Eight organisations exempt from Companies Income Tax in Nigeria

…and when the exemption no longer applies

As companies across Nigeria conclude their annual Companies Income Tax (CIT) filing obligations, tax professionals are reminding businesses and non-profit organisations that not every entity operating in the country is required to pay Companies Income Tax.

While Companies Income Tax is one of the government’s major sources of non-oil revenue, the Nigeria Tax Act provides exemptions for specific organisations whose activities are considered to serve public, charitable or mutual-interest purposes. However, tax experts caution that these exemptions are not blanket waivers, as income generated from commercial activities may still be taxable.
Section 162 of the Nigeria Tax Act outlines categories of income, profits, gains and benefits that qualify for exemption from Companies Income Tax.

According to Chizoba Ngwudo, a tax planning officer and associate member of the Institute of Chartered Accountants of Nigeria (ICAN), many organisations wrongly assume that once they qualify as a religious body, cooperative society or charitable institution, every source of their income automatically enjoys tax exemption.

“The key point to remember is that tax exemption is not absolute,” Ngwudo said in a LinkedIn post explaining the provision. “Where any of these organisations engage in trade or business activities for profit, the income attributable to those commercial activities may be taxable in accordance with the applicable tax laws.”

Read also: CITN explains importance of Tax Awareness Day

Below are eight categories of organisations that qualify for exemption under the Act.

Friendly societies
Friendly societies are voluntary, non-profit associations created to provide financial or social assistance to members during periods of illness, unemployment, death or other forms of hardship. Since these organisations exist primarily for the welfare of their members rather than commercial gain, income generated in furtherance of those objectives is exempt from Companies Income Tax.

Registered cooperative societies
Registered cooperative societies are also exempt from Companies Income Tax under the law. These organisations are formed by individuals who voluntarily pool resources to meet common economic, social or cultural needs.
Examples include farmers’ cooperatives, consumer cooperatives, thrift and credit societies, housing cooperatives and other member-owned associations. The exemption recognises their role in promoting financial inclusion, community development and shared economic prosperity.

Educational organisations of a public nature
Educational institutions established for public benefit also qualify for tax exemption, provided they operate primarily to advance education rather than generate profits for private individuals or shareholders.
The provision covers educational organisations whose income is applied towards their educational objectives. However, commercial ventures that are unrelated to those objectives may not enjoy the same tax treatment.

Religious organisations
Churches, mosques and other religious organisations operating for public religious purposes are exempt from Companies Income Tax on income generated from their core activities, including tithes, offerings, donations and similar contributions.
Ngwudo disclosed that this exemption does not automatically extend to every source of revenue earned by religious bodies.
She explained that where a church begins operating commercial ventures, such as renting out event halls for business purposes or selling products for profit, the income generated from those activities may become liable to tax under the applicable laws.
The distinction, she said, lies between income earned in pursuit of a religious mission and income derived from commercial enterprise.

Read also: How Nigeria’s new tax architecture is rewriting corporate compliance

Charitable organisations
Charitable organisations established solely for public benefit are similarly exempt from Companies Income Tax.
These include organisations that provide humanitarian assistance, healthcare, poverty alleviation, community development or other charitable services without operating for private profit.
However, where charitable organisations establish businesses that generate taxable commercial income, those earnings may fall outside the exemption provided by the Act.

Registered trade unions
Registered trade unions also qualify for exemption under Section 162.
These organisations exist to represent employees or employers in matters relating to employment, collective bargaining and workplace welfare rather than to operate as profit-making businesses.
Their exemption reflects the public-interest role they play in protecting workers’ rights and promoting industrial harmony.

Federal, state and local governments
Federal, state and local governments, together with their ministries, departments, agencies (MDAs) and other public institutions, are generally exempt from Companies Income Tax.
The exemption also extends to public institutions established to perform government functions.
However, the Act makes an important distinction where such entities engage in commercial activities. Income generated from business operations may still be taxable depending on the nature of those activities.

Government purchasing authorities
Government purchasing authorities established by law are also listed among organisations exempt from Companies Income Tax.
These statutory bodies are responsible for procuring goods, works and services on behalf of government institutions and are exempt because they perform public administrative functions rather than commercial activities.

Although the Act provides relief for qualifying organisations, tax professionals say entities claiming exemptions should still maintain proper accounting records and periodically review their sources of income to ensure they remain compliant with the law.
The growing diversification of revenue sources among religious organisations, charities, educational institutions and cooperative societies means many now generate income beyond their traditional activities. Where such income is linked to commercial enterprises rather than their public-interest objectives, the exemption may no longer apply.
Ngwudo advised organisations to understand the distinction between exempt income and taxable commercial earnings before assuming they are completely outside the Companies Income Tax net.
For affected organisations, understanding the scope of Section 162 is increasingly important as tax authorities continue to strengthen compliance and encourage taxpayers to properly classify their income under Nigeria’s evolving tax framework.