Insurance companies are owned either wholly by foreigners or Nigerians, or partly owned by both foreigners and Nigerians. These companies can either be for life or non–life insurance businesses. Section 14 (1 – 5) of CITA 1990 provides for the taxation of such companies, which gives them certain unique principles and methods that are adopted for the ascertainment of their taxable profits and subsequently, their tax liabilities.
This unit, therefore, exposes you to those unique intricacies and the computations of taxable profits for both life and non–life insurance companies.


At the end of this unit, you should be able to:

  1. distinguish between life and non–life insurance companies
  2. explain how the profits of life and non–life insurance companies are ascertained
  3.  discuss the term “permanent establishment”
  4. explain the general procedures for ascertaining tax liabilities in respect of all insurance companies, irrespective of their nature.


3.1 Assessment of Non–Nigerian Insurance Companies for Taxation

In the case of a non–Nigerian insurance company that carries on business in Nigeria and which its profit partly accrues outside Nigeria, the profits on which tax may be imposed are ascertained as shown below.

(a) Aggregating interest and premium and other incomes received in Nigeria (less premium return to the insured or premium paid on re-insurance);
(b) Adding, there to, reserves of unexpired risk at the beginning of the year.
(c) Deducting therefrom:
(i) reserve for unexpired risk at the end of the year;
(ii) the actual losses in Nigeria (less amount to be recovered from any re-insurance);
(iii) agency expenses incurred wholly and necessarily in the pursuance of business in Nigeria;
(iv) a fair proportion of head office expenses as approved by FBIR.

3.1.2 Foreign (Non-Nigerian) Life Assurance Company

In the case of a life assurance business, whether proprietary or mutual, other than a Nigerian company, which carries on business through a permanent establishment in Nigeria, the profits on which tax may be imposed shall be the total investment income less management expenses, including commission.

Where the profits of such a company accrue in part outside Nigeria, the profit on which tax may be imposed shall be that proportion of the total investment income of that company. That is, premium receivable in Nigeria x investment income = Total premium receivable.

Where the insurance company has its head office outside Nigeria, a fair proportion of the head office expenses may be approved by the revenue board in addition to the agency’s expenses as deduction for tax purposes provided that:
(a) the board may substitute some basis, other than the one prescribed above, for ascertaining the required proportion of the total investment income;
(b) any amount distributed in any form as dividend from the actual re-evaluation of unexpired risks or from any other re-evaluation shall be deemed to be part of the total profits to the company. SELF-


Explain briefly the process of ascertaining the taxable profit of a non- Nigeria insurance company.

3.2 Nigerian Insurance Companies

In the case of an insurance company which is a Nigerian company, the profits on which tax may be imposed shall be ascertained in accordance with the provisions for non–Nigerian insurance companies earlier mentioned as though the whole investment and premium income of the company were received in Nigeria; even though the insurance company has branches outside Nigeria.

Taxation of Life Assurance Companies in Nigeria

Section 14 (1) of CITA 1990, states that profit on which tax may be imposed shall be the total investment income of the company less management expenses including commission. Where a life assurance company declares a dividend to be paid to shareholders, which has its head office abroad from the increase arising from actuarial revaluation, the company shall pay tax on the dividend as if such dividend is the total profit of the company.

In practice, the formula to be adopted for actuarial valuation can be discussed and agreed with the FBIR and it will be subject to review from time to time. Again, if a life assurance company has its head office abroad with an agency in Nigeria, the income to be imposed to tax is only that portion that is accrued in Nigeria.