CIT and Microfinance Institutions: Tax Considerations for Financial Inclusion Providers in Nigeria.

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Microfinance institutions (MFIs) in Nigeria serve as crucial drivers of financial inclusion, offering essential financial services to individuals and small businesses who may not have access to traditional banking. While MFIs play a pivotal role in economic development, they must also navigate the tax landscape to ensure compliance with the law. The Companies Income Tax (CIT) Act, among other tax regulations, governs the tax implications for MFIs operating in Nigeria. In this article, we will explore the key tax considerations that MFIs should be aware of to support their financial inclusion initiatives.

Taxation of Microfinance Institutions:

  1. Companies Income Tax (CIT): MFIs, which are registered as companies, are subject to CIT, which is currently assessed at a rate of 30% of their taxable profits. It is essential for MFIs to accurately determine their taxable income, taking into consideration specific deductions and exemptions applicable to their operations.
  2. Withholding Tax (WHT): MFIs may be required to deduct and remit withholding tax on various payments, including interest on loans, dividends, and fees, in accordance with the applicable rates.
  3. Value Added Tax (VAT): VAT may apply to certain financial services offered by MFIs. However, certain financial services provided by MFIs may be exempt from VAT.
  4. Customs Duties: Importation of equipment and materials for MFI operations may attract customs duties, which should be considered when planning for capital expenditures.

Tax Planning and Compliance:

To effectively manage their tax obligations and support their financial inclusion initiatives, MFIs in Nigeria should consider the following strategies:

  1. Accurate Record-Keeping: Maintain meticulous records of all transactions, including interest income, expenses, and withholding tax deductions, to ensure compliance and facilitate accurate tax reporting.
  2. Loan Portfolio Management: Implement effective loan portfolio management systems to track and manage interest income and ensure proper tax reporting.
  3. Transfer Pricing: If engaging in related-party transactions, comply with transfer pricing regulations to determine fair market values and interest rates.
  4. Tax Credits: Explore opportunities to offset tax liabilities with available tax credits, such as foreign tax credits for taxes paid in other jurisdictions.
  5. Professional Guidance: Engage tax experts and legal counsel with expertise in the microfinance sector to navigate the complexities of tax laws effectively.


Tax considerations are a critical aspect of financial management for microfinance institutions in Nigeria. Ensuring compliance with tax laws and optimizing tax positions are essential for maintaining financial health and meeting regulatory requirements. By aligning their tax strategies with the provisions of the CIT Act and other relevant regulations, MFIs can continue to drive financial inclusion, support economic growth, and improve the livelihoods of individuals and small businesses across Nigeria.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.