For Nigerian businesses expanding internationally, taxation is a major concern. One of the biggest challenges? Double taxation—where a company’s income is taxed in both Nigeria and the foreign country where it operates. This can eat into profits, create financial strain, and make global expansion less attractive. Fortunately, Double Taxation Agreements (DTAs) exist to ease this burden, but many businesses don’t fully understand how to leverage them.

DTAs are bilateral agreements between Nigeria and other countries that prevent businesses from being taxed twice on the same income. Nigeria has treaties with nations like the UK, Canada, China, and South Africa, among others. These agreements determine which country has the primary taxing rights and provide mechanisms for tax relief, such as tax exemptions or foreign tax credits. However, not all income types are treated equally, so understanding the fine print of each treaty is crucial.

For instance, a Nigerian company earning income in the UK might qualify for a tax credit, allowing the UK tax paid to be deducted from its Nigerian tax liability. However, without proper documentation and compliance, businesses might still face double taxation. Tax residency status also plays a key role—some DTAs require proof that a business is a Nigerian tax resident before granting tax relief. This means businesses need to maintain clear records and obtain the necessary certificates from tax authorities.

Another overlooked aspect is withholding tax rates. Under normal circumstances, Nigeria imposes a 10% withholding tax on dividends, interest, and royalties paid to foreign entities. But DTAs often reduce these rates—for example, the Nigeria-UK treaty allows for a lower withholding tax on dividends, making cross-border transactions more tax-efficient. Not knowing this could mean overpaying taxes unnecessarily.

To fully benefit from DTAs, Nigerian businesses must:

✔ Identify applicable treaties before entering a foreign market.

✔ Obtain tax residency certificates to claim treaty benefits.

✔ Structure their transactions tax-efficiently based on DTA provisions.

✔ Keep detailed documentation to avoid disputes with tax authorities.

Leveraging DTAs effectively can significantly reduce tax liabilities, improve profitability, and simplify compliance for Nigerian businesses going global. Yet, many companies fail to optimize these agreements due to lack of awareness or poor tax planning. Is your business expanding internationally? Let’s discuss in the comments how DTAs can work for you.