Income Tax in Nigeria: Everything You Need to Know in 2024

Income Taxes in Nigeria

Welcome to your go-to guide on understanding income tax in Nigeria! In this post, we’ll break down the complexities of income tax in Nigeria, making it easier for you to navigate the tax landscape.

Income tax is one of the most important parts of taxes in Nigeria. It plays a significant role in revenue generation for the government. Understanding income tax in Nigeria is essential for individuals and businesses alike. 

This post will cover everything from the basics of income tax to the specific processes, reliefs, and exemptions available. Let’s get into it. 

Why Income Tax Matters

Income tax is vital for Nigeria’s revenue generation, funding essential public services like healthcare, education, and infrastructure development. Paying taxes contributes to the nation’s growth and stability.

Brief History of Income Tax in Nigeria

Income tax in Nigeria has evolved significantly since its colonial-era introduction. It was initially imposed on expatriates and has now gradually expanded to include Nigerian citizens and businesses. 

The legal framework has undergone several reforms to adapt to the changing economic landscape, culminating in the current laws governing income tax today.

Legal Basis for Income Tax in Nigeria

Income tax in Nigeria is primarily governed by two acts:

  • Companies Income Tax Act (CITA) for businesses
  • Personal Income Tax Act (PITA) for individuals

These tax laws outline the principles, rates, and procedures for tax assessment and collection.

Personal Income Tax in Nigeria

Who Is To Pay?

Personal Income Tax (PIT) applies to individuals earning income in Nigeria, including:

  • Salaried employees
  • Self-employed individuals
  • Sole traders
  • Partners in a partnership
  • Trustees and executors

Taxable income includes:

  • Salaries
  • Wages
  • Bonuses
  • Pensions
  • Other benefits

Rates and Brackets

Nigeria’s PIT is progressive, meaning higher income earners pay a higher rate. Here are the current rates:

  • First NGN 300,000: 7%
  • Next NGN 300,000: 11%
  • Next NGN 500,000: 15%
  • Next NGN 500,000: 19%
  • Next NGN 1,600,000: 21%
  • Above NGN 3,200,000: 24%

How It Is Calculated

PIT is calculated on an individual’s total income from all sources, including salaries, wages, bonuses, and pensions. Allowable deductions and reliefs are subtracted from the gross income to determine the taxable income.

Company Income Tax in Nigeria

Companies Income Tax (CIT) applies to:

  • All companies operating in Nigeria
  • Foreign companies with Nigerian-sourced income

Here’s a breakdown of taxable income components for companies:

  • Trade or business profits
  • Rent from properties
  • Premiums, interest, and other investment incomes
  • Dividends, interest, royalties, and fees from Nigeria
  • Income accruing in, derived from, or brought into Nigeria

The standard CIT rate is 30%. However, small companies with an annual turnover of NGN 25 million or less are exempt. Medium-sized companies with turnovers between NGN 25 million and NGN 100 million are taxed at 20%. The taxable income is determined after deducting allowable business expenses from the gross profit.

Eligibility to File Income Tax in Nigeria

All companies incorporated under the Companies and Allied Matters Act (CAMA) must file annual Company Income Tax returns. This includes:

  • Newly incorporated companies
  • Foreign companies doing business or deriving income from Nigeria

Foreign companies must file returns on their Nigerian-sourced profits through an appointed agent or representative. This applies to:

  • Branch offices of foreign companies
  • Foreign companies executing turnkey projects
  • Foreign companies providing technical services/consultancy

Options for Filing Income Tax in Nigeria

You can file your tax returns either electronically or manually:

Manual Filing

  1. Gather required documents:
    • Tax Identification Number (TIN) or RC number
    • Completed tax return forms (Form C08A, C08B, C08C, or C08D)
    • Audited financial statements
    • Tax computation schedules
    • Capital allowance schedules
    • Withholding tax credit notes
    • Tax exemption/compliance certificates
    • Supporting schedules/documents
  1. Submit at the nearest FIRS or SIRS tax office:
    • Ensure you obtain a receipt or acknowledgment.

Electronic Filing (e-filing)

  1. Gather the required documents.
  2. Login to the FIRS self-filing system
    • Complete and submit the applicable tax form.
    • Accurately report your income and claim eligible deductions.
    • Calculate your taxable income and tax liability.

Tax Deductions and Credits

Under CITA, companies can deduct various expenses to arrive at their taxable profits:

Operating Expenses

  • Salaries, wages, and allowances
  • Interest on borrowings
  • Repairs and renewals
  • Rent and royalties paid

Capital Allowances

  • Industrial buildings and plants
  • Machinery and equipment
  • Furniture and fittings
  • Motor vehicles

Tax-Exempt Income

  • Dividends from other Nigerian companies

Unrelieved Losses

  • Incomes specifically exempt from tax

Filing and Deadlines

For Individuals:

  • The deadline is typically 90 days after the start of the year (March 31).

For Businesses:

  • The deadline is six months after the accounting year ends.

Penalties for Late Filing

Failing to file or pay taxes on time can result in penalties, interest charges, and legal consequences.

personal income tax in Nigeria

Frequently Asked Questions

Who needs to file income tax returns in Nigeria? 

All individuals earning income and companies operating in Nigeria must file annual tax returns.

What are the deadlines for filing tax returns in Nigeria? 

Individuals must file by March 31 each year. Companies must file within six months after the end of their accounting year.

What happens if I miss the filing deadline? 

Late filing incurs penalties and interest charges.

How do I register to pay income tax in Nigeria? 

Individuals and businesses must register with the Federal Inland Revenue Service (FIRS) and obtain a Tax Identification Number (TIN).

Can I file my taxes online? 

Yes, you can file electronically via the FIRS e-filing portal.

Can foreign companies doing business in Nigeria be taxed? 

Yes, foreign companies earning income from Nigerian sources must pay tax. This applies to branch offices, companies executing turnkey projects, and those providing technical or management services.

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