on the taxation of Limited Liability Partnerships (LLPs) as defined under the Companies and Allied Matters Act (CAMA) 2020 (as amended).
According to the FIRS’s Circular, LLPs are body corporates (defined as such by the CAMA), and so are subject to all applicable corporate tax obligations as outlined below:
1. Company Income Tax:
LLPs must pay income tax on profits derived in Nigeria. Companies with a turnover below ₦25 million are exempt from income tax.
2. Withholding Tax (WHT):
LLPs are required to deduct WHT on dividends, interest, and more, remitting it to tax authorities.
3. NASENI Levy:
LLPs in specific sectors with turnovers exceeding ₦100 million are subject to a 0.25% levy on profit before tax.
4. Nigeria Police Trust Fund Levy:
LLPs, along with other companies, must pay a 0.005% levy on net profits to the Nigeria Police Trust Fund.
5. Tertiary Education Tax:
LLPs with turnovers exceeding ₦25 million are liable for a 3% Tertiary Education Tax.
6. Value Added Tax (VAT):
LLPs making taxable supplies over ₦25 million in a year must register for VAT, charge it on invoices, and file returns.
7. Personal Income Tax:
Profits distributed to partners are considered dividends. Income from sources other than the LLP is taxed under the Personal Income Tax Act.
8. Capital Gains Tax (CGT):
LLPs pay a 10% CGT on chargeable gains from asset disposals.
9. Stamp Duties:
LLPs are subject to stamp duties on relevant instruments. The payer usually covers the duty.
10. Other Obligations:
LLPs must file tax returns, maintain records, file Capital Gains Tax returns bi-annually, and deduct PAYE from employee emoluments. Failure to meet these obligations may result in penalties.
For more details, please refer to the full Circular issued by the Federal Inland Revenue Service.
For personalised help or consultation on how the tax laws may apply to your business or organisation, please do not hesitate to contact us via clients@vi-m.com.