Taxes in Nigeria are design and collected by governments. Taxes could be collected by Federal, State or Local governments. Contact us for your Company Tax Clearance Certificate in Nigeria
All Federal taxes in Nigeria are collected by Nigeria’s Federal Inland Revenue Service (FIRS). All state government taxes are collected by the state internal revenue services in the state government territory and Local government taxes are collected by local internal revenue services in the her territory.
Most taxes in Nigeria are collected by Federal Government through Federal Inland Revenue Service (FIRS). Federal Inland Revenue Service classified taxes under Federal into nine(9).
Read: How to Obtain Company Income Tax Certificate
The Taxes are as follows:
1. COMPANIES INCOME TAX (CIT)
2. PETROLEUM PROFIT TAX (PPT)
3. VALUE ADDED TAX (VAT)
4. PERSONAL INCOME TAX (PIT)
5. WITHHOLDING TAX (WHT)
6. EDUCATIONAL TAX (EDT)
7. STAMP DUTIES (STD)
8. CAPITAL GAINS TAX (CGT)
9. NATIONAL INFORMATION TECHNOLOGY DEVELOPMENT FUND (NITDF) LEVY
1. Companies Income Tax (CIT):
Under Companies Income Tax Act you have to pay Companies Income tax if you are a resident or non-resident company incorporated in Nigeria.
Payment Info: For resident companies and organization-
Companies and organizations prepare and submit their annual self-assessment tax return according to the FIRS specifications. This has to be done with the proof (e.g. e-ticket issued from the bank) of payment of the full amount or first installment of the Tax return.. The payments are made to designated banks.
For non-resident companies and organization-
Companies make their tax payment through remittance. Their tax is deducted at the source and deposited to designated banks. These companies’ tax subject to Withholding Tax (WHT) deduction on their earning in Nigeria. This will be their tax upon filing tax return.
Read: How to Start Oil & Gas Business in Nigeria
2. Petroleum Profit Tax (PPT):
The Petroleum Profit Tax is subject to any resident company or person in charge of a non-resident company who are exploring for petroleum or producing it. This also includes any liquidator, receiver, or agent of liquidator or receiver of any company carrying on petroleum operations in Nigeria.
Payment Info: The Petroleum Profit Tax is a type of pre-paid tax. You have to prepare and submit your annual tax return to JP Morgan Chase Bank, within five months of the end of each assessment year.
The payment is done mainly 2 segments of 12-13 phases. The first segment is the estimated annual return paid not later than February of each year. The tax due is than paid in 12 months installments throughout the year. In case of the accumulated actual tax exceeds the tax paid a 13th month payment can be paid. If the opposite occurs you will get the refund.
Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay Value Added Tax or VAT.
Payment Info: This tax is primarily collected by the seller when any taxable item or service is sold. The seller then nets off the VAT and submits it to FIRS through a designated bank. The bank immediately issues an e-ticket as evidence. When this is presented to the Integrated Tax Office (ITO) a e-receipt is issued.
Read: What to know about Nigeria Content Development
4. Personal Income Tax (PIT) :
Individuals resident in Federal Capital Territory(Abuja), Nigerian armed force employee, non-resident earning or deriving income from Nigeria and officers of Nigerian foreign service will have to pay Personal Income Tax.
Payment Info: Persons who get paid through employment pay their Personal Income Tax through Pay As You Earn (PAYE) system. According to PAYE, employers deduct Personal Income Tax from the salaries of their Employees and pay it directly to FIRS through a designated bank on behalf of the employee in a monthly basis.
5. Withholding Tax (WHT) :
The Withholding Tax has no distinction of its own. This tax is only a mechanism to collect other taxes.
Various person may be subject to Withholding Tax deduction to balance their tax liabilities for different types of tax. WHT deductions are regarded as advance payments (or payments on account) of the relevant tax liability that will arise from the tax returns of the period concerned.
Payment Info: When a person benefits from any payment and the income is taxable, the Withholding Tax is withheld by the payee. It is then directly remitted to FIRS through a designated Bank.
Read: Obtain Nigerian Content Equipment Certificate (NCEC)
6. Educational Tax (EDT) :
All the companies registered in Nigeria, in other words, all the companies subject to Companies Income Tax (CIT) are also liable to Educational Tax(EDT).
