Capital Allowance & Tax Depreciation Calculator
Computes qualifying capital expenditure Initial & Annual Allowances, Tax Written Down Value (TWDV), 66.67% assessable profit restriction, and balancing charges under CITA Second Schedule.
Computational Framework & Statutory Formulas
Initial Allowance = Qualifying Capital Cost × Initial Allowance Rate (%)
Annual Allowance = (Cost - Initial Allowance - ₦10 Retention) / Remaining Useful Tax Life
TWDV = Cost - Cumulative Initial & Annual Allowances Claimed
Nigerian Economic & Statutory Context
In Nigeria, commercial depreciation charged in financial accounts is disallowed for tax purposes under CITA Section 27. Instead, companies claim Capital Allowances on Qualifying Capital Expenditure (QCE) under the Second Schedule to CITA. For non-manufacturing and non-agricultural companies, total capital allowances claimed in any tax year cannot exceed two-thirds (66.67%) of assessable profit.
Frequently Asked Questions (FAQ)
Why is accounting depreciation added back to profit in Nigerian tax computations?
Accounting depreciation reflects subjective management estimates of useful life and residual value. Under Nigerian tax law (CITA Section 27), accounting depreciation is strictly disallowable and must be added back, while statutory Capital Allowances are claimed according to uniform legislated rates.
What is the ₦10 retention rule in Nigerian capital allowance schedules?
Under Nigerian tax law, an asset is not written down to zero. A nominal sum of ₦10 is permanently retained in the Tax Written Down Value (TWDV) of the asset until it is physically sold, disposed of, or scrapped, confirming the asset is still in active business use.
Which companies are exempt from the 66.67% capital allowance restriction?
Under CITA Second Schedule, companies engaged in manufacturing, agricultural business, and agro-allied activities are exempt from the 2/3 (66.67%) restriction and can claim capital allowances up to 100% of their assessable profit.