Lagos
EY
UBA House, 10th and 13th Floors
57 Marina
P.O. Box 2442 Marina Lagos Nigeria
Executive contacts
Akinbiyi Abudu
+234 811-209-3005
Email: akinbiyi.abudu@ng.ey.com
Michael Aluko +234 802-343-4033
Email: michael.aluko@ng.ey.com
Zion Athora +234 811-209-3045
Email: zion.athora@ng.ey.com
Immigration contact
Kayode Faboyede
A. Income tax
+234 811-249-4364
Email: kayode.faboyede@ng.ey.com
Who is liable. Residents are generally subject to tax on their worldwide income. However, foreign earnings derived by Nigerian residents are exempt from tax if the earnings are repatri ated into Nigeria in convertible currency through a domiciliary account with an approved Nigerian bank. Income earned by a Nigerian from employment with the Nigerian government is considered Nigerian-source income, even if services are per formed abroad. Nonresidents are subject to tax on Nigeriansource income only.
Individuals are considered residents if they are in one of the fol lowing categories:
• Nigerian and non-Nigerian individuals who reside in Nigeria
• Expatriate employees of a resident company who are present in Nigeria for employment purposes
• Expatriate employees of a nonresident company who are pres ent in Nigeria for more than 183 days in a 12-month period
• Expatriate employees of a non-Nigerian company if their remu neration is recharged to a Nigerian company or borne by a fixed base in Nigeria and if they are not liable to tax in another country that has entered into a double tax treaty with Nigeria
Income subject to tax
Employment income. Taxable income includes salaries, wages, fees, allowances and other gains or profits from employment, such as bonuses, premiums, noncash benefits and other perqui sites.
Gratuities paid to employees at the end of assignments are fully exempt from tax. Compensation for loss of office is also fully exempt from personal income tax. However, compensation for
loss of office in excess of NGN10 million is subject to capital gains tax at 10%.
Self-employment and business income. Resident individuals who carry on a trade, business, profession or vocation are subject to tax on income derived from activities in and outside Nigeria. Self-employment income derived by nonresidents is subject to tax in Nigeria if the trade, business, profession or vocation is carried on even partly in Nigeria. However, only the gains or profits attributable to the part of the operations carried on in Nigeria are taxable.
Partners are taxed on their shares of partnership income, regard less of whether the income is distributed.
For both residents and nonresidents, a 5% tax is withheld from contract payments, payments with respect to construction-related activities and commissions, as well as from consulting, profes sional, management and technical fees. The recipient must include the income in his or her tax return, but may claim a credit for the tax withheld.
Taxable income is calculated by deducting allowable expenses, statutory reliefs and losses from gross income. Resident and nonresident self-employed individuals are taxed at the rates set forth in Rates
Investment income. Withholding tax at a rate of 10% is imposed on dividends, interest, royalties and income from the rental of mov able or immovable property. For nonresidents, the withholding taxes are final taxes. For residents, the withholding taxes on dividends, interest and royalties are final taxes, but the withholding tax on rent is treated as an advance tax payment.
Investment income earned abroad and brought into Nigeria through the Central Bank of Nigeria, or through any other autho rized dealer appointed by the Minister of Finance, is exempt from tax.
Directors’ fees. Companies paying directors’ fees must withhold tax on the fees at a rate of 10%. For a resident, final tax is assessed when the individual files a tax return including income from all sources. For nonresidents, the 10% withholding tax is a final tax.
Capital gains. Capital gains consist of the disposal proceeds of an asset, less its cost and disposal expenses. Capital gains are taxed separately from ordinary income at a rate of 10%.
Amounts derived from the disposition of capital assets are tax able. These assets include the following:
• Land and buildings
• Options, debts and other property rights
• Any currency other than Nigerian currency
• Any form of property created by the disposing person or other wise coming to be owned without being acquired
• Movable assets including motor vehicles
If these assets are located in Nigeria, they are taxable in Nigeria, regardless of where the beneficial owner is resident. Assets located outside Nigeria are taxable in Nigeria if the beneficial owner is resident in Nigeria or if he or she is a foreigner who is present in
Nigeria for a period, or for an aggregate of periods, exceeding 183 days within a 12-month period. Capital gains derived from the disposal of capital assets located outside Nigeria, and administered by a trustee of a trust or settlement with a seat of administration outside Nigeria, are taxable if the seat of administration is trans ferred to Nigeria during the year of assessment and if the disposal of the asset occurred while the seat of administration was in Nigeria. For capital assets located outside Nigeria, a capital gains tax is levied on the proportionate amount of gain remitted to or received in Nigeria by nonresidents. For example, if 40% of the sales proceeds is remitted to Nigeria, 40% of the capital gain is subject to tax in Nigeria.
The taxation of gains accruing from the disposal of trade or business assets, including real property, may be deferred if the assets are replaced within one year before or after disposal.
