In Nigeria, corporate donations have become an essential aspect of business operations, reflecting a commitment to social responsibility and community development. Companies frequently contribute to various public causes, from educational programmes to disaster relief efforts. However, under Nigerian tax regulations, not every donation qualifies for tax deductions, which raises questions about the financial implications of corporate philanthropy.
The recent enactment of the Nigeria Tax Act, 2025 (NTA 2025), has introduced significant changes to the treatment of corporate donations. This new legislation expands the scope of deductible donations, providing companies with greater flexibility in their corporate social responsibility (CSR) initiatives compared to the previous legal framework.
Under the NTA 2025, companies can now deduct donations made for both revenue and capital purposes. This marks a considerable shift from the existing Companies Income Tax Act (CITA), which only allowed deductions for revenue-based donations. The new law outlines specific categories of eligible donations that qualify for tax deductions. These include contributions to public funds, statutory bodies, and institutions focused on religious, charitable, educational, or scientific endeavours established within Nigeria. Additionally, donations made to organisations recognised under the Diplomatic Immunities and Privileges Act or those aimed at addressing pandemics, natural disasters, or other public emergencies are also eligible.
However, while the NTA 2025 broadens the scope of deductible donations, it does impose certain limits on the amount that can be claimed. Companies can deduct donations up to 10% of their profit before tax for any given assessment year. For non-cash donations, the deduction is limited to the lower of the market value at the time of donation or the purchase price of the item when it was acquired. Furthermore, proper documentation is crucial; companies must provide evidence of their donations to the relevant tax authority to secure these deductions.
For instance, consider a company that reports a profit before tax of ₦2 billion and decides to donate ₦500 million worth of equipment to a statutory body. Under the previous CITA regulations, this capital donation would not have been deductible at all. However, with the NTA 2025 in effect, this company can claim a deduction capped at ₦200 million—10% of its profit before tax—provided it maintains adequate documentation to support its claim.
This change in legislation is significant for several reasons. First, it allows companies to align their capital projects—such as donating infrastructure or equipment—with their tax planning strategies. This alignment can enhance a company’s overall financial health while simultaneously contributing positively to society. Additionally, CSR initiatives now have a more robust legal foundation under the NTA 2025, although the 10% cap remains a point of contention.
The question arises: should this 10% cap be revisited? In times of economic hardship, many businesses may wish to increase their contributions to societal causes. The current limit could potentially restrict their ability to make larger donations that could significantly benefit communities in need. A review of this cap could encourage more substantial corporate involvement in social initiatives, fostering an environment where businesses can play a more active role in addressing pressing societal challenges.
Moreover, as Nigeria continues to navigate various economic and social issues, fostering a culture of philanthropy among corporations could be instrumental in driving positive change. By allowing companies to make more generous contributions without stringent limitations, the government could stimulate greater corporate engagement in community development efforts.
Finally, while the NTA 2025 has made notable strides in enhancing the treatment of corporate donations under Nigerian tax law, there remains room for improvement. The expansion of deductible contributions is a welcome change that encourages businesses to engage in CSR activities more actively. However, revisiting the 10% cap on deductible donations could further empower companies to make meaningful contributions during challenging times. As we move forward, it will be essential for policymakers and business leaders to engage in dialogue about how best to balance corporate giving with fiscal responsibility and societal needs.
Dr Adeniyi Bamgboye, DBA, FCTI, FCA, FCCA, a dual-qualified chartered accountant, tax expert, and policy analyst, is the managing partner of Empyrean Professional Services, an audit, business, and financial advisory firm dedicated to enhancing its clients’ business value. 08060603156. Adeniyi.bamgboye@empyrean.ng
