Company in Name, Partnership in Substance: The Taxation of Limited Liability Partnerships under the Nigeria Tax Act, 2025

Abstract.

In November 2025, our CEO argued on LinkedIn that limited liability partnerships (“LLPs”) are passthrough vehicles for Nigerian tax purposes, a view several distinguished practitioners pushed back on, largely because the text of the Nigeria Tax Act then in circulation defined a “company” to include an LLP. This article revisits that debate against the Final Approved Copy for Print of the Nigeria Tax Act, 2025 (“NTA” or “the Act”) which is published on the website of the Nigerian National Assembly and circulated in print form by the Nigeria Revenue Service (“NRS”), and it does so with a significant new datum: the final text omits limited liability partnerships from the general definition of “company”, retaining the LLP-inclusive definition only in section 118, an interpretation provision expressly confined to the upstream petroleum Part of the Act. The article sets out the statutory framework, engages each of the views expressed in the debate, highlights the differences between the debated text and the final text, and concludes that under the Act as finally approved, LLPs are taxed as passthrough vehicles, transparent entities whose profits are taxed in the hands of their partners.

1.    Introduction

Few questions in Nigeria’s new tax settlement have generated as much genuine intellectual disagreement as the tax classification of the limited liability partnership. The stakes are not academic. An LLP taxed as a company faces companies income tax at 30% (potentially 25% by presidential order under section 56), the 4% development levy under section 59, and withholding tax on distributions, a cumulative burden that would make the form commercially unattractive. An LLP treated as a transparent vehicle, by contrast, pays no entity-level income tax: its profits flow through and are taxed once, in the hands of its partners, at the rates applicable to each partner. That is how most jurisdictions treat LLPs, and it is the treatment on which international fund structures with Nigerian elements depend.

When our CEO published the original post on LinkedIn, “Unpopular Opinion: LLPs Are Passthrough Vehicles in Nigeria”, We expected disagreement, and the profession delivered it generously, because practitioners from top law firms weighed in. This article consolidates the statutory analysis, presents each view fairly, and takes a position, one now materially reinforced by what the final approved text of the Act actually says.

2.    Background: CAMA 2020 and the FIRS Circular

The Companies and Allied Matters Act, 2020 (“CAMA”) introduced the LLP into Nigerian law for the first time: a body corporate with separate legal personality and perpetual succession, yet constituted, governed and wound up as a partnership of its partners. That hybrid character posed an immediate classification question for tax: should the LLP be taxed as a company, because it has corporate personality, or as a partnership, because that is what it is in substance?

In August 2023, the then Federal Inland Revenue Service (“FIRS”), now Nigeria Revenue Service (“NRS”) answered administratively. Its Information Circular No. 2023/06 asserted that

“all companies and corporate bodies (including Limited Liability Partnerships (LLP)) are statutorily required to pay income tax on profits accrued in, derived from, brought into or received in Nigeria for each year of assessment.”

The FIRS’ position, in other words, was entity-level taxation (no transparency). This was an unusual position internationally and it disrupted fund and investment structures that assumed, as they safely could almost everywhere else, that an LLP is tax-transparent. The NTA was the legislature’s opportunity to settle the question. Whether it did (and in which direction) is the substance of the debate this article addresses.

3.    The Statutory Framework in the Final Approved Text of the Nigeria Tax Act, 2025 (“NTA”)

Five clusters of provisions in the final approved copy bear on the question.

3.1. The charging and rate provisions

Section 3 imposes income tax on “profits or gains of any company or enterprise”, on the “income of any individual or family”, and on income accruing to trustees or estates. Section 56 levies tax on the total profits of “every company” at 0% for small companies and 30% for all others (reducible to 25% by presidential order). Section 59 imposes a development levy of 4% on the assessable profits of all companies chargeable to tax under Chapters Two and Three, other than small and non-resident companies.

