Everyone in Nigeria, whether you’re an individual earning a salary or a business owner, deals with taxes at some point. It’s not just about money being deducted or forms to fill, it’s really a way that the government gathers funds to provide services, you know, roads, hospitals, schools. Maybe you’ve wondered, though, exactly what all those tax terms you hear actually mean. I know I did. Understanding these terms isn’t only for accountants or finance pros, it honestly helps you make better decisions and, well, perhaps avoid some headaches. Knowing the basics lets you check if you’re being taxed correctly or if you’re entitled to some reliefs you didn’t even know about.
Common Nigerian Tax Terms Explained (A-Z Glossary)
Understanding Nigerian tax can get confusing (or even intimidating, if you’re seeing these terms for the first time). Here’s a friendly glossary. Just skim, read, revisit. Forget something? No worries, everyone does, that’s really what glossaries are for.
A
Assessment:
This is the process where the tax authorities figure out how much tax you, or your business, need to pay. They’ll check your income, maybe expenses, even sometimes your personal situation.
Audits:
A closer look at your financial records by the tax office, often to check your returns (it sounds scary, but it’s sometimes just routine).
C
Company Income Tax (CIT)
One of the big ones. CIT is the tax that companies in Nigeria pay on their profits. If your business is registered as a company, this is for you. The rate is usually 30%, but there’s a lower rate of 20% for small companies (with an annual turnover of N25 million or less) (FIRS Guide). What does this mean? Simply, if your company makes money after all costs, the government takes a slice. And you have to file annual returns to report these profits.
Learn more in our detailed business tax guide.
Capital Gains Tax (CGT)
Let’s say you sell a property, shares, or other valuable assets (not goods you sell every day, but “capital assets”). If the sale makes you a profit, that’s called a capital gain, and the government takes 10% of that gain (with some exceptions). If you inherit something and sell it, sometimes you might not need to pay CGT.
Credits (Tax Credits):
These are like rewards, they reduce your tax because you’ve done something the government wants to encourage, like investing in certain sectors.
D
Deductions:
Amounts that can be subtracted from your taxable income (like pension contributions), reducing how much tax you owe.
E
Education Tax (EDT)
This tax is paid by companies, not individuals, to fund education in Nigeria. It’s 2.5% of assessable profit. So if your company is making a profit, you chip in to help the educational system.
F
Federal Inland Revenue Service (FIRS):
The main federal tax agency. If you’re paying federal taxes or have questions about things like VAT or CIT, this is who you deal with.
M
Minimum Tax:
If a company declares little or no profit, they may still need to pay a minimum amount of tax, so nobody escapes completely, it’s a kind of safety net for tax revenue.
N
National Information Technology Development Levy (NITDL)
A specially targeted tax, mainly for companies earning over N100 million. It’s 1% of profit before tax, and it funds technology development (so, in a roundabout way, it helps Nigeria’s tech scene).
Nigerian Tax Authorities:
These include FIRS at the federal level and SIRS (State Internal Revenue Service) at the state level.
P
Personal Income Tax (PIT)
This might be the tax most people hear about. If you have a job, you’re probably already paying this without thinking, since it’s deducted from your salary (Pay-As-You-Earn system or PAYE). Freelancers, business owners, and anyone earning money has to pay PIT too. Rates are different depending on income level (it’s progressive, higher income, higher percentage), and you file returns every year with your local SIRS.
See our step-by-step guide to PIT and how to file in Nigeria.
Petroleum Profit Tax (PPT)
If you’re in the oil and gas industry, this is the tax you face. The details are pretty technical, to be honest, and rates can be as high as 85%. Not really something for every Nigerian, unless you work in petroleum.
PAYE (Pay As You Earn):
The system employers use to deduct PIT straight from employees' salaries, so you don’t have to calculate or remit yourself (which frankly is nice).
Learn more about payroll and employee tax in Nigeria.
R
Remittance:
Just means sending the tax collected to the appropriate authority. For example, your employer remits PIT to the SIRS.
Residency for Tax:
Where you live determines where you pay PIT (the SIRS of your resident state).
S
Stamp Duties (SD)
Ever heard of stamp duties? These are taxes on documents, think property transactions, agreements, maybe even your rent. Both federal and state authorities collect stamp duties, depending on the transaction.
SIRS (State Internal Revenue Service)
Every state in Nigeria has one. If you pay PIT, this is your point of contact.
T
Tax Identification Number (TIN):
Every taxpayer (person or company) in Nigeria needs a unique number, your TIN. You’ll need it for pretty much any official tax or government formality.
How to get a TIN in Nigeria: All you need to know.
Tax Returns:
The forms where you declare your income, profits, and other details to the tax authorities. Individuals who don’t have PAYE and all companies must file these every year.
Types of Taxes Explained in Practice
Let’s look at a few more terms, because sometimes just hearing them out loud helps:
- Withholding Tax (WHT): This is when some amount is held back (withheld) from payments you receive, like for contracts, rent, dividends, or professional services. The withheld portion is paid straight to the government, as advance tax for you. Later, you can offset this against your tax due.
- Value Added Tax (VAT): When you buy stuff (goods or services), usually 7.5% VAT is added to the price. The seller collects it from you, then sends it to the FIRS. Some essential things, like basic food and medical goods, might not have VAT.
- Tax Reliefs: Deductions or allowances that help lower your taxable income (maybe you’re married, have kids, or contributed to a pension).
Curious about something not listed here? The tax space isn’t frozen, new terms show up all the time.
