Tax residency in Nigeria
The Nigerian tax regulation defines a Nigerian resident as an individual who is living in Nigeria for more than 6 months a year. A foreigner holding a Nigerian residence permit (CERPAC) is also deemed to be a tax resident.
Individual residents in Nigeria are taxable on their worldwide income, whereas a non-resident is only taxable on the income earned from business activities performed in Nigeria. Non-resident expatriate employees are therefore subject to income tax in Nigeria unless:
- they work for an employer based in a country other than Nigeria,
- their compensation is not paid by a “fixed base” (i.e. permanent implantation) of their employer in Nigeria, or
Good to know:
- their compensation is taxed in another country (you should check in advance whether your home country has a tax agreement with Nigeria).
Taxes in Nigeria are all collected by the national Federal Inland Revenue Service (FIRS).
PERSONAL INCOME TAX
Tax is imposed on individuals who are either in employment or are running their own small businesses, under a business name or partnership.
Though collection of Personal Income Tax is a federal responsibility, this tax is generally collected by state governments from those that are resident in their various states, regardless of whether they are federal, state, local government, or private sector workers. The Federal Inland Revenue Service, also collects this tax but only from residents of the Federal Capital Territory as well as what may be described as highly mobile federal worker; staff of the Ministry of Foreign Affairs, other Nigerians and foreigners outside the country but earning income in Nigeria (non-residents), expatriate workers resident in Nigeria, Police Officers, and Military Officers. Civilians working in Police and Military formations, however, pay to their respective States of residence.
The current law guiding the taxation of personal incomes is the Personal Income Tax Act (Cap P8 LFN 2004). Under the law, Federal and States’ tax boards are empowered to identify persons living in or earning income from Nigeria who are required to pay tax, and to assess incomes and tax their incomes using specified guidelines and rules. This law also guides the tax official in identifying the residence of potential taxpayers, as well as the sources and origins of their incomes for the purpose of taxing the income.
Pay-As-You-Earn (PAYE) i.e. taxes from employment
II. Taxes from self-employed persons (Direct Assessment)