How to Calculate Development Levy Alongside CIT in Nigeria

The 4% Development Levy and CIT are calculated on different profit bases. Learn how to compute both correctly under the NTA 2025, with worked examples and filing steps.

The Development Levy and Company Income Tax are two separate charges that every non-small Nigerian company must compute and pay from January 2026 — and the most common mistake is assuming they apply to the same profit figure. They do not. CIT is charged on chargeable profits (after deducting capital allowances and brought-forward losses). The Development Levy is charged on assessable profits (before capital allowances and losses). This single difference means you can owe zero CIT but still face a substantial development levy bill. If your finance team is treating these as one calculation, your numbers are wrong.

This guide shows you exactly how to compute both charges side by side, with three worked examples at different profit levels.

What the Development Levy Is and What It Replaced

Section 59 of the Nigeria Tax Act 2025 introduces a 4% development levy on the assessable profits of all companies chargeable to tax in Nigeria, other than small companies and non-resident companies. The levy consolidates four previously separate charges that companies used to pay individually:

• Tertiary Education Tax (TET): 2.5% of assessable profits — funded TETFund
• Information Technology Levy (IT Levy): 1% of profit before tax — funded NITDA
• NASENI Levy: 0.25% — funded the National Agency for Science and Engineering Infrastructure
• Police Trust Fund Levy: 0.005% of net profit — funded police infrastructure

Under the old system, these four levies totalled approximately 3.755% to 4.255% of profits (depending on the profit base used for each), with four separate computations, four filings, and interactions with four different agencies. The NTA 2025 replaces all four with a single 4% charge, filed once alongside your CIT return. For companies that were already paying all four levies, the effective rate is roughly the same or slightly lower — the real benefit is the administrative simplification.

Revenue from the levy is paid into a special account and distributed among the beneficiary agencies: TETFund receives 50%, the Nigerian Education Loan Fund 15%, NITDA Fund 8%, NASENI 8%, the National Board for Technological Incubation 4%, the Defence and Security Infrastructure Fund 10%, and the National Cybersecurity Fund 5%.

The Critical Difference: Assessable Profits vs Chargeable Profits

This is the single most important technical point in this article, and the one most frequently misunderstood in practice. The Development Levy and CIT use different profit bases:

CIT: Charged on Chargeable Profits

The CIT computation starts with accounting profit, adds back non-deductible expenses, arrives at adjusted profit, then deducts capital allowances and brought-forward tax losses. The result is chargeable profit — the figure on which CIT at 30% is applied.

Chargeable Profit = Adjusted Profit − Capital Allowances − Tax Losses Brought Forward

If your capital allowances and loss offsets are large enough, chargeable profit can be zero — meaning you owe no CIT.

Development Levy: Charged on Assessable Profits

The Development Levy is charged on assessable profits — defined by PwC as “taxable profits adjusted for capital gains/losses before deducting tax depreciation and trading losses.” In practical terms, assessable profit is your adjusted profit before capital allowances and before loss relief. It is always equal to or higher than your chargeable profit.

Assessable Profit = Adjusted Profit (before capital allowances and before loss relief)

This means:

• You cannot use capital allowances to reduce your Development Levy base
• You cannot use brought-forward tax losses to reduce your Development Levy base
• Even if your CIT is zero (because capital allowances wiped out chargeable profit), you still owe 4% on assessable profits

This catches many capital-intensive businesses off guard. A manufacturing company that invests heavily in equipment may claim substantial capital allowances that eliminate its CIT liability — but its Development Levy bill remains unaffected because the levy ignores those allowances.

Step-by-Step: Computing CIT and Development Levy Together

Here is the full computation sequence, from accounting profit to final tax payable:

Step 1: Determine Accounting Profit

Start with your profit before tax from the audited financial statements. This is your accounting profit as per the books.

Step 2: Add Back Non-Deductible Expenses

The NRS routinely adds back expenses that are not deductible for tax purposes. Common add-backs include accounting depreciation (which is replaced by capital allowances for tax), entertainment expenses above allowable limits, donations to non-approved organisations, penalties and fines, provisions for bad debts (unless specifically proven), and expenses not wholly and exclusively incurred in producing income. The result is your adjusted profit.

Step 3: This Is Your Assessable Profit (Development Levy Base)

Stop here for the Development Levy computation. Your adjusted profit — before capital allowances and before loss relief — is your assessable profit. Apply 4%.

Development Levy = 4% × Assessable Profit

Step 4: Deduct Capital Allowances

Now apply capital allowances — the tax equivalent of depreciation. This reduces your adjusted profit towards chargeable profit. Under the NTA 2025, the initial allowance on first-year asset purchases has been removed, so capital allowances are now claimed as annual allowances spread over the asset’s useful life.

Step 5: Deduct Brought-Forward Tax Losses

If you have tax losses from previous years, deduct them from the figure remaining after capital allowances. Under the NTA 2025, losses can generally be carried forward indefinitely.

Step 6: This Is Your Chargeable Profit (CIT Base)

The result is your chargeable profit. Apply the CIT rate.