Deductions
Deductible expenses. The following expenses are deductible from employment income:
• Contributions to approved pension funds in Nigeria
• Contributions to the National Housing Fund
• Contributions to the National Health Insurance Scheme
• Compensation for loss of office (also, see Employment income)
• Mortgage interest on a loan to develop an owner-occupied resi dential house
• Reasonable relocation allowance
• Gratuity
Personal allowances. Nigeria provides the following personal reliefs.
Type of allowance Amount of allowance
Consolidated relief allowance
NGN200,000 or 1% of gross (CRA); gross income for CRA income, whichever is higher, purposes is the total income plus 20% of gross income earned less nontaxable income, income on which no further tax is payable, business-related expenses and tax-exempt items provided in the Sixth Schedule to the Nigerian Personal Income Tax Act.
Life insurance premiums (self)
Any expenses proved to the satisfaction of the relevant tax authority to have been incurred by the individual on research during the period, including the amount of levy paid to the National Agency for Science and Engineering Infrastructure Act
No limit
No limit
Business deductions. Expenses are deductible if they are reason able and are incurred wholly, exclusively and necessarily in producing income. Expenses of a capital, private or domestic nature are not deductible.
Allowable expenses include the following:
Interest on money
and employed as capital in acquiring income
• Rental payments on business premises
Repair and maintenance expenses
Salaries, wages, allowances, utility costs and insurance premiums
Bad debts
Any loss incurred in a previous year is deductible from the income of the same trade or business for up to four years.
Rates. The following rates apply to residents and nonresidents.
Taxable income
Tax Cumulative tax NGN
First 300,000
Next 300,000
Next 500,000
Next 500,000
Next 1,600,000
Above 3,200,000
NGN NGN
21,000
54,000
75,000 129,000
95,000 224,000
560,000
Minimum tax of 1% of gross income is due, even if applicable reliefs reduce tax liability below zero.
Individuals who earn the monthly minimum wage of NGN30,000 or below are exempted from any requirement to pay personal income tax or file a tax return.
Relief for losses. Business losses of a self-employed person may be carried forward for four years. Loss carrybacks are not allowed.
B. Inheritance and gift taxes
Nigeria does not impose inheritance and gift tax.
C. Social security
Pension. The mandatory minimum contribution to the Nigerian Pension Scheme is 18% of an employee’s monthly emoluments. Employers and employees are required to make contributions of 10% and 8%, respectively. Monthly emoluments are total emolu ments as may be defined in the employee’s employment contract but cannot be less than the sum of basic salary, housing allow ance and transport allowance.
In addition to the above contributions, employees may make voluntary contributions to their retirement savings accounts. An employer may agree to the payment of additional benefits to the employee on retirement or elect to bear full responsibility for the scheme provided that the employer’s contribution is not less than 20% of the monthly emoluments of the employee. In addition, every employer must maintain a group life insurance policy in favor of each employee for a minimum of three times the annual total emoluments of the employee. The premium must be paid not later than the date of commencement of coverage.
National Housing Fund. Nigerian employees earning a basic sal ary of NGN3,000 or more per year are required to contribute 2.5% of their basic salary to the National Housing Fund, admin istered by the Federal Mortgage Bank of Nigeria.
Employee Compensation Scheme. The Employee Compensation Scheme (ECS) is designed to provide adequate compensation for all employees or their dependents for any death, injury, disease or disability arising out of or in the course of employment. Under the ECS, employers are required to remit on a monthly basis to the National Social Insurance Trust Fund 1% of the employer’s total monthly payroll as ECS contributions. This guarantees the registration of the employees for the benefits of the scheme. The contribution is mandatory for employers.
Industrial Training Fund. Employers with five or more employees are required to contribute 1% of their total payroll costs to the Industrial Training Fund (ITF). Employers with less than five employees but with a turnover of NGN50 million (approximately USD125,000) and above are also required to make the above contribution to the ITF. The term “employee” includes temporary employees who work for periods of not less than three months. The ITF may refund up to 50% of the amount contributed by an employer if the employer has engaged in approved training for its employees.
D. Tax filing and payment procedures
The federal government is responsible for enacting individual income tax legislation. The Internal Revenue office in each state administers and collects taxes from taxable residents. The federal government collects taxes from the armed forces, police personnel and External Affairs Officers as well as tax levied on nonresidents for income derived from Nigeria.
The tax year in Nigeria is the calendar year. Income tax is assessed on employment income on a current-year basis. Tax on income from a trade, business, profession or vocation is assessed on a preceding-year basis, except for the first three and the last two years of assessment. The basis period is the financial year chosen for the trade, business, profession or vocation. Investment income and other income are also assessed on a preceding-year basis.
