Navigating the tax rates in Nigeria can feel like wandering through a maze. With various types of taxes and rates applicable to individuals and corporations, understanding the intricacies is crucial for compliance and financial planning.

This guide aims to shed light on the different tax rates in Nigeria, ensuring you have the essential information at your fingertips.

Consumption Taxes

Value-Added Tax (VAT)

VAT is a consumption tax applied to goods and services. The standard rate is 7.5%, but some goods and services enjoy exemptions or zero-rated status, such as:

• Exported goods and services (excluding non-oil exports)
• Medical goods and services
• Basic food items
• Locally produced sanitary napkins
• Books and educational materials

Additionally, non-oil exports and goods/services purchased by diplomats or for humanitarian projects are zero-rated.

Excise Duty

Excise duties are levied on specific goods like tobacco, alcohol, and carbonated beverages. This tax also extends to telecommunication services provided within the country.

Corporate Taxes

Company Tax

Corporate Income Tax (CIT) is charged at a rate of 30% on profits of resident companies, which are taxed on worldwide income. Non-resident companies pay tax only on Nigeria-sourced income. Digital companies and non-resident firms providing consultancy, technical, or professional services face a 10% final tax if they have a significant economic presence in Nigeria.

Capital Gains Tax

Capital gains tax is 10% on profits from the disposal of assets. Some exemptions apply, such as gains from shares sold above NGN 100 million or reinvested within 12 months in a Nigerian company.

Other Corporate Taxes

Additional taxes include:

• Stamp duties
• Property tax (varies by state)
• Pension contributions (10% of gross salary for employers with 15+ employees)
• National Housing Fund contributions (2.5% of basic salary)
• Payroll taxes
• Information technology tax (1% of profit before CIT for companies with turnover above NGN 100 million)
• Police Fund levy (0.005% of net profit)
• Tertiary education tax (2.5% of assessable profit)
• National Agency for Science and Engineering Infrastructure levy (0.25% of profit before tax for certain sectors)
• Cabotage levy (2% surcharge on contract sums earned by coastal trade vessels)

Individual Taxes

Personal Income Tax

Personal income tax in Nigeria is progressive, with rates up to 24%. Here’s the breakdown:

• NGN 0 – 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%

A minimum tax rate of 1% applies if there is no taxable income.

Allowable Deductions and Tax Credits

Expenses that are wholly, exclusively, necessarily, and reasonably incurred in earning taxable income are deductible. Specific deductions include life insurance premiums, contributions to state pension funds, housing and healthcare costs, and mortgage interest on owner-occupied accommodations. A consolidated relief allowance of NGN 200,000 or 1% of gross income (whichever is higher) plus 20% of gross income is also available.

Other Notable Taxes

Withholding Tax (WHT)

WHT, ranging from 5% to 10%, is an income tax deducted at source from payments for contracts, rents, supplies, and services.

Petroleum Profit Tax (PPT)

PPT is levied on profits from petroleum operations. Rates vary: 50% for PSC operations with NNPC, 65.75% for non-PSC operations in the first five years, and 85% thereafter.

Capital Gains Tax (CGT)

CGT is 10% on profits from asset disposals, with certain exemptions for transactions involving shares.

Stamp Duties

Stamp duties are taxes on written documents involving land or property acquisition, charged either at fixed rates or proportionally.

Education Tax (EDT)

A 2% tax on assessable profit of Nigerian companies, this tax funds the Tertiary Education Trust Fund (TET Fund).

National Information Technology Development Levy (NITDL)

A 1% levy on profit before tax for companies with an annual turnover of NGN 100 million or more, governed by the NITDA Act.

Tenement Rate

These property taxes, paid by landlords or occupiers to local governments, are based on property value and serve as part of internally generated revenue.

Understanding the tax rates in Nigeria is crucial for compliance and effective financial management. By staying informed and adhering to these guidelines, individuals and businesses can navigate the tax system more effectively and avoid potential pitfalls.