Want to learn more about Taxes in Nigeria? If you are reading this post, then you are one of the growing numbers of Nigerian business persons and entrepreneurs who are interested in knowing what their tax obligations are, and making sure they are operating their business while paying the right taxes.
- Capital Gains Tax
- Companies Income Tax
- Education Tax
- Personal Income Tax
- Stamp Duties
- Value Added Tax
- Withholding Tax
Nigeria’s tax system is tasked with the responsibility of providing the government with enough resources to finance the country’s development – company tax and petroleum royalties in fact account for the primary source of government revenue.
Some taxes are payable to the Federal Government (and administered by Federal Inland Revenue Service), some are payable to the State Governments and some to Local Governments.
Taxes in Nigeria
The different taxes areas listed below
Capital Gains Tax:
Capital Gains Tax Act. Chapter 42. LFN 1990
A 10% tax imposed on Capital Gains arising from a sale, exchange or other disposition of properties known as chargeable assets.
Companies Income Tax:
Companies Income Tax Act. Chapter 60. LFN 1990
A tax chargeable on all companies (other than Companies engaged in petroleum operations as defined under the PPTA) registered in Nigeria.
Resident companies in Nigeria are subject to the Company Income Tax (CIT) on their worldwide income, while only the income from Nigerian source of non-residents companies is taxed under the CIT.
The CIT is generally levied at a flat 30% rate but is reduced to 20% for smaller companies (with a turnover not exceeding NGN 1m) operating in the manufacturing industry and wholly export-oriented.
Resident companies are also charged a 2% tertiary education tax.
Additionally, companies operating in the petroleum industry, whether resident or not, are required to pay the Nigerian government a special Petroleum Profit Tax (PPT) at rates varying from 50% to 85% according to the age of the company and its relationships with the Nigerian National Petroleum Corporation (NNPC).
Education Tax Act. No 7 of 1993
A tax that is chargeable on all companies registered in Nigeria at 2% of chargeable profits as a contribution to the Education Tax Fund.
Personal Income Tax:
Personal Income Tax Act. No 104 of 1993
A tax that is payable by all individuals and registered businesses and partnerships except those registered under Part A of Companies and Allied Matters Act 1990.
Employees simply pay their income tax through the Pay As You Earn (PAYE) system, whereby employers deduct the due tax at source from the salaries and transfer it directly to the FIRS on a monthly basis, while independent workers and beneficiaries of additional income are required to file their own tax returns.
Income tax in Nigeria is levied at a progressive rate capped at 24%. Here are the applicable rates for personal income tax in Nigeria :
Annual income (NGN):
- First 300,000: personal income tax rate of 7%
- Then the next 300,000: personal income tax rate of 11%
- Next 500,000: personal income tax rate of 15%
- Next 500,000: personal income tax rate of 19%
- Next 1,600,000: personal income tax rate of 21%
- Finally above 3,200,000: personal income tax rate of 24%
Stamp Duties Act. Chapter 411. LFN 1990
Stamp Duty is Chargeable according to a scale fixed by the Joint Tax Board.
Value Added Tax:
Value Added Tax Act. No 102 of 1993
A tax payable by the consumer at 5% of the net value added based on eligible transactions once consumed.
All registered businesses are expected to register and have a VAT registration certificate, and boldly display their VAT registration number on all invoices.
This is not really a tax.
It is an advance payment of tax (at 10%) to which individuals and organizations are entitled to demand a withholding tax credit note.
Thank you for reading this post, if you have found it useful please share with your network using one of the share buttons below. If you have any suggestions or feedback, please use the comment section