Employers are obliged to file annual returns with respect to a year of assessment for employees no later than 31 January of the following year of assessment. Every taxable individual is required to file an individual tax return within 90 days after the beginning of each year of assessment. Individuals who earn the monthly minimum wage of NGN30,000 or less are not required to file a tax return.
Like residents, nonresidents earning income in Nigeria must account for such income in their tax returns.
Tax on employment income is paid by withholding from salary under the Pay-As-You-Earn (PAYE) system. For business income, the tax due must be paid within 60 days after the receipt of an assessment notice from the Internal Revenue.
Married persons are taxed separately, not jointly, on all types of income.
E. Double tax relief and tax treaties
Foreign tax paid on income brought into Nigeria through the Central Bank of Nigeria, or through any other authorized dealer
approved by the Minister of Finance, may be credited against tax payable in Nigeria on the same income.
Nigeria has entered into double tax treaties with the following jurisdictions.
Belgium Korea (South) Romania
Canada Mauritius
South Africa
China Mainland Netherlands Spain
Czech Republic Pakistan United Kingdom
France Philippines
F. Entry visas
Nigerian consulates abroad issue various types of entry visas to bona fide business travelers, expatriate assignees (either on short- or long-term assignments) and visitors traveling for holi days. Entry visas are typically issued for a single entry into Nigeria, but visitors on tourist and business visa platforms may be granted multiple entries at the discretion of the Nigeria con sulates abroad.
The various entry visas include transit visas issued to individuals who are passing through Nigeria en route to other destinations, but expect to stay in the country for up to seven days. Travelers in direct transit or whose transition period does not exceed 48 hours do not need transit visas.
Tourist visas are issued to applicants coming to Nigeria to visit families and friends or for tourism purposes. The visitor’s stay in Nigeria can be extended subject to the approval of Nigeria Immigration Service (NIS), and relevant statutory fees may apply.
Business visas are issued to visitors and investors coming to Nigeria for discussions or meetings relating to business purposes. Any form of work-related activity is prohibited for holders of this visa. An extension of stay in Nigeria is permissible subject to NIS approval, and relevant statutory fees may apply.
A few years ago, the federal government introduced the Visa on Arrival (VOA) program to promote foreign direct investment and to ease doing business in Nigeria. The VOA program facilitates expedited entry into Nigeria for top executives of multinationals, high net worth private investors and business travelers from countries where no Nigerian consulates are located. In addition, consideration is given to other business travelers who need to urgently attend meetings, seminars and conferences in Nigeria on short notice. The approval of this facility is at the sole discretion of the Comptroller General (CG) of the NIS.
Temporary work permit (TWP) visas are issued to expatriates with specialized skills for work on short-term specific projects that are based in Nigeria. The visa application process is initiated in Nigeria by obtaining a local approval (a TWP pre-approval) for up to two months, which is granted by the CG of the NIS. The expatriates then present the approval, together with other sup porting documents at the relevant Nigerian consulate abroad. An extension of stay in Nigeria is permissible subject to NIS approv al, and relevant statutory fees may apply. For further details regarding the TWP visas, see Section G.
The subject-to-regularization (STR) visa is issued to expatriate assignees (including their dependents if applicable) who will be coming to work and live in Nigeria on a long-term basis. Expatriate assignees on this work visa platform are expected to be placed in the host company’s approved Expatriate Quota (EQ) positions. On arrival in Nigeria, a Combined Resident Permit and Alien Card (CERPAC) is issued to an expatriate assignee as a temporary resident permit receipt. Subsequently, a Green Card, which is a permanent resident permit, is expected to be issued within 90 days.
G. Work permits and self-employment
The federal government, through its relevant agencies, regulate the employment of expatriates in Nigeria to ensure that the right skills are imported or transferred and, at the same time, to pro mote employment opportunities for qualified Nigerians. Applications for entry visas into Nigeria are screened for security as well as the potential for foreign direct investment.
The TWP visa application process is initiated in Nigeria by obtaining an electronic TWP pre-approval from the headquarters of the NIS. Specific information about the expatriate, including a copy of the international passport data page, the nature of assignment to be performed and country of visa application must be well articulated in the application. On approval of the CG of the NIS, a TWP pre-approval is issued for presentation at the relevant Nigeria consulate abroad.
The following documents are generally required to process a TWP visa application:
• Completed visa application form
• Copy or original TWP pre-approval as approved by the CG of the NIS
• Letter of invitation or visa application letter (to be provided by the host company on its letterhead and addressed to the spe cific Nigerian consulate abroad)
• Acknowledgment receipt confirming payment of visa fee
• Postal order made payable to the Nigeria consulate office and additional administrative charges for express service (this may not apply to all Nigerian consulates)
• International passport with a minimum of six months’ validity and with two blank facing pages
• Return flight ticket
The above list is not exhaustive because visa requirements are determined by the various Nigerian consulates abroad.
