NIGERIA Law and Practice Contributed by: Theophilus Emuwa, Jibrin Dasun, Perpetua Onyeukwu and Tubosiya Ibama, ǼLEX
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Businesses seeking long-term growth and continuity typically adopt a corporate form, most commonly the private limited liability company (ltd). An ltd may be incorporated with a single shareholder but must not have more than 50 shareholders, and is required to restrict the transfer of its shares. Another widely used corporate structure is the pub - lic limited liability company (plc), which must have at least two shareholders and may have an unlimited number. A plc is the prescribed form for companies listed on the stock exchange. Other corporate forms recognised under Nigerian law include the unlimited liability company, under which shareholders bear unlimited liability, although this structure is rarely utilised. There is also the company limited by guarantee, which is a non-profit structure used for charitable or similar objects. In addition, limited liability partnerships (LLPs) are rec - ognised as having a separate legal personality distinct from their partners. However, LLPs are not tax-trans - parent in Nigeria, and, like corporate structures, are subject to taxation at the corporate level. 1.2 Use and Taxation of Transparent Business Structures The following transparent entities are recognised by Nigerian law: • general partnerships; • limited partnerships; and • sole proprietorships. Many small and medium-sized enterprises, as well as petty traders, carry on business as partnerships or sole proprietorships. 1.3 Tests for Determining Tax Residence Tax Residence for Incorporated Businesses A company is resident for tax purposes in Nigeria if:
• it is formed, registered or incorporated under Nige - rian law; • its central place of management and control is in Nigeria; or • its effective place of management and control is in Nigeria. Resident companies are subject to income tax on their worldwide profits. Therefore, the profits of a Nigerian company are deemed to accrue in Nigeria, regardless of where they actually arise. There are three instances where a non-resident com - pany (NRC) would be liable to tax in Nigeria. The first instance is where it has a permanent estab - lishment (PE) in Nigeria. An NRC would be deemed to have a PE in Nigeria where it: • has a place, in Nigeria, through which its business is wholly or partly carried on or at its disposal for the purposes of its business; • carries on business in Nigeria through an author - ised agent acting on its behalf or on behalf of related or controlled entities; • maintains a stock of goods or merchandise in Nigeria from which deliveries are made by a person on its behalf; • undertakes, alone or with others, a project in Nigeria involving activities such as surveys, design, delivery, construction, assembly, installation, com - missioning, decommissioning, or any supervisory activity in connection with those activities, regard - less of how the project is divided or where parts are performed; or • furnishes any service in Nigeria through employ - ees, agents, subcontractors or other persons engaged by it for such purpose. The second instance is where the NRC has a signifi - cant economic presence (SEP) in Nigeria. An NRC shall be deemed to have SEP in Nigeria where the person transmits, emits or sends by itself or through other person, signals, sounds, messages, images or data of any kind by cable, radio, electromagnetic sys - tems or any other electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce, application store, high-frequency trading,
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