3.2. The general definitions.

The general interpretation section of the final print (section 201; the equivalent provision was numbered section 202 in the text circulated during the debate) defines a “company” as “a company or corporation, established by or under any law in force in Nigeria or elsewhere.” It defines a “partnership” as “an association, or a body of two or more persons who have agreed to combine their rights, powers, property, labour or skill for the purpose of carrying on a trade or business and sharing the profit”, and “person” to include “a company, partnership, community, family, individual, executor, trustee and legal arrangement.” Notably, “individual” expressly excludes a partnership.

3.3. The petroleum-only definition.

Section 118, which opens with the words “In this Part —”, defines “company”, for the purposes of the upstream petroleum taxation Part alone, as

“any company or corporation, including Limited Liability Partnership, established by or under any law in force in Nigeria or elsewhere.”

3.4. The deemed-distribution rule.

Section 10 deals with undistributed profits that the tax authority may treat as distributed. Subsection (5) provides:

“In the case of a limited liability partnership, all the profits of the partnership shall be deemed as distributed, and taxable income, proportionately, in the hands of the respective partners.”

3.5. The partnership taxing provisions.

Section 11 provides that

“where two or more companies carry out a trade or business in a partnership, joint venture or a similar arrangement in Nigeria, any income or profit arising therefrom shall constitute a source of profits and each company’s share shall be taxed separately.”

Section 15 governs partnerships of individuals: each partner’s gains or profits comprise remuneration and benefits charged to the partnership accounts plus the partner’s share of profits, and any person who directly or indirectly shares in the profits of a Nigerian partnership must file returns in his own name and pay the applicable tax.

4.    The Critical Difference: What Changed Between the Debated Text and the Final Act

The entire LinkedIn debate (my original post and every response to it) was conducted on the footing that the NTA’s general definition of “company” expressly included LLPs. My post quoted that definition; every counterargument was premised on that inclusion, but with the deletion of LLPs from the definition of a ‘company”, one struggles to see a basis for taking a different position.

“In the Final Approved Copy for Print of the Nigeria Tax Act, 2025, the phrase “limited liability partnership” appears exactly twice in the entire Act: in section 10(5), which deems all LLP profits distributed and taxable in the hands of the partners, and in section 118, which includes LLPs in the definition of “company” only “in this Part”, the Part dealing with upstream petroleum operations. The general definition of “company” in the general interpretation section makes no mention of limited liability partnerships at all.”

The differences are set out below.

We believe that the omission (if one calls it so, although there are good reasons to believe it was a deliberate deletion) is consequential and my analysis in section 6 below addresses it.

5. The Debate: All Views Considered

The table below summarises the positions taken in the original post, the repost, and the comment threads under both. The positions canvased by various professionals are labelled with “Commenter”, as we have refrained from mentioning names specifically.

5.1 The case for entity-level taxation

The entity-taxation school rested on three pillars. The first was definitional: the debated text defined a company to include an LLP, and, as Commenter 1 put it, if the legislature had not intended LLPs to be taxed as companies “it wouldn’t have defined an LLP as a company.”

The second was the canon that specific provisions override general ones: Commenters 2 and 3 both argued that a specific LLP-as-company definition must prevail over the general partnership provisions, so that an LLP suffers companies income tax and the development levy, with after-tax profits deemed dividends subject to withholding, a materially higher effective rate than a conventional partnership.

The third was structural, and it was Commenter 4’s distinctive contribution: section 11, he argued, regulates external contractual arrangements between companies (joint ventures and unincorporated partnerships), not the internal constitution of an incorporated vehicle. On his reading, extending section 11 to LLPs because their partners are companies proves too much: a company whose shareholders are all companies would, by parity of reasoning, be a “partnership of companies”, which is absurd. The inclusion of LLPs in the company definition was, for him, a clarifying act that made LLP partners functionally shareholders.

Commenter 5 added two useful glosses: that the mischief behind section 11 is the long-standing practice of companies trading through unincorporated structures to avoid the heavier corporate tax burden (particularly in oil and gas), and that much of the confusion flows from Nigerian tax legislation never defining or conceptualising “passthrough” at all (in contrast, for example, to the United States Internal Revenue Code, which expressly identifies its passthrough entities).

