Section 163

(1) There is exempt from tax under chapter two of this Act –
exemption
(a) the profits accruing to, or gains from disposal of assets of any person
being –
(i) a statutory or registered friendly society, where the profits or gains
are not derived from a trade or business carried on by such society,
(ii) a co-operative society registered under any enactment or law
relating to co-operative societies, not being profits or gains from any
trade or business carried on by that society,
(iii) engaged in educational, religious or charitable activities of a public
character where the profits or gains are not derived from a trade or
business carried on by such person,
Cap. T14 (iv) a trade union registered under the Trade Unions Act where the
LFN, 2004 profits or gains are not derived from a trade or business carried on by
such trade union,
(v) a Federal, State or Local Government in Nigeria, their Ministries,
Departments and Agencies and other public institutions, other than profits
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or gains derived from trade or business or any instrumentality established
for the purpose of trade or business, and
(vi) a government purchasing authority established by an enactment
and empowered to acquire any commodity for export or redistribution;
(b) dividend distributed by authorised collective investment scheme;
(c) dividend or rental income received by a real estate investment company
on behalf of its shareholders, where not less than 75% of the dividend or
rental income is distributed within 12 months after the end of the financial
year in which the dividend or rental income was earned, provided that nothing
in this subsection shall be construed to exempt a –
(i) shareholder from tax on the dividend or rental income received
from a real estate investment company,
(ii) real estate investment company from tax on management fee,
profits or any other income earned for and on its own account, and
(iii) real estate investment company from tax on dividend or rental
income if it does not meet the conditions stipulated in this paragraph.
(d) compensating payments, which qualify as dividends under section 4
of this Act, received by a lender from its approved agent or a borrower in a
regulated securities lending transaction;
(e) compensating payments, which qualify as dividends or interest under
section 4 of this Act, received by an approved agent from a borrower or
lender on behalf of a lender or borrower in a regulated securities lending
transaction;
(f) consular fees received on behalf of a foreign State, or by a consular
officer on behalf of the State, and the employment income of such officer,
other than income in respect of any trade, business, profession or vocation
carried on by the officer or in respect of any other employment exercised
by him in Nigeria:
Provided that this exemption shall not apply to the income of an employee
engaged in domestic duties, or where the officer or employee ordinarily
resides in Nigeria and is not a national of the foreign State;
(g) an income in respect of which tax is remitted or exempt under the Cap. D9
provisions of the Diplomatic Immunities and Privileges Act or of any LFN, 2004
enactment, order or notice continued in force or effected by that Act;
(h) pension funds and assets created pursuant to the Pension Reform Act No. 4,
Act; 2014
(i) pension, gratuity or any retirement benefits granted in accordance
with the Pension Reform Act;
(j) wound and disability pensions granted to members of the armed forces
or of any recognised national defence organisation, or to a person injured as
a result of enemy action;
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(k) a sum received by way of death gratuities or as consolidated
compensation for death or injuries;
(l) subject to the provisions of Part VIII of Chapter Two of this Act,
redundancy lump sum payment and other compensation of capital nature
for loss of employment;
(m) gains accruing from the disposal of assets by an angel investor, venture
capitalist, private equity fund, accelerators or incubators with respect to a
labelled startup provided the assets have been held in Nigeria for a minimum
of 24 months;
(n) income earned from bonds issued by a State or the Federal Government
of Nigeria;
(o) emoluments of any person serving as other rank and other personnel
serving in combat zones, hazardous areas or in designated operations,
provided that where any other income accrues to the person, not being
income by way of personal emoluments, that income shall be liable to tax
under Chapter Two of this Act;
Thirteenth (p) income generated by companies engaged in agricultural businesses
Schedule including crop production, livestock, aquaculture, forestry, dairy and such
other businesses as described in the Thirteenth Schedule to this Act, for the
first five years upon commencement of business;
(q) dividend received from investments in wholly export-oriented
businesses;
(r) profits of a company engaged in sporting activities;
(s) dividend, interest, rent or royalty derived from outside Nigeria and
brought into Nigeria through approved channels;
(t) income of a person from an employment where such person earns
gross income of national minimum wage or less from such employment;
(u) wages and salaries of military officers; and
(v) the profits of any Nigerian company (other than companies engaged
in the upstream, midstream or downstream petroleum operations) in respect
of goods or services exported from Nigeria if the proceeds of such exports
are repatriated through official channels.
(2) The following shall not constitute chargeable gains under Part VIII of
Chapter Two of this Act –
(a) gains accruing to –
(i) pension funds and assets approved under the Pension Reform Act,
and
(ii) an individual from disposal of investment held as part of any national
provident fund or other retirement benefits schemes established under
the provisions of any Act or enactment for employees throughout Nigeria;
(b) gains on the disposal of a decoration, awarded for valour or gallant
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conduct which a person acquires otherwise than for consideration in money
or money's worth.
(3) A company shall be entitled to an additional deduction of 50% in the
relevant years of assessment in respect of costs incurred in any two calendar
years from 2023 to 2025 on the following –
(a) wage awards, salary increases, transportation allowance or transport
subsidy granted to a low-income worker, which bring the gross monthly
remuneration of the worker up to an amount not exceeding N100,000
Provided that any additional award or salary increase to an employee earning
above N100,000 as monthly salary shall not qualify for the additional
deduction under this subsection; and
(b) salaries of any new employee constituting a net increase in the average
number of new employees hired in 2023 and 2024 calendar years over and
above the average net employment in the three preceding years, provided
that such new employees are not involuntarily disengaged within a period of
three years post-employment.
(4) In this section –
"net employment" means the total number of persons employed less the
total number of persons disengaged during the calendar year, whether such
disengagement is voluntary or not.
"other rank" has the meaning assigned to it by the Armed Forces Pen- Cap. A23,
sions Act. LFN 2004
"personal emoluments" means wages or salaries and includes allowances,
benefits in kind, gratuities, superannuation or pension schemes and any other
income derived solely by reason of employment as other rank.