Personal income tax in nigeria

This follows many years of agitation for the personal income tax law in nigeria to be brought in line with presentday economic realities. The finance act includes provisions that create nexus for the taxation of income earned by foreign companies from technical, management, consultancy or professional services that are remotely provided to a person resident in nigeria. Nigeria personal income tax rate 20112020 data 20212022. Then you must have your tax identification number tin number. Nigeria disposable personal income 20072019 data 2020. In nigeria today, only salary earners pay personal income tax pit faithfully through the pay as you earn paye system, which deducts tax at source. Nigeria exempts small businesses from company income tax. The personal income tax pit act, provides the conditions for deeming income taxable in nigeria. Personal income tax amendment act is the amendment of the personal income tax cap p8, lfn 2004.

Sep 05, 2018 personal income tax amendment act, 2011 pitam is the principal act for the taxation of employees in nigeria. Nigerian personal income tax laws have evolved over the years with several amendments introduced to align with the income of nigerians. The incidence of taxation on employment income and the relevant authority are determined by residence. Excess dividend tax s 19, int eri m d ivid end s s 43. Nigeria individual sample personal income tax calculation. Unfortunately, the correct assessment and collection of taxes from these groups of taxpayers remains a mirage due to myriad of factors. The legal basis for this tax is found in the provisions of the personal income tax decree now act. The personal income tax pit is the most common tax type in the country. Personal income tax is tax imposed on gain or profit from any trade, business, profession or vocation. Personal income tax administration in nigeria economics essay. Section 82 of personal income tax act, cap p8, lfn 2004 states that where an employer is required under a provision of this act to make deductions from. Taiwo oyedele is a partner in the tax and corporate advisory services unit of pwc nigeria and a regular paper presenter on professional tax matters. It is well known fact that there are numerous problems inherent in the nigeria personal income tax system.

Resident companies are liable to corporate income tax on their worldwide income, whereas nonresidents are subject to taxation only on their nigeria source. The tax on these foreign companies will be limited to the tax withheld deducted from payments made to them. In nigeria, the federal inland revenue service firs is the authority for monitoring collection and administration of tax in nigeria. Personal income tax act is a topic everyone should know, whether you are an employee or an employer. Nigeria tax calculator 201920 income tax calculator. Tax credit allowable against tax payable on income derived from outside nigeria. Income tax in nigeria is levied at a progressive rates capped at 24%. P8 lfn 2004 as updated to may 2007, third schedule paragraph on income of ecclesiastical, charitable or educational institution. Disposable personal income in nigeria averaged 12304714. Personal income tax in one of the types of taxes in nigeria that is levied by the federal government of nigeria what is personal income tax in nigeria. It has remained difficult, if not impossible to get the selfemployed to pay tax faithfully and since the government has not been able to effectively device means of assessing the income of those. Nigeria personal income tax rate 20112020 data 2021. Personal income tax pit is a compulsory tax charged on the income earned by an individual.

Calculating your income tax in nigeria is simple, simply select a specific online income tax calculator from the list below to calculate your annual gross salary. The withholding tax rates in nigeria wht varies among individuals and companies corporate bodies. It provides, among others, that the gain or profit from an employment shall be deemed to be derived from nigeria if the duties of the employment are wholly or partly performed in nigeria or the employer is in nigeria, unless the duties of the. If you dont have a tax manager in your company, who can calculate the income tax for you, then you may need to get your hands on this calculator. Where a taxpayer has no taxable income because of personal reliefs and allowances or total income produces a tax lower than the minimum. This service even created the tax calculator for corporations in nigeria. Personal income tax that is supposed to be paid by self employed individuals in nigeria constitutes a major source of revenue accruable to various state government of the nation. Income of an individual derived from sources such as employment, business, asset, investments etc. Some other taxes for instance property tax, substantial in many countries, such as the united states and payroll tax are not shown here.

Nigeria uses payasyouearn paye system of calculating personal income tax which is called paye tax. Pit is calculated using the graduated tax tablescale with rates ranging between 7% 24%, depending on the amount of chargeable income. Self employed individuals are expected to file annual returns annually and pay the taxes due. The list focuses on the main indicative types of taxes. In developed economies, the tax authoritys website is usually the first point of reference for individual tax both earned and unearned. A tax calculator can be accessed from its website to aid tax payers determine an estimate of nigeria tax that will be deducted from their income. Overview of personal income tax in nigeria explained. The main body that collects taxes in nigeria is firs. Personal income tax rate in nigeria is expected to reach 24. Sep 27, 2018 nigeria uses payasyouearn paye system of calculating personal income tax which is called paye tax. A taxpayer is required to file returns for the preceding year within 90 days of the end of the year.

The taxable income band is from ngn300,000 to above ngn3,200,000 in a year. Most of these online tools are only accessible via the internet. How to calculate company income tax in nigeria legit. Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as value added tax vat in nigeria. Disposable personal income in nigeria decreased to 17580757. Deletion of provisions that grant certain personal reliefs it is unclear if the amendment seeks to eliminate claim of child benefit or other surrounding provisions. Aug 07, 2018 the withholding tax rates in nigeria wht varies among individuals and companies corporate bodies.