CIT = 30% × Chargeable Profit (0% if you qualify as a small company)

Step 7: Deduct Tax Credits

Deduct WHT credit notes and any instalment payments already made during the year. The balance is your CIT payable.

Step 8: Add CIT and Development Levy

Your total corporate tax bill for the year is CIT payable plus Development Levy.

Worked Example 1: Standard Company — ₦200 Million Turnover

Profile: A trading company in Lagos. No tax losses brought forward.

CIT: 30% × ₦43,000,000 = ₦12,900,000

Development Levy: 4% × ₦55,000,000 = ₦2,200,000

Total corporate tax: ₦12,900,000 + ₦2,200,000 = ₦15,100,000

The effective tax rate on accounting profit is 33.6%. The Development Levy adds 4.9 percentage points on top of the CIT rate because it applies to the higher assessable profit base.

Worked Example 2: Capital-Intensive Manufacturer — High Capital Allowances

Profile: A manufacturing company that invested heavily in new machinery. Substantial capital allowances eliminate CIT but not the Development Levy.

CIT: 30% × ₦0 = ₦0

Development Levy: 4% × ₦50,000,000 = ₦2,000,000

Total corporate tax: ₦2,000,000

This is the scenario that catches companies off guard. CIT is zero — the capital allowances wiped out chargeable profit entirely. But the Development Levy is still ₦2 million because it is calculated on assessable profit, which does not benefit from capital allowances. Cash flow planning must account for this levy even in years when no CIT is due.

Worked Example 3: Company With Brought-Forward Losses

Profile: A company recovering from loss-making years. Has ₦80 million in tax losses brought forward.

CIT: 30% × ₦0 = ₦0

Development Levy: 4% × ₦70,000,000 = ₦2,800,000

Total corporate tax: ₦2,800,000

Again, zero CIT — this time because loss relief eliminated chargeable profit. But the Development Levy is ₦2.8 million. Companies emerging from loss-making periods should budget for this levy from day one of profitability. It hits before any CIT does.

Comparison With the Old System

Under the pre-2026 regime, the same company in Example 1 (₦55 million assessable profit) would have paid:

• CIT at 30%: ₦12,900,000 (same as now, assuming same chargeable profit)
• Tertiary Education Tax (2.5%): ₦1,375,000
• IT Levy (1%): ₦550,000
• NASENI Levy (0.25%): ₦137,500
• Police Trust Fund (0.005%): ₦2,750
• Total old levies: ₦2,065,250

New Development Levy: ₦2,200,000

The levy is marginally higher (₦134,750 more) but requires one computation instead of four, one payment, and one filing. For most companies, the administrative saving far outweighs the small rate difference.

Who Is Exempt From the Development Levy

• Small companies: Turnover of ₦50 million or less and fixed assets not exceeding ₦250 million. Professional service firms do not qualify as small companies regardless of size.
• Non-resident companies: The levy does not apply to non-resident companies operating in or deriving income from Nigeria.
• Hydrocarbon tax computations: The levy does not apply to assessable profits computed for hydrocarbon tax under the petroleum provisions of the NTA.

Everyone else pays. There is no medium-company exemption, no sector-specific carve-out, and no phase-in period. If you are a non-small company chargeable to CIT in Nigeria, the 4% Development Levy applies from the 2026 assessment year onwards.

How to File and Pay

The Development Levy is filed alongside your CIT return through the NRS Self-Service Portal at selfservice.nrs.gov.ng. The deadline is the same as your CIT filing deadline — within six months of your accounting year-end. For companies with a December year-end, this means filing by 30 June 2027 for the 2026 assessment year.

Payment is made through the same channels as CIT — Remita, Quickteller, or designated bank branches using the assessment reference generated by the portal. The NRS collects the levy and pays it into a special account for distribution to the beneficiary agencies.

If you are applying to pay CIT in instalments (up to three, if requested at the time of filing), confirm with the NRS whether the instalment arrangement also covers the Development Levy or whether the levy must be paid in full upfront.

The Development Levy and the 15% Minimum ETR

For companies subject to the 15% minimum effective tax rate under Section 57 of the NTA (MNE constituent entities and companies with turnover above ₦20 billion), the question of whether the Development Levy counts as a “covered tax” in the ETR computation is material.

If the levy is included in the ETR numerator, a company paying 30% CIT plus 4% Development Levy has a combined effective rate well above 15% — the minimum ETR is comfortably met. If the levy is excluded, the ETR calculation relies on income tax alone, and the top-up tax analysis changes.

Most professional commentary treats the Development Levy as likely included in covered taxes for ETR purposes, given that it consolidates charges previously treated as tax. However, the NRS has not issued formal guidance on this point. Companies in scope should model both scenarios until clarification is published. Monitor nrs.gov.ng for updates.

