Section 20 Nigeria Tax Act 2025

Section 20 of the Nigeria Tax Act 2025 is about Deductions Allowed. It provides as follows:

(1) Except where the provisions of section 18 of this Act or Part IX of Chapter Two apply, for the purposes of ascertaining the profits or loss from any trade, business, profession or vocation under this Act, there shall be deducted all expenses for that period wholly and exclusively incurred in the production of the income, including –

(a) any sum payable by way of interest on debt employed in generating the income of the trade, business, profession or vocation, subject to the provisions of the Third Schedule to this Act;

(b) rent and premiums, incurred during that period, in respect of land or building occupied for the purposes of generating the income;
(c) any outlay or expenses incurred in respect of –
(i) salary, wages or other remuneration paid to employees, and
(ii) cost to the company of any benefit or allowance provided to its employees;

(d) any expense incurred for repair of premises, plant, machinery or fixtures employed in acquiring the income, or for the renewals, repair or alteration of any implement, utensil or articles so employed;

(e) any amount of expenditure incurred for establishing, preserving or defending title to or rights over an asset ;
(f) any contribution to any staff pension, provident or other retirement benefits fund, society or scheme approved under the Pension Reform Act or any similar enactment in Nigeria ;

(g) any expense proven to the satisfaction of the relevant tax authority to have been incurred, being damage to, or loss of stock or inventory of the trade, business, profession or vocation ;

(h) bad or doubtful debts incurred in the course of a trade or business, notwithstanding that the debts were due and payable before the
commencement of the basis period, being –
(i) debts becoming bad during the said basis period other than bad debt incurred in respect of transaction with a related party, or

(ii) doubtful debts estimated in accordance with generally acceptable accounting principles and to the extent that it is proven, to the satisfaction of the relevant tax authority, that the debts in respect of which a deduction is claimed were incurred in the course of the company’s business operations that produced the assessable profits,
(i) any expense incurred by the trade, business, profession or vocation on
research and development for the period;

(j) any other expense incurred during any previous period for the purpose of such trade or business, or specifically for the period which the profits are being ascertained, provided that any expenditure incurred within six years prior to commencement of business which would have been deductible if incurred after commencement of business, shall be deemed to have been incurred on the first day of commencing the trade or business;

(k) dividends or mandatory distributions made by a real estate investment company duly approved by the Securities and Exchange Commission, to its shareholders;

(l) compensating payments made by a lender to its approved agent or a borrower in a regulated securities lending transaction, which qualify as interest under section 4 (6) (a) (ii) of this Act; or

(m) any expense incurred by a person on assistive devices and disability related products including hearing aids, wheelchairs, and braille materials.

(2) Notwithstanding the provision of subsection (1)(h), in determining bad or doubtful debts deductible –
(a) appropriate reduction shall be made in respect of any amount that had been allowed for deduction in any previous period in respect of the same debt; and

(b) all sums recovered on account of sums previously written off or allowed for deduction in respect of bad or doubtful debts shall be added to the profits of the trade, business, profession or vocation in the period of recovery.