By Joshua I. | March 26, 2025
This guide breaks down key considerations to help diaspora Nigerians comply with Nigerian tax laws while avoiding double taxation.
1. Your Residency Status Determines Tax Liability
Nigeria’s tax laws are built around residency status. An individual is considered a tax resident if they spend at least 195 days in Nigeria within 12 months. Tax residents are subject to worldwide income taxation, meaning that the income they earn both within and outside Nigeria must be declared and taxed locally.
Conversely, non-residents, or those spending fewer than 195 days in Nigeria annually, are only taxed on income derived from Nigerian sources. Examples include rental income from their Nigerian properties or employment duties performed in Nigeria.
2. The Employment Income that Apply for Non-Residents
Non-residents working in Nigeria may still face tax obligations unless specific exemptions apply under a Double Taxation Treaty (DTT). For instance, if a non-resident’s employment duties are performed in Nigeria, but:
- The employer is based outside Nigeria,
- Their remuneration is not paid through a Nigerian fixed base (e.g., a local office), and
- Their income is taxed in the employer’s country under a DTT,
then the individual may be exempt from Nigerian taxes. Nigeria has DTTs with several countries, including the UK, Canada, and South Africa, to prevent double taxation.
3. Taxation of Business Profits and the SEP Rule
Foreign nationals or entities earning business profits from Nigeria are taxable if they establish a fixed base (e.g., an office or branch) in the country. Additionally, Section 6(A) of the Personal Income Tax Act (PITA) introduces the Significant Economic Presence (SEP) rule for non-residents providing technical, professional, management, or consultancy (TPMC) services to Nigerian residents.
While the Ministry of Finance has yet to define SEP criteria, this provision aims to tax digital or remote services impacting Nigeria’s economy. Businesses should monitor updates to ensure compliance.
4. Clarifications from the Finance Ministry
In 2017, former Finance Minister Kemi Adeosun clarified misconceptions about diaspora taxation. Key points include:
- No Double Taxation: Nigerians paying taxes abroad are exempt from Nigerian taxes on the same income.
- Targeted Enforcement: The focus is on Nigerian tax residents and undeclared Nigerian-sourced income. For example, rental income from Nigerian properties must be declared locally, even if the owner resides abroad.
- Foreign Assets: Nigerian tax residents must declare global income, including rents from overseas properties or dividends from foreign investments. As Adeosun stated, “The fact that you earned it, you have to declare it in Nigeria and pay tax on it.”
5. Exemptions for Most Diaspora Nigerians
According to Adeosun, the “vast majority” of Nigerians abroad, especially those working or running businesses overseas, personal income taxes do not apply.
As already established, taxes apply primarily to:
- Tax residents, that is those who have lived 195+ days in Nigeria, but have earned foreign income.
- Non-residents or those earning Nigerian-sourced income, for instance, rents, business profits in Nigeria but live abroad, who do not declare it in their country of residence.
6. The Proposed Tax Reforms Do Not Affect this
The new Tax Reform Bills do not affect any of these in principle. The core definition of tax residency, remains unchanged. Consequently, Nigerians residing abroad who do not meet these residency criteria can expect to continue to be exempt from paying Nigerian taxes on their foreign-earned income.
Taxpal helps simplify and automate your tax filings to ensure compliance.