Common Mistakes in Computing the Development Levy

• Applying the levy to chargeable profits instead of assessable profits. This is the number one error. The Development Levy base is assessable profit — before capital allowances and loss relief. Using chargeable profit understates the levy and creates an underpayment that will surface on audit.
• Assuming zero CIT means zero Development Levy. As Examples 2 and 3 show, you can owe zero CIT but still face a significant levy bill. Companies with large capital allowances or loss offsets must budget for the levy separately.
• Not adding back accounting depreciation. Accounting depreciation is not deductible for tax — it is replaced by capital allowances. If you forget to add it back when computing adjusted profit, your assessable profit (and therefore your levy base) is understated.
• Confusing the NTA small company threshold with the NTAA small business threshold. The ₦50 million turnover threshold (NTA Section 56/202) determines CIT and Development Levy exemption. The ₦100 million threshold (NTAA Section 22(4)) applies to VAT filing. Mixing them up can lead to wrongly claiming levy exemption.
• Treating the levy as a deductible expense in the same year. The Development Levy is a charge on profits, not an operating expense. It is computed on the assessable profit for the year and is not itself deductible in arriving at that assessable profit.
• Overlooking the state development levy. Some states impose their own development levy on residents and employees. The federal 4% Development Levy under the NTA is entirely separate from state-level levies. You may owe both. Track them separately and do not offset one against the other.

Tips for Getting It Right

• Compute assessable profit as a separate line in your tax computation. Do not jump from adjusted profit straight to chargeable profit without explicitly stating the assessable profit figure. This makes the Development Levy calculation transparent and auditable.
• Use a dual-track computation template. Build your tax computation spreadsheet to show both the CIT track (through to chargeable profit) and the Development Levy track (stopping at assessable profit) side by side. This eliminates the risk of applying the levy to the wrong base.
• Budget for the levy in loss-making and high-capex years. If you are investing heavily in assets or carrying forward losses, your CIT may be zero — but your Development Levy will not be. Include the levy in your cash flow forecast as a fixed annual cost tied to assessable profit.
• Verify your small company status annually. If your turnover or assets exceed the threshold in any year, you lose the exemption. Review both figures at year-end and adjust your tax computation accordingly.
• Cross-check with our calculator. Use the CIT Calculator to estimate your Company Income Tax liability, then compute the 4% Development Levy separately on your assessable profit. The total gives you your full corporate tax exposure.

Final Thoughts

The Development Levy and CIT are two charges that share a filing deadline and a portal but have fundamentally different computation bases. Getting them right requires understanding one key distinction: CIT uses chargeable profit (after capital allowances and losses), while the Development Levy uses assessable profit (before capital allowances and losses). Every other aspect of the computation flows from this difference.

For most companies, the 4% levy is a marginal cost increase over the old fragmented levies — and the administrative simplification of filing one charge instead of four is a genuine benefit. For capital-intensive businesses and loss-making companies, the levy is the charge that shows up even when CIT does not. Budget for it accordingly.

Use our CIT Calculator to model your Company Income Tax, then add the 4% Development Levy on your assessable profit for the full picture. If the interaction between CIT, the levy, capital allowances, and loss relief is getting complex, consult a tax professional from our Tax Professional Directory. For official guidance on the levy computation and filing process, visit the NRS website at nrs.gov.ng.

FAQs About Development Levy and CIT Computation

What is the Development Levy rate?

4% of assessable profits, under Section 59 of the NTA 2025. It applies to all companies chargeable to tax in Nigeria except small companies (turnover ≤ ₦50 million, assets ≤ ₦250 million) and non-resident companies. The levy replaces the Tertiary Education Tax, IT Levy, NASENI Levy, and Police Trust Fund Levy.

What is the difference between assessable profit and chargeable profit?

Assessable profit is your adjusted profit before deducting capital allowances and tax losses brought forward. Chargeable profit is your adjusted profit after these deductions. CIT is charged on chargeable profit. The Development Levy is charged on assessable profit. This means the levy base is always equal to or higher than the CIT base.

Can I owe zero CIT but still pay the Development Levy?

Yes. If your capital allowances or brought-forward losses reduce chargeable profit to zero, your CIT is zero — but the Development Levy still applies on your assessable profit (before those deductions). A company with ₦50 million in assessable profit and zero chargeable profit still owes ₦2 million in Development Levy.

Is the Development Levy filed separately from CIT?

No. The levy is filed alongside your CIT return through the NRS Self-Service Portal at selfservice.nrs.gov.ng. The deadline is the same as your CIT filing deadline — within six months of your accounting year-end.

What taxes did the Development Levy replace?

Four separate charges: the Tertiary Education Tax (2.5% of assessable profits), the Information Technology Levy (1% of profit before tax), the NASENI Levy (0.25%), and the Police Trust Fund Levy (0.005%). Under the old system, these totalled approximately 3.755% to 4.255% with four separate computations and filings. The new single 4% levy simplifies this to one calculation and one payment.

Are non-resident companies liable for the Development Levy?

No. Section 59 of the NTA explicitly excludes non-resident companies from the Development Levy. Non-resident companies with a PE or SEP in Nigeria pay CIT on attributable profits at 30% (or the applicable minimum tax) but do not pay the 4% levy.

Does the Development Levy count towards the 15% minimum ETR?

This has not been formally confirmed by the NRS. Most professional commentary suggests it is likely included as a covered tax for ETR purposes, given that it consolidates charges previously treated as tax. Companies subject to the minimum ETR should model both scenarios until the NRS publishes definitive guidance.