Nigeria's income tax rate for individuals is progressive, ranging from 7% to 24% based on income brackets. For those earning N300,000 and below, the tax rate is 7%. Income between N300,001 and N600,000 attracts a rate of 11%, while earnings from N600,001 to N1.6 million incur a tax rate of 15%. Higher incomes from N1.6 million to N3.2 million are taxed at 19%, and any income above N3.2 million faces the maximum rate of 24%. Corporate tax rates generally stand at 30%, with Nigerian companies benefiting from reduced rates of 20% in specific circumstances, such as small businesses or industries encouraged by the government.
Personal income tax: Progressive rates
In Nigeria, personal income tax is structured on a progressive rate system designed to increase the tax burden proportionally with income levels. As of 2023, the rates range from 7% for the lowest income brackets to 24% for the highest earners, ensuring that individuals with higher earnings contribute more. For individuals earning between N300,000 and N3,200,000, tax rates incrementally increase from 11% to 24%, creating a fair tax environment. You may also find that taxpayers can benefit from various reliefs and deductions that can lower their taxable income.
Corporate tax: Flat rate
Nigeria imposes a corporate income tax at a flat rate of 30% on the profits earned by companies operating within its jurisdiction. This rate applies to both resident and non-resident companies engaged in business activities in Nigeria. Certain industries, such as petroleum, have unique tax regulations and rates that differ from the standard corporate tax. You should be aware that compliance with Nigerian tax laws requires proper registration and filing to avoid penalties and ensure business sustainability.
Value Added Tax (VAT): Standard rate
Nigeria's Value Added Tax (VAT) is currently set at a standard rate of 7.5%. This tax applies to the supply of goods and services, with certain exemptions in place for essential items such as basic foods and medical supplies. As part of the government's strategy to enhance non-oil revenue, the VAT rate was increased from 5% to 7.5% in 2020, reflecting a broader effort to diversify the economy. Tax compliance is vital for businesses operating in Nigeria, as VAT registration is mandatory for enterprises with an annual turnover above a specified threshold.
Capital Gains Tax: Fixed rate
In Nigeria, the Capital Gains Tax (CGT) is levied at a fixed rate of 10% on gains derived from the disposal of chargeable assets. This tax applies to individuals, companies, and other entities, and specifically targets profits made from the sale of real estate, stocks, and other investments. Certain exemptions, such as those for assets held within a pension scheme or gains below a specified threshold, may apply. Understanding this fixed rate is essential for effective investment planning and compliance with Nigerian tax regulations.
Education Tax: Applied on corporate profits
In Nigeria, the income tax rate for companies is generally set at 30% on profits. However, the Education Tax, a statutory obligation for corporate entities, is levied at a rate of 2% on assessable profits. This tax contributes significantly to educational funding in Nigeria, aiming to enhance the quality of education and infrastructure. Companies must ensure compliance with these tax obligations to support national educational initiatives while fulfilling their fiscal responsibilities.
Non-resident taxation: Specific rules
In Nigeria, non-residents are subject to a flat income tax rate of 30% on their Nigeria-sourced income. This taxation applies to various sources, including dividends, interest, and royalties. Non-residents must also comply with withholding tax obligations, where taxes are deducted at the source before income is paid out. The Nigerian tax authority requires non-residents to register for tax purposes when engaging in business or investing in Nigeria, ensuring transparency and proper tax compliance.
Double Tax Agreements
Nigeria's income tax rate varies based on the classification of the taxpayer; corporations face a standard rate of 30%. However, individuals are subject to a progressive tax rate that ranges from 7% to 24%. Nigeria has established Double Tax Agreements (DTAs) with numerous countries to prevent tax evasion and encourage foreign investment, allowing for the relief of taxation for income earned in both jurisdictions. These agreements typically enable taxpayers to claim a tax credit or exemption on certain income sources, thereby mitigating the risk of dual taxation.
Tax Identification Number (TIN) required
Nigeria's income tax rate varies depending on the type of taxpayer; individuals are typically taxed at progressive rates ranging from 7% to 24%, while corporate entities face a standard rate of 30%. To engage in any form of taxation, obtaining a Tax Identification Number (TIN) is mandatory for both individuals and businesses, serving as a unique identifier within the Nigerian tax system. The TIN facilitates efficient tax administration and compliance, ensuring that an individual or company's tax obligations are effectively managed. To obtain your TIN, you must register with the Federal Inland Revenue Service (FIRS) or state tax authorities, providing necessary identification and documentation.
Self-assessment system
In Nigeria, the personal income tax rate operates within a progressive structure, ranging from 7% to 24%, based on the individual's earnings. The self-assessment tax system enables taxpayers to file their income tax returns and calculate their tax liabilities independently, promoting transparency and accountability. You are responsible for determining your taxable income and ensuring compliance with regulations set by the Federal Inland Revenue Service (FIRS). This system empowers citizens to manage their finances while encouraging timely payments to support national development initiatives.
Tax incentives available
Nigeria's corporate income tax rate is generally set at 30% for companies, but smaller businesses earning less than 25 million Naira annually benefit from a lower rate of 20%. Tax incentives are available to promote investment in specific sectors; for instance, companies involved in agriculture, infrastructure, and renewable energy can qualify for a Pioneer Status, enjoying tax holidays that last between three to five years. Investors can also benefit from capital allowances, which allow for the depreciation of qualifying assets, reducing overall taxable income. Your business can further take advantage of tax exemptions on certain profits derived from export activities, fostering competitiveness in the global market.