5.2 The case for transparency

Our own position, supported by Commenter 6, rested on the statutory machinery rather than the label. An LLP answers perfectly to the Act’s definition of a “partnership” (an association or body of two or more persons combining rights, powers, property, labour or skill to carry on a trade or business and share the profit), and “person” includes a company, so a partnership of corporate partners is squarely within it. Section 11 then does the operative work for corporate partners: each company’s share of the income or profit of the partnership “shall be taxed separately.” Section 15 does the equivalent work for individual partners. And section 10(5), the only substantive provision in the entire Act that names the LLP, deems all its profits distributed and taxable proportionately in the hands of the respective partners.

As we noted in the threads, that is the signature of partnership treatment, not company treatment: if an LLP were truly a company, distributions to its partners would be dividends, withholding tax would ordinarily be the final tax on them, and there would be no need for a provision taxing the profits in the partners’ hands at all. Commenter 6 added the purposive point: the LLP form exists to give partnerships corporate benefits (asset-holding in the entity’s name, succession, limited liability), and construing it as an ordinary taxable company strips the form of its point.

Two honest concessions from my side of the debate should be recorded. First, we acknowledged that section 11 speaks of companies in partnership, so an LLP whose partners are individuals is governed instead by the individual-partnership provisions (a distinction, not a difficulty, since section 15 supplies the transparency for that case). Second, we noted that section 10(5) speaks of “profits”, and a determined reader could argue that a first-line entity charge might precede the deemed distribution. Both points are resolved by the final text, as the next section explains.

6.   Analysis

6.1 The definitional anchor of the entity-taxation view is gone

Every argument for entity-level taxation was tied to one drafting fact: that the Act generally defined a “company” to include an LLP. In the Final Approved Copy for Print, it does not exist. The general interpretation section defines a company as “a company or corporation, established by or under any law in force in Nigeria or elsewhere”, full stop. The only LLP-inclusive definition of company in the Act is section 118, and section 118 opens with the words “In this Part”, a formula that confines its definitions to the upstream petroleum Part in which it sits. A definition expressly limited to one Part of a statute cannot be exported to the rest of it; that is elementary.

The interpretive significance of the omission is amplified by the legislative history. The earlier text included LLPs in the general definition; the final text removes those words while deliberately retaining them in section 118. The expressio unius principle applies with unusual force here: the legislature demonstrably knew how to include LLPs within “company” (it did so, in terms, for petroleum taxation) and chose not to do so for the Act generally. Where the drafter includes words in one provision and omits them from a parallel provision, the omission is presumed deliberate.

The petroleum carve-in also makes policy sense on its own terms because upstream arrangements are notoriously conducted through partnership-like structures, and the fiscal regime for petroleum deliberately sweeps every participating vehicle, including LLPs, into the entity net for that Part alone.

6.2 An LLP is a “partnership” as the Act defines it

With the company definition out of the way, the classification question becomes straightforward. The Act defines a partnership by reference to substance (an agreement between two or more persons to combine rights, powers, property, labour or skill to carry on a trade or business and share profit), and nothing in that definition distinguishes incorporated from unincorporated partnerships. An LLP is constituted by exactly such an agreement. Commenter 4’s shareholder analogy, elegant as it is, does not survive this text: shareholders of a company have not “agreed to combine their rights, powers, property, labour or skill” to carry on the company’s business; they hold capital in an entity whose business is carried on by its directors. Partners in an LLP have made precisely that agreement, registered under CAMA. The analogy also cuts against itself in company law: CAMA maintains extensive distinctions between partners in an LLP and shareholders in a company in governance, in agency (every partner is an agent of the LLP), in capital structure and in distribution rights, which is why the “functionally shareholders” characterisation cannot simply be assumed for tax purposes.

