CIT and Capital Allowances

Introduction: Capital expenditures, such as investments in assets and equipment, are essential for business growth and sustainability. Recognizing the importance of capital investments, the Nigerian government provides tax incentives in the form of capital allowances under the Companies Income Tax (CIT) Act. Capital allowances allow businesses to deduct a portion of the cost of qualifying assets from their taxable income, reducing their tax liability. In this article, we will explore the concept of capital allowances and how businesses can make the most of them. Understanding Capital Allowances: Capital allowances are deductions that businesses can claim on qualifying capital expenditures. These deductions are provided to encourage investments in assets that contribute to business growth, productivity, and competitiveness. Unlike regular operating expenses, which are fully deductible in the year they are incurred, capital allowances allow businesses to recover the cost of assets over time. Qualifying Assets for Capital Allowances: Maximizing Capital Allowance Benefits: Benefits of Capital Allowances: Conclusion: Capital allowances are a valuable tax incentive that can significantly reduce a company’s tax liability while promoting investment in essential assets. Nigerian businesses should proactively assess their capital expenditures and take advantage of available capital allowances to optimize their tax positions. 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, www.sunmoladavid.com . You can also reach us via WhatsApp at +2348038460036.