When the new Nigeria Tax Act 2025 (NTA 2025) was signed into law, the headlines were impossible to miss.
“Eleven laws repealed.”
“Thirteen amended.”
“Remote workers must now pay tax.”
Excitement filled the air as the news spread. The government celebrated the Act, calling it a major milestone in tax reform. Economists praised it as a step toward greater transparency and efficiency, while business owners expressed optimism, seeing it as a promise of a fairer and simpler system.
Everyone was talking about the simplified structure, the cleaner framework, and the promise of a new tax era. But buried deep in those 200+ pages is one small section that could completely change how companies collaborate and share profits in Nigeria.
That section is Section 11, and it’s quietly redefining how partnerships, joint ventures, and business alliances are taxed.
Before Now, It Was a Grey Area No One Wanted to Touch
Before this new Act, the old Companies Income Tax Act (CITA) left one big question unanswered.
“If two or more companies come together to do business, who exactly pays the tax?”
CITA treated partnerships as something meant only for individuals, not for companies. So, when two or more companies teamed up in a joint venture, collaboration, or unregistered partnership, CITA gave no clear guidance on how to tax profits from company collaborations.
Tax practitioners often had to improvise. Some treated the venture as a single entity, while others split profits informally. It worked until the taxman came knocking.
The confusion grew worse in cases where
- A Nigerian company partnered with a foreign company
- Profits were earned across borders
- The collaboration wasn’t registered, just based on an agreement or handshake
Predictably, this led to inconsistent tax treatment, double taxation, and in some cases, missing income from one company’s books.
Now, Each Company Must Carry Its Own Tax Cross
Under Section 11 of the Nigeria Tax Act 2025, the rule is finally clear.
“Where two or more companies carry out a trade or business in a partnership, joint venture, or similar arrangement in Nigeria, any income or profit arising therefrom shall constitute a source of profits and each company’s share shall be taxed separately.” (Emphasis Mine)
In practical terms, this means
- The partnership itself is not taxed; each company’s share of profit is.
- Even if the collaboration looks like one business, each partner must record its own share of revenue and expenses.
- If one of the partners is foreign, its Nigerian-sourced income will be taxed in Nigeria.
- If the partnership operates abroad, any Nigerian partner must include its share of profit in its Nigerian tax return.
This is a major shift. It finally clarifies something businesses have struggled with for years: who pays tax when companies do business together in Nigeria.
Why You Should Care About Section 11 of the Nigeria Tax Act 2025
Think about it this way by considering these examples.
- Two film production companies work together on a blockbuster. Each must now declare its share of profit.
- A Nigerian tech startup partners with a UK firm to build an app. The UK partner’s earnings from that deal are taxable in Nigeria.
- Several logistics firms join forces on a nationwide delivery project. Each must now account for its piece of the pie.
This isn’t just about paying tax any more, it goes beyond that. It affects how businesses report income, how they draft contracts, and plan operations in their business. The government is clearly plugging leakages and tightening transparency, and aligning Nigeria’s tax system with global best practices and standards.
For a deeper understanding of your general tax obligations — from deductions to penalties — you can read our guide on What Every Nigerian Business Must Know About Taxes: Legal Obligations, Deductions, And The Price of Non-Compliance. It complements this article by explaining how compliance begins long before profit-sharing or partnerships come into play.
The Oil and Gas Exception
Section 11(4) provides one clear exception for oil and gas partnerships.
These are already governed by their own fiscal regime under the Petroleum Industry Act (PIA), which applies Hydrocarbon Tax and other sector-specific systems.
This means while industries such as technology, construction, consulting, logistics, and creative industry will feel the full effect of Section 11, the oil and gas operations remain under their existing taxation framework.
What This Means in Everyday Business Life
Let’s make this practical. Here’s how Section 11 will impact ordinary business operations.
- More Record-Keeping
Each partner must now maintain separate, detailed records of income and expenses. You can no longer rely on a single joint-venture account to cover all transactions. - Cross-Border Caution
If your partner is based outside Nigeria, your contracts must reflect withholding tax, transfer pricing, and double-taxation treaty rules. - Audit Readiness
The FIRS will expect to see each company’s portion of profit clearly stated in its financials statements, even if your books are managed jointly. - Restructuring Opportunities
Some companies may actually benefit from formalising their partnerships. Clearer structures can reduce risk, simplify compliance, and create room for tax optimisation.
Bonus Insight: What If the Companies Create or Register a New Entity?
Here’s where things get interesting.
Section 11 only applies when two or more companies do business together without forming a new company. This is what we call an unincorporated joint venture or partnership.
Once those same companies decide to register a new company to manage the collaboration, the tax story changes completely. The new entity becomes a separate legal person and a taxpayer in its own right.
It files its own returns, pays Companies Income Tax (CIT) on its total profits, and the original companies are taxed only when they receive dividends or management fees.
In summary, once a partnership becomes a registered company, Section 11 steps aside and ordinary corporate taxation rules take over.
Example:
If Company A and Company B build a bridge together under an informal joint venture, each reports its share of profit under Section 11.
But if they form AB Projects Limited, the company itself becomes the taxpayer.
Understanding this subtle difference could save your business millions or protect you from penalties during audit.
You’re Invited to Our Free Tax Webinar
At Starr Attorneys, we believe that having knowledge of the law and understanding it is the first step to compliance and business growth.
That’s why we’re hosting an exclusive Tax Webinar at the end of this month to break down the Nigeria Tax Act 2025 in plain, practical language with no legal jargon or generalisations.
The sessions will cover
- Business Owners – How the new law affects profit-sharing, restructuring, and partnerships.
- Remote Workers – How cross-border payments and digital income are taxed.
- Creatives and Freelancers – How to structure collaborations without losing money to double taxation.
- Salary Earners – How to understand your new deductions and entitlements.
📅 Date: End of November 2025 (exact date will be shared via email)
💻 Venue: Online
🎙️ Host: Temitope Odeyinka – Managing Partner, Starr Attorneys
👉 Register here: https://forms.gle/MjwQEFPoertq6r5f9
Do not wait for the penalties before learning the rules. Join us and let’s make sense of this new tax era together.
Written by: Temitope Odeyinka
International Business lawyer
Managing Partner, Starr Attorneys.