6.3 Section 10(5) is machinery that only works for a transparent entity

Section 10(5) now stands as the Act’s only substantive statement about LLP taxation, and it is emphatic: all the profits of the LLP are deemed distributed and are taxable income, proportionately, in the hands of the respective partners.

Three features of this provision merit attention. First, its breadth: unlike the rest of section 10, which permits the NRS to direct that a proportion of a closely-held company’s undistributed profits be treated as distributed, subsection (5) deems all LLP profits distributed, automatically. An LLP therefore cannot shelter or defer income at the entity level even in principle.

Second, its mechanics: the profits are “taxable income… in the hands of the respective partners”, not dividends subject to withholding as a final tax, which is how a company’s distributions to individuals or corporate shareholders are treated.

Third, its context: placed within an anti-avoidance provision about undistributed profits, its evident purpose is to ensure the partner-level charge cannot be postponed by retention. All three features are the fingerprints of a transparency regime.

The residual argument I flagged in the threads (that “profits” might imply a prior entity-level charge) falls away on the final text. An entity-level income tax charge on an LLP would need a charging provision, and there is none: section 56 taxes the total profits of every “company”, which the LLP is not (outside petroleum); section 59’s development levy is imposed on “companies” likewise.

6.4 The operative provisions supply the full passthrough machinery

The partner-level charge is fully provided for. Where the partners are companies, section 11 taxes each company’s share of the partnership’s income separately, at that company’s rates. Where the partners are individuals, section 15 attributes to each partner his remuneration and share of profits, computed per the partnership agreement (or equally in default), and obliges every person sharing in the profits of a Nigerian partnership to file returns in his own name and pay the applicable tax. Where partners are mixed, each is taxed under the chapter applicable to him. Section 10(5) closes the loop by ensuring no profits escape attribution. This is a complete, coherent transparency regime.

7.    Position

On the Final Approved Copy for Print of the Nigeria Tax Act, 2025, my conclusion is that limited liability partnerships are passthrough vehicles for Nigerian income tax purposes, except in upstream petroleum operations, where section 118 expressly incorporates them to companies for that Part alone. The reasoning, in compressed form: an LLP is not a “company” under the Act’s general definition, so the company charging and rate provisions (sections 56 and 59) do not reach it; it is a “partnership” as defined, so the partnership provisions (sections 11 and 15) tax its profits in the hands of its partners; and section 10(5), the Act’s only general LLP-specific provision, confirms the design by deeming all LLP profits distributed and taxable proportionately at partner level. The tax treatment thus aligns Nigeria with international practice and preserves the commercial rationale of the LLP form: limited liability and entity-level asset holding, with single-layer taxation.

This is no longer, we would suggest, an unpopular opinion so much as the textual one. The counterarguments in the debate were serious and well made, but they were made against a text that the National Assembly did not, in the end, enact.

8. Practical Implications and a Call for Guidance

Three practical notes follow.

First, transparency does not mean invisibility: partnership provisions require registration particulars and returns, partners must file in their own names, and prudence suggests LLPs should maintain full accounts and comply with filing obligations under the Nigeria Tax Administration Act pending administrative guidance.

Second, partner-level planning remains constrained: remuneration to partners must be defensible, and connected-party dealings remain subject to transfer pricing scrutiny.

Third, and most importantly, the Nigerian Revenue Service should issue guidance, and ideally the legislature should say the word the statute never says, “passthrough”, in terms. Jurisdictions that define their transparent entities expressly do not have debates like this one. Until such clarification, taxpayers structuring through LLPs should document their positions carefully; but they should do so, in my view, on the footing that the final text of the Nigeria Tax Act, 2025 makes the LLP what the rest of the world already understood it to be a company in name, a partnership in substance.

Expect a second part to this article where we analysis the benefits of LLPs in investment fund structuring.

Note

The opinion expressed in this article is not a legal opinion, rather the opinion of the author. Readers are counselled to seek specific legal advice from professionals.

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