Companies that require services of foreign nationals for perma nent or long-term employment must have previously obtained an approval for specific EQ positions at the Federal Ministry of Interior (FMI) in Abuja as well as a business permit for nonindigenous companies. After the validity and availability of the EQ positions are confirmed, host companies can bring their qualified expatriate assignees to Nigeria on the STR visa plat form (see Section F).
Foreign nationals taking up employment in Nigeria are classified into the following categories for visa application purposes:
• Individuals taking up employment in Free Trade Zones in Nigeria. This category is not subject to EQ conditions.
• Individuals taking up employment with partially governmentowned organizations and private sector companies and organizations. This category is subject to EQ conditions.
Expatriates coming to Nigeria for employment under the above categories must apply for entry visas through Nigerian consulates abroad. The Nigerian consulates may issue entry visas, including STR visas (see Section F).
Applications for STR visas must be supported with quadruplicate copies of the following documents, stamped by the appropriate Nigerian consulate in the applicant’s home country or country of residence:
• Completed visa application form (Form IMM/22)
• Credentials and academic qualifications or certificates
• Valid EQ approval letter
• Business permit and certificate of incorporation of the host company
• Offer of employment letter
• Acceptance of employment letter
• Board of directors’ resolution (applicable if roles are to be assigned for senior management positions, such as Managing Director, Chief Executive Officer and General Manager)
• Letter of invitation or visa application letter (to be provided by the host company on its letterhead and addressed to the spe cific Nigerian consulate abroad)
• Acknowledgment receipt confirming payment of visa fee, as well as a postal order made payable to the Nigeria consulate for additional administrative charges and express service (this may not apply to all Nigerian consulates)
• International passport with a minimum of six months’ validity and with two blank facing pages
Requirements may vary slightly among Nigerian embassies in different countries.
STR visas are granted for three months. The required documents must be approved and endorsed by the Nigerian embassy abroad and given to the expatriate in a sealed envelope, for presentation to the NIS on the expatriate’s arrival in Nigeria. The host com pany must present these documents to the NIS together with a CERPAC usually referred to as a temporary residence permit and an application letter for “Regularization of Stay.” On approval of the CG of the NIS, a permanent residence permit (Green Card) is issued.
The CG of the NIS abolished the use of re-entry visas (single and multiple re-entry visas) by resident expatriates, effective from 6 March 2015. Consequently, resident expatriates can commute in and out of Nigeria based on endorsed CERPACs or valid Green Cards. Expatriates employed in Nigeria are issued CERPACs on application for regularization of stay, which must be made within three months of arrival in the country. Permanent resident per mits (Green Cards) are issued on completion of this process.
Expatriates may transfer from one company to another if the prior consent of the NIS is obtained. To obtain consent, the previous employer must signify in writing it has no objection to the change of employment, and the new company then applies to the NIS for the transfer of the expatriate.
Economic Community of West African States (ECOWAS) nationals are exempted from EQ conditions and are only required to obtain ECOWAS residence cards for work purposes. This type of residence permit is valid for two years, subject to the validity of the assignee’s international passport.
All resident expatriates or visitors who wish to remain in Nigeria for a period of more than 90 days must complete the migrant e-registration process, as mandated by the federal government.
Foreign nationals may establish businesses in Nigeria and own up to 100% of the share capital of their companies. Companies that are partly or wholly owned by foreign nationals must be registered with the Nigerian Investment Promotion Commission or the FMI in Abuja after incorporation.
H. Family and personal considerations
Family members. Family members of expatriates must show evi dence of their relationships, including marriage certificates and birth certificates. Dependents above 18 years of age are also issued CERPACs. Dependent minors are issued “Minor” immi gration status endorsements, subject to the validity of their par ents’ residence permits. This allows them travel in and out of the country. Dependent minors are permitted to attend public or pri vate schools.
A dependent with CERPAC status may be employed by a Nigerian company if he or she is at least 18 years of age, with requisite academic qualifications and if the company has vacant expatriate quota positions. An application is forwarded by the Nigerian company to the NIS with copies of the applicant’s résumé and academic professional certificates. On NIS approval of the application, the status of the applicant is upgraded from the status of dependent to principal residence expatriate.
Driver’s permits. Foreign nationals are not permitted to drive legally in Nigeria with their home country driver’s licenses. They must have international driver’s licenses or prove that they have applied for Nigerian driver’s licenses.
Nigeria does not have driver’s license reciprocity with any other country. Foreign nationals must apply for Nigerian driver’s licenses after obtaining their residence permits.
The following documents must be submitted with an application form and payment of the necessary fee to obtain a driver’s license:
• A copy of the residence permit
• A copy of the foreign driver’s license
• Two passport-size photographs
• The applicant’s blood group
• Evidence of good eyesight
No actual driving test is required of a license applicant. However, a physical examination is conducted if considered necessary by the issuing authority.