Major Types of Taxes in Nigeria
If you want to see all the taxes at a glance, I think a simple list works well. Here are the top types you’ll probably encounter:
- Personal Income Tax (PIT): Paid by individuals, collected by SIRS (states)
- Company Income Tax (CIT): Paid by companies on profits, collected by FIRS (federal)
- Value Added Tax (VAT): Paid by consumers, collected by businesses and remitted to FIRS
- Withholding Tax (WHT): Deducted at source from payments, remitted by the paying party to FIRS/SIRS
- Stamp Duties (SD): Paid on documents, collected by FIRS or SIRS depending on transaction
- Capital Gains Tax (CGT): Paid on profit from sale of certain assets, collected by FIRS
- Education Tax (EDT): Paid by companies, collected by FIRS
- Petroleum Profit Tax (PPT): Oil and gas sector, collected by FIRS
- National Information Technology Development Levy (NITDL): Paid by specified companies, collected by FIRS
Who collects what?
- Federal: FIRS (CIT, VAT, PPT, CGT, Education Tax, NITDL, some stamp duties)
- State: SIRS (PIT, some stamp duties, WHT on individuals)
- Local: Minor taxes or levies, often unrelated to federal ones
Nigerian Tax Authority Guide
In Nigeria, tax is managed mainly by two big institutions:
- Federal Inland Revenue Service (FIRS): Handles taxes that go to the federal government. If you run a company or handle VAT, you deal with the FIRS. They also handle almost all taxes for multinational businesses. Their website is updated regularly and offers lots of downloadable resources (FIRS Official Site).
- State Internal Revenue Service (SIRS): Each state has its own SIRS. They handle PIT and other state taxes. If you’re an individual (not a company), this is usually who you interact with.
These authorities have the power to audit, collect, and enforce tax payments. Sometimes the overlap can be a bit confusing, like with stamp duties, but generally: individuals, state; companies, federal.
Commonly Asked Nigerian Tax Questions (FAQs)
Let’s tackle some of the questions many Nigerians (at least those I know) tend to ask, sometimes over and over again. It’s fine, tax can feel like learning a new language.
What is the difference between CIT and PIT?
CIT is for companies, PIT is for individuals. Companies pay tax on profits (after costs), while individuals are taxed based on personal income (salary, business earnings).
Who must register for VAT?
Every business that sells taxable goods or services in Nigeria, and earns over the VAT threshold (which is usually quite low), needs to register with the FIRS for VAT. If you’re unsure, the FIRS actually has a checklist.
When are tax returns due in Nigeria?
For companies, the annual CIT returns are due within six months after the company’s financial year ends. For individuals not on PAYE, PIT returns are due by March 31st of each year.
See a full guide to filing taxes in Nigeria.
How do I get a Tax Identification Number (TIN)?
You apply via the FIRS or your state’s SIRS. Usually, it’s online now, though the process can take a bit, especially if documentation isn’t perfect (Get a TIN - FIRS).
Can I claim tax reliefs or incentives?
Yes, there are various allowances you can claim, such as for pensions, children, spouse, and more. Companies may qualify for sector-specific incentives, like those in agriculture or tech.
How is tax residency determined?
Where you live for at least 183 days in a year typically sets your residency for PIT. Sometimes, it gets more nuanced (students, remote work), but this is the basic rule.
What penalties exist for non-compliance?
Late filing or non-payment attracts penalties and interest (these add up quickly and make most people very anxious, frankly). Sometimes accounts can be frozen.
Didn’t see your question? Just ask, honestly, it’s better to clarify than assume.
Practical Tax Tips for Nigerians
If there’s anything you take from this, perhaps let it be these simple habits:
- Keep Records: Receipts, contracts, invoices, salary slips, don’t throw them away. They might seem useless until FIRS or SIRS asks for proof, then suddenly they’re precious.
- Stay Informed: Laws do change. What was true last year may shift, even if slightly. If in doubt, check FIRS or your state SIRS site.
- File and Pay Promptly: Deadlines are deadlines. Late returns mean penalties, which is nobody’s idea of fun.
- Ask for Help: Tax consultants, the FIRS helpdesk, even their social media (surprisingly responsive, sometimes). Don’t try to “wing it” with taxes.
You can also chat with our Nigerian tax chatbot for quick, expert answers.
Resources for Further Information
Honestly, nobody remembers all this, so here are some bookmarks worth keeping:
- Federal Inland Revenue Service (FIRS) (forms, laws, FAQs, TIN portal)
- Nigeria Tax Laws Download Page (FIRS)
- Nigerian Tax News (helps to keep up with changes)
- Simple VAT Calculator (useful for everyday transactions)
- Nigerian Tax Calculators & Guides (for PAYE, WHT, VAT and more)
Need a more detailed explainer? Check out our longer guides on Personal Income Tax Nigeria and Value Added Tax Nigeria if you want a deep dive.
Browse Nigerian tax insights and updates on our blog for ongoing tips and news.
Conclusion: Navigating Nigerian Taxes with Confidence
Maybe you’re new to tax, or just tired of the jargon. Either way, maybe it’s now just a little clearer. The Nigerian Tax Glossary & FAQs is a tool you should return to anytime you feel lost or need to double-check something. Taxes will keep changing, obviously, but learning the language, even a bit, can really help you feel less stressed, and maybe, maybe even a bit empowered.
Feel free to bookmark, share, or even ask questions in the comments. If something’s unclear, your question will help make this resource better for everyone.
For more official details, always refer to the FIRS. This guide is a starting point, not a law textbook.