Introduction
Nigeria's new tax regime has raised an important compliance question for businesses and corporate service providers, what tax filing obligations apply to a company that has been incorporated but has not commenced business?
The question is particularly relevant to shelf companies, i.e. non-operational companies or companies incorporated and maintained for future acquisition or use, which may have no employees, revenue, business transactions or taxable supplies for considerable periods.
The enactment of the Nigeria Tax Act 2025 ("NTA") and the Nigeria Tax Administration Act 2025 ("NTAA"), effective from 1 January 2026, has changed aspects of the framework governing corporate taxation and tax administration in Nigeria.
A key point emerging from the new regime is that incorporation, income-tax filing and VAT compliance are separate considerations. The fact that a company is nonoperational or has not commenced operations does not necessarily relieve it of all tax compliance obligations. Conversely, incorporation alone does not necessarily mean that a dormant company must submit monthly VAT returns. This article considers the distinction and its practical implications for companies maintaining dormant or non-operational entities in Nigeria.
A shelf company is still a company
Neither a "shelf company" nor a "non-operational company" constitutes a distinct category of corporate entity that is generally exempt from Nigerian corporate and tax law. Once a company is incorporated at the Corporate Affairs Commission (CAC) pursuant to the Companies and Allied Matters Act 2020 ("CAMA"), it acquires a separate legal personality and becomes subject to the statutory obligations attaching to its corporate status.
Dormancy therefore described the company's factual position rather than its legal status. A company may have no trading activities, revenue or material transactions, but this does not, without more, suspend the company's legal existence or relieve it of applicable statutory filing obligations. This distinction is important when considering the tax treatment of shelf and dormant companies.
Annual income-tax returns: dormancy does not necessarily mean no filing
The starting point under the NTAA is the annual tax-return obligation. Section 11 requires a company to file a self-assessment return with the Nigeria Revenue Service (NRS) for each relevant accounting period, whether or not it is liable to pay tax. The practical consequence is that a nil tax liability should not be confused with the absence of a filing obligation.
For dormant companies, this distinction is significant. A company that has not traded during an accounting period may have no taxable profit and, consequently, no substantive income-tax liability. However, the absence of a tax liability does not necessarily relieve the company of its annual filing obligations.
Where applicable, a company's return should reflect its actual financial position, supported by the appropriate bank statement or other prescribed documentation evidencing that it generated no income or taxable activity during the period. Put simply: "nothing to pay" does not necessarily mean "nothing to file".
VAT is different
The position is difference for Value Added Tax (VAT). As a general rule, section 22(1) of the NTAA requires a taxable person to submit a VAT return to NRS on or before the 21st day of the following month, whether or not any economic activity took placeduring the relevant period.
There is, however, an important exception. Section 22(4) provides that the monthly filing requirement does not apply to a “small business”, while section 22(5) further permits a qualifying small business to elect, by written notice to NRS, to opt out of the exemption and enter the VAT compliance framework.
For dormant companies, the practical question is therefore not simply whether the company has traded, but whether it qualifies for the statutory small-business exemption.
The ₦100 million small-business threshold
For purposes of the NTAA, the relevant concept is "small business". The statutory definition broadly captures a business with annual gross turnover not exceeding ₦100 million and total fixed assets below ₦100 million. This definition excludes any small business providing professional services.
The distinction matters because a qualifying small business benefits from specified VAT exemptions, including relief from the general obligation to register, charge VAT on its taxable supplies and file monthly VAT returns, unless it elects otherwise. Section 22(6) also makes clear that once a business ceases to qualify as a small business, it must file monthly VAT returns.
A genuinely dormant shelf company with no business activity, taxable supplies or turnover may readily satisfy the turnover limb of the test. That, however, should not be the end of the enquiry. Its assets, nature of business and any applicable statutory exclusions should also be considered before treating it as a small business.
Terminology is equally important. The tax legislation uses the expressions “small business” and "small company" in particular statutory contexts. For international businesses accustomed to a single SME classification across different taxes, the safer approach is to determine eligibility for a particular exemption by reference to the specific statutory provision governing that tax obligation.
Does a dormant company have to file monthly nil VAT returns?
For a qualifying small business that has not opted out of the statutory exemption, section 22(4) provides the principal answer: the general monthly VAT return requirement in section 22(1) does not apply.
It should therefore not be assumed that every Nigerian incorporated company must file monthly nil VAT returns merely because it remains on the corporate register. Equally, dormancy by itself should not be treated as creating a VAT filing exemption.
The proper approach is to consider the company's circumstances: whether it meets the statutory requirements for a small business, whether an exclusion applies,, whether it has elected into the VAT compliance framework, and whether its previous tax registration or compliance history requires separate consideration.
In practical terms, VAT compliance turns on the company's statutory status, not simply on whether it describes itself as dormant.
Tax identification should not be confused with substantive tax liability
The NTAA also provides a framework for assigning Tax Identification numbers (Tax ID) to taxable persons. From a compliance perspective, the existence of a Tax ID should not, byitself, be taken to mean that a company has generated taxable income or is necessarily subject to every periodic tax filing obligation.
The better approach is to distinguish between a company's tax identity and its substantive tax and filing obligations. Those obligations must be determined by reference to the company's activities, income and the particular statutory provisions applicable to it.
This distinction is especially relevant to shelf companies. A company may obtain a Tax ID as part of the incorporation and tax-administration process without having commenced business or generated any taxable income. The mere existence of the Tax ID does not change the company's underlying commercial position.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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