Personal Income Tax in Nigeria: A Complete Guide for Nigerians and Expats (2025 Update)

Personal income tax in Nigeria (commonly called PIT Nigeria) is a fundamental part of the country's tax system. It's crucial for both Nigerian residents and expats to understand, as it determines how much of one's income is due to the government. With the Finance Act bringing fresh changes in 2025, understanding PIT is more important than ever—whether you run a business, work for a company, or are a foreign worker residing in Nigeria.

Knowing your legal responsibilities regarding income tax rates Nigeria helps you avoid penalties, obtain important documents like the tax clearance certificate Nigeria, and remain on the right side of the law.

What is Personal Income Tax in Nigeria?

Personal income tax in Nigeria (PIT) is a tax imposed on individuals’ earnings, including salaries, wages, business profits, and investment income. Both Nigerians and foreigners who live or earn in Nigeria are typically liable to pay, if their income exceeds set thresholds.

Who is required to pay?
- Nigerian residents: All individuals earning income within Nigeria.
- Foreign expats and residents: Must pay if they reside for at least 183 days in a year or derive income from Nigeria.
- Non-residents: Taxed on Nigerian-sourced income only.

Administration of PIT:
- Federal Inland Revenue Service (FIRS): Oversees PIT for residents in the Federal Capital Territory (FCT) and expatriates working in Nigeria for companies.
- State Boards of Internal Revenue (SBIR): Administer PIT for most residents in their states.
- Legal basis: The Personal Income Tax Act (PITA) of 2004, updated regularly, especially by the Finance Acts.

Types of Personal Income Tax in Nigeria

Pay-As-You-Earn (PAYE)

PAYE Nigeria is the most common method for income tax collection from employees. Here’s how it works:
- The employer deducts income tax each month from the employee’s salary.
- The withheld tax is remitted to the state's tax authority on behalf of the staff.
- Employees working for companies or government agencies are under PAYE.

Direct Assessment

Direct assessment tax Nigeria applies to:
- Self-employed individuals: artisans, freelancers, contractors, and professionals (e.g., lawyers, doctors running their own practice).
- They self-assess their income, calculate tax, and remit directly to the relevant state tax board.

For expats:
- Foreign individuals employed directly by Nigerian businesses are typically on PAYE.
- Expats running their own business or earning contract income in Nigeria fall under direct assessment.

Income Tax Rates and Bands in Nigeria (2025)

Income tax rates in Nigeria are determined by tiers, so the rate you pay depends on your annual earnings. For 2025, the rates and bands are:

Minimum tax Nigeria:
- If your chargeable income is below ₦300,000 after reliefs, you pay 1% of your gross income as minimum tax.

Tax-exempt income:
- Certain earnings are not taxed, like national minimum wage (up to ₦30,000/month), certain allowances, and specific pension contributions.
- For full details, see the FIRS PIT exemptions page.

How to Calculate Your Personal Income Tax

Here’s how to calculate PIT Nigeria for 2025:

1. Calculate your gross income: Add up salary, bonuses, allowances, profits, etc.
2. Deduct allowable reliefs: Pension (up to 8% of salary), National Housing Fund (NHF), life assurance, and Consolidated Relief Allowance (CRA = higher of ₦200,000 or 1% of gross, plus 20% of gross income).
3. Get “chargeable income”: Gross income – total reliefs.
4. Apply the income tax bands. Calculate based on the slab rates above.

Example Calculations

Example 1: PAYE Employee

• Annual gross income: ₦2,400,000
• Allowable reliefs: ₦200,000 (CRA base) + ₦480,000 (20% gross) = ₦680,000
• Chargeable income: ₦2,400,000 – ₦680,000 = ₦1,720,000
• Apply tax bands:
• First ₦300,000 x 7% = ₦21,000
• Next ₦300,000 x 11% = ₦33,000
• Next ₦500,000 x 15% = ₦75,000
• Remaining ₦620,000 x 19% = ₦117,800
• Total annual PIT: ₦246,800

Example 2: Direct Assessment (Self-Employed)

• Annual business profit: ₦5,000,000
• Allowable reliefs: Total ₦1,200,000 (assume pensions, NHF, CRA)
• Chargeable income: ₦5,000,000 – ₦1,200,000 = ₦3,800,000
• Apply bands (see table);
• Total tax = (₦21,000 + ₦33,000 + ₦75,000 + ₦95,000 + ₦336,000) = ₦560,000

Try the FIRS PIT Calculator for your exact figure.

Tax Clearance Certificate in Nigeria

A tax clearance certificate Nigeria (TCC) proves your taxes are fully paid. You’ll often need it for:
- Business registration/renewal
- Immigration/residency permits
- Government contracts and tenders
- Loan applications or property purchases

How to Get a TCC:
1. File your tax returns for at least the last three years.
2. Ensure all PIT, PAYE, or direct assessment payments are up-to-date.
3. Apply via your state tax board or FIRS online portal.
4. Submit required documents: returns, proof of payments, valid ID.
5. Wait for verification and issuance.

Filing and Paying Personal Income Tax

• Key deadlines: PIT annual returns are due by March 31st each year (following the tax year).
• Where to pay:
• State Internal Revenue Service offices (for where you live/work)
• Online portals (e-filing for FIRS, FCT, and many states)
• Bank designated tax payment branches
• Documents needed: ID card, employment letter/contract, proof of payments/withholdings, previous TCC if renewing.

Useful Links:
- FIRS e-filing portal
- Lagos State IRS portal

Penalties for Non-Compliance and How to Avoid Them

• Late or non-payment: Up to ₦5,000 per month of default, plus interest. Willful evasion may result in prosecution.
• Avoid penalties by:
• Keeping accurate income/expenditure records
• Remitting your tax on time
• Consulting licensed tax professionals for advice
• Using official online e-filing/tax management platforms

Common FAQs for Nigerians and Expats

Is foreign income taxable in Nigeria?
- Yes, if you are tax-resident, your worldwide income is taxable (subject to double taxation treaties).

What if I work in more than one state?
- Pay PIT to the tax authority where you reside or primarily work.

What happens when I relocate/leave Nigeria?
- File final returns, pay any outstanding PIT, and apply for your final TCC for future proof.

What about multiple employments?
- Sum income from all sources, declare total income, and pay tax through the dominant employer, with all others providing income details.

How to resolve tax disputes?
- Appeal to the state tax board, and escalate to the Tax Appeal Tribunal if unresolved.

Latest Developments in Personal Income Tax (2025)

• The 2025 Finance Act updated minimum tax to ₦30,000/month before reliefs.
• Remote workers and digital nomads must declare all Nigerian-sourced income, regardless of location.
• Crypto incomes now reportable under PIT for full-year residents (details here).
• Streamlined TCC application via new state and FIRS e-portals.
• Reliefs/credits increased for NHF and voluntary pension contributors.

Conclusion

Staying compliant with Nigeria’s personal income tax laws keeps you safe from penalties, secures important certificates, and supports national development. Whether you’re a Nigerian, an expat, or a self-employed professional, understanding PIT Nigeria is key in 2025 and beyond!

For more help:
- Visit FIRS Official PIT page
- See our full guides on Tax Clearance Certificate and PAYE vs. Direct Assessment

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