Taxing Worldwide Profits under the Nigeria Tax Act 2025: An Analysis of Section 6

Section 6 of the Nigeria Tax Act 2025 establishes a comprehensive framework for the taxation of worldwide profits attributable to Nigerian companies and Nigerian-controlled corporate structures. Subsection (1) provides the foundation for this by deeming the profits of a Nigerian company to accrue in Nigeria wherever they arise, regardless of whether they are brought into or received in Nigeria. By doing so, the Act adopts an approach under which Nigerian companies are subject to tax on their global income. This provision effectively removes the relevance of physical remittance or repatriation of profits as a condition for tax liability.

Subsections (2) and (3) build on this and introduce targeted anti-avoidance measures aimed at addressing profit shifting through foreign subsidiaries and multinational group structures. Subsection (2) applies where a foreign company controlled by a Nigerian company earns profits but does not distribute those profits as dividends in a given year, the Act authorises the tax authority to treat the proportion of the undistributed profits attributable to the Nigerian parent, and which could have been distributed without detriment to the subsidiary’s business, as having been distributed. These deemed profits are then included in the Nigerian company’s taxable profits for the purposes of subsection (1).

Subsection (3) further extends the reach of Section 6 by introducing a minimum effective tax rate mechanism applicable to non-resident subsidiaries and multinational group entities linked to Nigerian companies. Where the income tax paid by such a non-resident entity in a particular year falls below the minimum effective tax rate prescribed by the Act, which is 15%, the Nigerian parent company is required to pay an additional amount sufficient to bring the overall tax burden on the subsidiary’s income up to the prescribed minimum. This provision effectively neutralises the tax benefits of low-tax jurisdictions and preferential tax regimes, and aligns Nigeria’s corporate tax policy with emerging global minimum tax standards.