Section 12(1) of CITA 1990 states that the profit or loss of a foreign company which carries on the business of transport by sea or by air, and any ship or aircraft owned or chartered by it and calls at any seaport or airport in Nigeria- its income or loss is deemed to be derived from Nigeria- shall be the full profit or loss arising from the carriage of passengers, mails, livestock or goods, shipped or loaded into an aircraft in Nigeria. This provision does not apply to passengers, mails, livestock or goods which are brought to Nigeria, solely for transhipment or for transfer from one aircraft to another or in the direction between an Aircraft and a ship.

Hence, the assessment of companies such as these to taxation differs a little in terms of the principles and methods from other assessments. The unit shall expose you to the detailed issues involved.


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

  1.  state the issues involved in taxation for shipping and airline companies
  2.  explain the ratios required for the determination of taxable profits
  3. distinguish between the ratio of adjusted profit and ratio of depreciation relief
  4.  illustrate the process of arriving at tax liability using the relevant tax rate.


3.1 Ascertainment of Taxable Profit

Where the Board (FBIR) is satisfied that the tax authority of any other country computes and assesses taxable profits on a basis not materially different from that prescribed by the act, then the profits of a company which operates a ship or an aircraft shall be taxed based on the procedure of ascertaining the gross adjusted profit ratio and the depreciation relief ration.

3.1.1 Gross Adjusted Profit Ratio

It is the ratio that the adjusted profit or loss before depreciation allowance bears to the total sum receivable in respect of carriage of passengers, mails, livestock or goods. In other words, it is the ratio of profit or loss before any allowance by way of depreciation of an accounting period bears to the total sum receivable in respect of the carriage of passengers and other items.

3.1.2 Depreciation Relief Ratio

Depreciation relief ratio is the ratio used in ascertaining the amount of capital allowances to be allowed. It uses the ratio of total depreciation to total sum received multiply by the total amount receivable in respect of the carriage of passengers and other items loaded in Nigeria.