As a general rule, income on a property rent, hire or lease payments or rights royalties situated in nigeria is liable to tax in nigeria, the place of payment notwithstanding. The rate of tax payable is not a fixed sum, depending on the gross income of the taxable employee, and the tax relief granted to him under personal income tax act pita. With the present economy, a lot of problem emanated from the assessment, collection and management of personal income tax. Business or trade only partially carried on or deemed to be carried on in nigeria. It provides, among others, that the gain or profit from an employment shall be deemed to be derived from nigeria if the duties of the employment are wholly or partly performed in nigeria or the employer is in nigeria, unless the duties of the employment are wholly performed, and. How to calculate personal income tax in nigeria legit. Some companies like to use fullyverified service, to. Where a person rents or hires propertyservices from another, wht at the rate of 10% will apply.

Here are the applicable rates for personal income tax in nigeria. Below is the basis of pay as you earn paye calculation for an. Simple tax guide for americans in nigeria taxes for expats. Each income tax calculator allows for employment income, expenses, divided, business and personal activity, everything you will require to calculate your income tax return for 201920. Under nigerian personal income tax laws all taxable persons are entitled to a consolidated relief allowance of 20% of gross income plus higher of 1% of gross income or n200,000. Our concern here is how to help you with standard formula with its procedures on how to compute your paye. What personal income tax should mean to me andersen tax nigeria. The table below shows a summary of the taxable income tax bands and applicable rates of tax on an annual basis. However, when there is an investment income paid by a nigerian resident to a nonresident and was sourced in nigeria is subject to withholding tax at source and this serves as the final tax paid.

Overview of personal income tax in nigeria explained oasdom. The annual paye tax rate progresses from this tax rate progresses from 7 percent to 24 percent of taxable income. A resident company is liable to tax on its worldwide income being its profits accruing in, derived from, brought into, and received in nigeria. Taxation is a crucial part of the everyday life of every person. In the longterm, the nigeria personal income tax rate is projected to trend around 24.

Personal income tax is a direct tax charged on the income of a person. This includes rental income on both real and personal property. Jan 06, 2020 nigerias new finance bill will ensure the exemption of small businesses with an annual turnover of less than n25 million from company income tax nigerias minister of finance, budget and national planning, zainab ahmed, has disclosed that the new finance bill, when signed into law, would have only companies doing a turnover of over n100 million pay 30% company income tax while companies. Personal income tax in nigeria is a tax levied on all incomes of an individual employed by a business or organization. Individuals resident in nigeria are taxable on their worldwide income.

The problems of personal income tax collection and. These also vary amongst either the individuals or companies involved. In nigeria, taxpayers are all people who earn salaries or gain any kind of profit out any other sources of money. Personal income tax pit can be described as the income tax payable for any year of assessment upon the chargeable income of an individual chargeable person. You can also select future and historical tax years for additional income tax calculations where figures are held, if you would like to. Personal income tax is calculated after some reliefs have been given and or certain expenses exempted according to a graduated rate specifies by pit. Relevant tax authority may assess and charge tax on the turnover of a business, etc. The minimum pit rate is 1% if the annual income is less than. Personal income tax amendment act, 2011 pitam is the principal act for the taxation of employees in nigeria. The problems of personal income tax collection and management. The tin number is a unique number issued and allocated to individuals or companies to identify them as registered tax payers in nigeria.

Vi lfn 2004 as updated and 1 st schedule to the act on goods and services exempted and zero rated goods, section 19, personal income tax act pita cap. Every taxpayer in nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside nigeria, the salaries, wages, fees, allowances, and other gains or benefits, given or. Tax rates in nigeria business environment nordea trade portal. Section 82 of personal income tax act, cap p8, lfn 2004 states that where an employer is required under a provision of this act to make deductions from emoluments or amounts on account of. Jan 30, 2018 personal income tax what you need to know. The personal income tax act, 2004 is now amended by the personal income tax amendment act, 2011. Personal income tax rates in nigeria are progressive up to 25%. The problems of personal income tax collection and management in nigeria. This is a law that takes care of tax matters as it affects all income earners. Personal income tax act is the amendment of the personal income tax cap p8, lfn 2004. Personal income tax in one of the types of taxes in nigeria that is levied by the federal government of nigeria what is personal inc ome tax in nigeria. Nigerias new finance bill will ensure the exemption of small businesses with an annual turnover of less than n25 million from company income tax nigerias minister of finance, budget and national planning, zainab ahmed, has disclosed that the new finance bill, when signed into law, would have only companies doing a turnover of over n100 million pay. Personal income tax in nigeria what you should know. In most cases, however, the withholding tax rates for individuals is anythin g from 5 percent to 10 percent while for companies, it is between 2.

Impact of personal income tax on the growth of nigeria. The applicable income tax rate depends on income level and corresponding tax rate for each income bracket. In the context of personal income tax, a person means an individual, a sole proprietorship nonjuristic person, communities and families and on executors and trustees of an undivided estate. Personal income tax rate in nigeria varies depending on the annual income of a person. If your income is larger than that, here are the rates you need to know about for your calculations. Personal income tax in nigeria personal income tax is a direct tax on the income from all sources of an individual adult, communities and families, and on executors and trustees. The nigeria income tax calculator is designed for tax resident individuals who wish to calculate their salary and income tax deductions for the 2019 tax assessment year 1 march 2019 29 february 2020. How to calculate your taxes using paye nairametrics. In the case of employment, a nonresident person is liable to tax in nigeria if the duties of employment are wholly or partly performed in nigeria, unless. The bill also seeks to provide clarity and efficiency in the administration of the individual income taxes in nigeria. How to get tax identification number tin number in nigeria.