Who Pays Personal Income Tax in Nigeria? A Complete Guide for Nigerians and Expats

Understanding personal income tax can feel intimidating, whether you’re a Nigerian or an expat living in Nigeria. This guide explains who pays personal income tax in Nigeria, why it matters, and how to meet your legal tax obligations. You'll find practical examples, the latest 2025 tax rates, and clear steps for all kinds of workers and business owners.

Understanding Personal Income Tax in Nigeria

What Is Personal Income Tax?

Personal Income Tax is a tax paid by individuals on their earnings—this includes salaries, business profits, investment returns, and more. In Nigeria, this tax helps the government fund public projects, education, security, roads, and healthcare.

Why Is Personal Income Tax Important?

• For Citizens: Personal income tax is vital for national development.
• For Expatriates: Paying tax is a legal requirement and proof of tax residency status in Nigeria.
• For the Government: The revenue adds to Nigeria’s budget for services benefiting everyone.

Who Is Liable to Pay Personal Income Tax?

Nigerian Residents

If you live and work in Nigeria most of the year (i.e., 183 days or more), you’re considered a Nigerian tax resident. Residents pay tax on their worldwide income, not just income earned in Nigeria.

Non-Residents and Expatriates

Non-residents (people living in Nigeria less than 183 days per year) pay tax only on income earned in Nigeria. Expatriates working or receiving income from Nigerian sources may need to register and file as well. Special rules apply for double taxation agreements—see FIRS DTA Guide for more.

Employees vs Self-Employed Individuals

• Employees: Taxes are deducted automatically from pay through the PAYE Nigeria system.
• Self-Employed/Business Owners: Must assess and pay tax directly using the direct assessment system.

What Income Is Taxable?

Sources of Taxable Income in Nigeria

1. Salaries and Wages
2. Business and Professional Income (e.g., freelance, small businesses)
3. Rent
4. Dividends and Interest
5. Bonuses and Allowances (some exceptions apply)

Exemptions and Non-Taxable Incomes

Certain incomes are exempt, including:
- Pensions and gratuities
- National Housing Fund contributions
- Life insurance premium payments
- Specified allowances (e.g., some transport or leave allowances – see FIRS Tax Exemptions)

Always check the latest regulations or with your state revenue office (SIRS directory).

How Is Personal Income Tax Calculated?

PAYE (Pay As You Earn) for Employees

Employers deduct tax directly from your monthly salary, submit it to the tax authorities, and issue you a payslip. You can verify your deductions using tools like the MyWorkPay PAYE calculator.

Direct Assessment for Self-Employed and Business Owners

If you run your own business or earn independent income, you must register, estimate your yearly earnings, and pay the assessed tax directly to your State IRS or FIRS.

Understanding Personal Income Tax Rates and Bands

Nigerian tax rates are structured in bands—a progressive system where higher earnings attract higher rates (see “Tax Rates” below).

Minimum Income Tax Provisions

If your calculated tax is less than the minimum tax allowed, you must pay the minimum income tax (usually 1% of your gross income).

Personal Income Tax Rates, Bands, and Examples

Current Tax Rates (2025 Update)

As of 2025, personal income tax rates (on chargeable income after reliefs) are:

Full 2025 Tax Bands Table - FIRS PDF

Sample PAYE Calculation for Employees

Example: Tunde earns a gross annual salary of ₦1,500,000.

• Tax reliefs are deducted first (e.g., consolidated relief allowance = higher of ₦200,000 or 1% of gross income + 20% of gross income).
• Income after reliefs: Suppose ₦1,000,000.
• Based on bands:
• 7% on first ₦300,000 = ₦21,000
• 11% on next ₦300,000 = ₦33,000
• 15% on next ₦400,000 = ₦60,000
• Total tax = ₦114,000/year (split monthly by employer for PAYE).

Try your own PAYE calculations here.

Tax Treatment for Foreigners/Expats

• Resident expats: Taxed like Nigerians, on worldwide income.
• Non-resident expats: Taxed only on Nigerian income.
• Check double taxation treaties for reliefs if paying tax in another country.

Personal Income Tax Compliance and Administration

Required Tax Returns and Filing Deadlines

• Employees: Usually auto-filed, but you should confirm with your HR. Annual tax deduction forms (PAYE) provided by employer.
• Self-Employed: Must file annual personal income tax returns by March 31st each year.

Download sample personal tax return forms - Ogun State IRS

Payment Methods and Channels

• Online payment portals
• Bank branches authorized by FIRS and SIRS
• At your local State IRS office

Penalties for Non-Compliance

• Fines for late filing (up to ₦5,000 monthly for individuals)
• Additional interest on unpaid taxes
• In severe cases, court prosecution

See FIRS Penalties and Enforcement guide.

Roles of Tax Authorities in Nigeria

Federal Inland Revenue Service (FIRS)

Handles taxes for federally-employed individuals, non-residents, expatriates, and certain high-income earners or people with multiple sources of income. FIRS Official Website

State Internal Revenue Services (SIRS)

State-level agencies collect taxes from local employees (private/public) and self-employed persons within their jurisdictions. For instance, Ogun State Revenue Service.

Relevant Contacts for Tax Assistance

• FIRS Contact page
• Ogun State Taxpayer Helpline
• Directory of SIRS in Nigeria

Frequently Asked Questions on Personal Income Tax in Nigeria

Q: What happens if I don’t file my personal income tax returns?
A: You may face fines, penalty interest, or even court action. Late returns attract ₦5,000/month penalties.

Q: Do I pay tax if I work remotely from Nigeria for an overseas employer?
A: Yes, if you’re a Nigerian tax resident. Your worldwide income is taxable in Nigeria.

Q: How is foreign income taxed for expats?
A: If you are tax-resident in Nigeria, all your income (including from overseas) is taxed here, but you may get double taxation relief if a treaty exists.

Q: Are there income thresholds below which I don’t pay tax?
A: Yes. If your annual income is below ₦300,000 after allowable reliefs, you do not pay tax, but you may still need to file a return.

Q: Where can I learn more or download official forms?
A: Visit FIRS official site or Ogun State IRS.

Summary:
Who pays personal income tax in Nigeria? In short: if you earn income in Nigeria—whether you’re a local, an expat, an employee, or self-employed—you probably do! Ensure compliance to avoid penalties, benefit from exemptions, and help build a stronger Nigeria.

Useful Links and Resources:
- Federal Inland Revenue Service (FIRS)
- Ogun State Internal Revenue Service
- PwC Nigeria Tax Data Card 2024
- MyWorkPay PAYE Calculator

For additional help, visit your nearest state revenue office or consult a registered tax professional.