Dividend Taxation in Nigeria: What Every Business Should Know

 

Dividend Taxation in Nigeria: What Every Business Should Know

By Baha’s Books

📊 Dividend Income Counts as Profit

In Nigeria, any dividend income a company earns — even if tax has already been deducted at the source — must still be included as part of the company’s profits.

This means that if your business receives dividends from investments in other companies, you cannot exclude them from your taxable income. They are considered part of your overall profit and will be taxed accordingly.

🟢 Dividends in Shares Are Not Taxed Twice

However, there is an important exception. If your company receives dividends in the form of shares (rather than cash), those dividends are not taxed again. This prevents double taxation and provides some relief for businesses investing in other companies.

⚠️ Dividends Without Profit Still Get Taxed

Some companies issue dividends even when they have no profit or when their profit is less than the dividends being paid. In such cases, the Nigerian government treats those dividends as if they were the company’s total profit for that year.

That means tax will still be applied — regardless of whether there is an actual profit or not.

📝 Why This Matters

Dividend taxation rules in Nigeria ensure that companies stay accountable, but they can also create confusion. Knowing the difference between cash dividends and share dividends, and understanding how the law treats dividends paid without profit, helps businesses avoid costly mistakes.

✅ Final Thoughts

Tax laws can be complex, but they don’t have to be overwhelming. At Baha’s Books, we break down financial rules into clear, practical insights to help business owners, CFOs, and finance managers stay compliant while focusing on growth.

📌 Want more clarity on Nigerian tax rules?
Visit us at bahasbooks.com for simplified guides, insights, and tools that make compliance easy.

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