Payment Info: Educational Tax is also prepared and submitted with annual self assessment of Companies Income Tax to designated Bank.
7. Stamp Duties (STD) :
Items or persons subject to Stamp Duties tax are written documents relating things between individuals or companies or group of soles. Stamp Duties may include instruments such as financial transaction, article of association between companies, statements, deals, bonds etc.
Payment Info:
Companies or persons related with the stamp duties must submit all the instruments to the Stamp Duties Office for stamping. The duty is paid directly to FIRS through designated bank.
8. Capital Gains Tax (CGT) :
All the companies registered in Nigeria which earn any capital gains or gains on the disposal of any form of assets whether it is in Nigeria or not are liable to Capital Gains Tax.
Payment Info: Capital Gains Tax is calculated and submitted with Companies Income Tax to FIRS through Designated Bank.
9. National Information Technology Development Fund (NITDF) Levy:
All the companies in Nigeria, who are operating as GSM provider or telecommunication company, Cyber company or internet service provider, bank, insurance etc. and has an annual turnover of N100,000,000.00 and above are liable to NITDF Levy.
Payment Info: Companies chargeable, pay the levy with their Companies Income Tax. The companies have to compute 1% of their profit and pay it through the designated bank.
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Understanding Pay As You Earn Taxes (PAYE) in Nigeria
All Employers in Nigeria are responsible for deducting PAYE (Pay As You Earn) taxes and from their employees’ pay. Taxes deducted are required to be remitted to the appropriate tax office by the 10th day of the month following the deduction. PAYE Taxes are calculated as follows:
• report this information to HM Revenue & Customs (HMRC) each time you pay an employee.
• You must also give your employees a pay statement and maintain adequate records of how much has been paid and any deductions made.
• Read further guidance on new employer – getting started on the HMRC website.
If you haven’t yet registered as an employer you can find out more in our guide how to register as an employer here.
PERSONAL INCOME TAX IN NIGERIA – PAYE, Direct & Self Assesment Taxes
Personal Income Tax in Nigeria is a tax levied on all incomes of an individual employed by a business or organization. Self employed individuals are expected to file annual returns annually and pay the taxes due.
A taxpayer is required to file returns for the preceding year within 90 days of the end of the year.
Direct Assessment Tax & Self Assessed Tax
Direct Assessment is used to assess tax for self employed individuals. With the self assessed tax, a new tax payer can assess him/herself, pay the calculated tax at designated banks and get an e-TCC (Tax Clearance Certificate) without visiting any tax office.
PAY AS YOU EARN (PAYE) TAXES
All employers in Nigeria are responsible for deducting Pay As You Earn (PAYE) taxes from their employees’ pay. Taxes deducted are required to be remitted to the appropriate tax office by the 10th day of the month following the deduction.
Monthly payments of Pay As You Earn (PAYE) tax liabilities are to be made on or before the 10th day of the month following the applicable month (e.g. January tax to be remitted by 10th of February).
PAYE Taxes are calculated as follows:
After the relief allowance and exemptions (see blow) have been granted, the balance of a taxpayer’s income is taxed on a graduated scale as shown below:
– First N300,000 of income @7%
– Next N300,000 of income @ 11%
– Next N500,000 of income @ 15%
– Next N500,000 of income @19%
– Next N1,600,000 of income @ 21%
– Above N3, 200,000 of income @ 24%.
Personal Income Tax Reliefs
The Personal Income Tax Amendment Act of 2011 scrapped the old relief systems and increased relief for all taxable person(s). The amendment combined all reliefs into the Consolidated Relief Allowance (CRA), which combines all previous reliefs (Housing, Meal, Utility, Transport, Leave allowances, etc) into a single relief of N200,000 subject to a minimum tax of 1% of gross income (whichever is higher) plus 20% of the gross income.
Highlights of the amendment are :
– Consolidated Relief – N200,000.00 or 1% of gross Income whichever is higher
– Plus 20% of Gross Income
– Minimum tax payable is 1% of Gross pay.
Other Tax Exempt Items
In addition to the Consolidated Reliefs and Allowances (CRA) above, the following items are tax exempt and tax is calculated after amounts paid in respect of these items are deducted;
– National Housing Fund Contributions
– National Health Insurance Scheme
– Life Assurance Premiums
– Pension Deductions