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Nigeria’s revised tax legislation contains extensive provisions for business deductions and incentives that many companies fail to utilize, the head of Enugu State’s tax collection agency said Friday.
Emmanuel Nnamani, chairman of the Enugu State Internal Revenue Service, told business owners in the Southeast that closer examination of the law reveals mechanisms to substantially reduce taxable income, countering frequent complaints that the system imposes excessive burdens.
Speaking at a sensitization event organized jointly with the Chartered Institute of Taxation of Nigeria, Nnamani outlined how companies can structure compensation packages to take advantage of allowable deductions under the framework.
The law permits businesses to cover executive and staff expenses including housing, utilities, domestic services and other benefits as deductible costs, he said. “If we structure our companies very well, the company should take over major payments such as accommodation, utilities and other benefits. These are allowable deductions under the tax law,” Nnamani said.
While such benefits are taxable as income for employees, the legislation caps the taxable portion at no more than 20 percent of an employee’s salary regardless of the actual value provided, he explained.
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Nnamani gave an example: if a company provides N20 million in housing to an employee earning N10 million annually, tax authorities will assess only 20 percent of the salary—N2 million—even though the benefit’s value exceeds that amount.
He urged business owners to consult tax professionals and study the legislation rather than dismissing it as punitive without understanding its provisions.
Additional reliefs available under the law include donation allowances reaching 10 percent of profits, research and development incentives, and capital allowances on qualifying assets, Nnamani said. He advised businesses to channel donations through recognized institutions to ensure they qualify for deductions.
The tax official stressed that compliance remains essential, noting companies must obtain Tax Identification Numbers, file annual returns and remit employee taxes promptly. Company income tax returns must be submitted within six months of financial year-end, while employers must remit Pay-As-You-Earn deductions monthly.
Nnamani encouraged businesses to adopt government-backed digitalization tools designed to assist with accounting, payroll management and tax remittances. “Do not see tax practitioners as an unnecessary cost. They help you structure your business in a tax-efficient way while you focus on growth,” he said.
He emphasized that tax authorities implement statutes enacted at the national level and urged taxpayers to formally contest any assessment they consider inaccurate rather than avoiding compliance altogether.
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Nigeria’s tax system has faced criticism from business groups arguing that multiple levies across federal, state and local levels create complexity and discourage investment. The federal government has undertaken reforms aimed at simplifying administration and broadening the tax base while reducing rates in some categories.
President Bola Tinubu’s administration established a Presidential Fiscal Policy and Tax Reforms Committee last year to overhaul the system. The committee, chaired by tax specialist Taiwo Oyedele, has proposed consolidating various levies and adjusting thresholds to reduce burdens on small enterprises while improving collection efficiency.
The reforms have generated mixed reactions. Some state governors have expressed concern about revenue implications, particularly regarding proposed changes to value-added tax distribution formulas. Business associations have called for clarity on implementation timelines and enforcement mechanisms.
Nnamani’s comments suggest state tax authorities are working to improve understanding of existing provisions even as broader legislative changes advance through the federal system. Enugu State has pursued digitalization of tax administration in recent years, introducing electronic filing platforms and payment systems.
The Southeast region, which includes Enugu, hosts substantial manufacturing and commercial activity but has faced infrastructure challenges and security concerns that have affected business operations. State governments in the zone have competed to attract investment through various incentive programs.
Tax compliance rates in Nigeria remain relatively low compared to other emerging economies, with large portions of economic activity occurring in the informal sector beyond the reach of tax authorities. Successive governments have struggled to expand the tax base while maintaining rates that don’t discourage formal business registration.
The Internal Revenue Service chairman said his agency would continue organizing sensitization programs to encourage voluntary compliance and create what he described as a more business-friendly tax environment.
Professional tax practitioners have noted that many Nigerian businesses operate without taking full advantage of legitimate deductions and reliefs available under law, often due to limited awareness or reluctance to invest in professional tax advisory services.
Nnamani’s emphasis on benefit-in-kind provisions appears aimed at addressing a common concern among businesses regarding compensation costs. By demonstrating how companies can provide substantial non-cash benefits while limiting tax exposure, revenue authorities hope to encourage formal documentation of employee compensation rather than informal cash payments that escape taxation.
The initiative reflects broader efforts by tax authorities to shift from enforcement-focused approaches toward education and facilitation, though collection targets and penalties for non-compliance remain in place.
