Nigeria Tax Act 2025: How Foreign Shipping and Airline Companies Are Taxed

 

Nigeria Tax Act 2025: How Foreign Shipping and Airline Companies Are Taxed

International trade and transport play a vital role in Nigeria’s economy. Every day, ships dock at Nigerian ports and aircraft land at Nigerian airports carrying passengers, goods, livestock, and mail. But when these vessels and planes are operated by foreign companies, a big question arises: should Nigeria tax the profits earned from those activities?

The Nigeria Tax Act, 2025 provides a clear answer. Yes—if a non-resident person earns profits from carrying on the business of transport by sea or air in Nigeria, those profits are taxable. This applies whenever their ships or aircraft, whether owned, leased, or chartered, call at Nigerian ports to ship or load passengers, cargo, or mail.

The Trans-shipment Exception

There is an important carve-out. If passengers, goods, or mail are simply brought into Nigeria for transfer—say, from one aircraft to another or between an aircraft and a ship—then those earnings are not taxed in Nigeria. The law recognizes that this is just transit, not genuine Nigerian-sourced income.

How Profits Are Calculated

The law uses a global approach to fairly calculate how much profit should be attributed to Nigeria. If the Nigerian tax authority is satisfied that the foreign company’s home country calculates shipping or airline profits in a way similar to Nigeria’s system, then the Nigerian taxable profit is determined using two global ratios:

  • Global adjusted profit ratio: the company’s worldwide ratio of profit to revenue is applied to its Nigerian earnings.

  • Global depreciation ratio: the company’s worldwide depreciation ratio is applied to Nigerian revenue to account for wear and tear of ships or aircraft.

Together, these ensure that Nigeria gets a fair share of tax without overestimating profits.

If this method cannot be applied, Nigeria has fallback rules. Profits are determined either by applying the foreign company’s global profit margin to Nigerian turnover or by using a fixed percentage of Nigerian revenue, as directed by the tax authority. Importantly, there is a minimum tax rule: regardless of calculations, the tax payable can never be less than 2% of the gross Nigerian revenue from carriage of passengers, mail, livestock, or goods. This minimum tax must be computed, assessed, and paid monthly.

Compliance Requirements

The Act sets strict compliance standards. If a company does not provide a separate financial statement for its Nigerian operations, it must submit a detailed gross revenue statement for its Nigeria-related income. This must be certified by one of its directors, reviewed by external auditors, and supported by contract agreements.

The law excludes profits from leasing vessels or containers, non-freight operations, or incidental income, which fall under different tax provisions.

Regulatory Enforcement

To ensure foreign shipping and airline companies comply, regulatory agencies in Nigeria’s shipping and air transport sectors are empowered to demand proof of tax compliance before granting licenses, approvals, or permits. Companies may be asked to show:

  • Evidence of tax filings for the previous year

  • Tax clearance certificates covering the past three years

  • Proof of tax declaration and payment for the intended shipment

Why This Matters

This provision is designed to close tax loopholes and ensure Nigeria benefits from the large volume of international transport activity tied to its ports and airports. By applying global accounting ratios and enforcing a minimum tax floor, Nigeria guarantees steady revenue, while ensuring foreign companies are taxed in line with global standards.

For shipping lines, airlines, and logistics companies operating internationally, this means that compliance is non-negotiable. Nigeria is no longer just a transit point—it is a jurisdiction where tax obligations must be met whenever profits are earned.

At Bahas Books, we help businesses and professionals understand these evolving rules so they can stay compliant, plan strategically, and operate confidently in cross-border markets.

👉 For more tax and compliance insights, visit bahasbooks.com.

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