Personal Income Tax

Tax is imposed on individuals who are either in employment or are running their own small businesses, under a business name or partnership.

Though collection of Personal Income Tax is a federal responsibility, this tax is generally collected by state governments from those that are resident in their various states, regardless of whether they are federal, state, local government, or private sector workers. The Federal Inland Revenue Service, also collects this tax but only from residents of the Federal Capital Territory as well as what may be described as highly mobile federal worker; staff of the Ministry of Foreign Affairs, other Nigerians and foreigners outside the country but earning income in Nigeria (non-residents), expatriate workers resident in Nigeria, Police Officers, and Military Officers. Civilians working in Police and Military formations, however, pay to their respective States of residence.

The current law guiding the taxation of personal incomes is the Personal Income Tax Act (Cap P8 LFN 2004). Under the law, Federal and States’ tax boards are empowered to identify persons living in or earning income from Nigeria who are required to pay tax, and to assess incomes and tax their incomes using specified guidelines and rules. This law also guides the tax official in identifying the residence of potential taxpayers, as well as the sources and origins of their incomes for the purpose of taxing the income.

Two types of PIT

01.

Pay-As-You-Earn (PAYE) i.e. taxes from employment

PAYE is an acronym for “Pay as You Earn”. It is a method of collecting personal income tax from employees’ salaries and wages through deduction at source by an employer as provided by the relevant sections of the Personal Income Tax Act (PITA). (S.81 of Personal Income Tax Act Cap P8 LFN 2011).read more »

02.

Taxes from self employed persons (Direct Assessment)

Direct Assessment is an assessment raised directly on self-employed persons (eg. Professionals, Contractors, Traders, Landlords etc).
The self employed person will without notice or demand, file a return of income earned in the preceding year using Tax Form A.

Capital Gains Tax (Individuals only)

It is a tax on the profit made from the sale or exchange of capital assets like land shares, machinery.

Stamp duties

It is a tax imposed on legal instruments/documents executed by individuals, this tax is usually placed on the transfer of homes, buildings, copyrights, land, patents and securities.

Business Premises levy

It is a tax on property used for the production of income including rental houses, office buildings, factories etc. Business premises amounts to N10,000 for registration and then N5,000 for renewal in subsequent years for urban areas and N2,000 / N1,000 respectively in rural areas.

Capital Gains Tax (Individuals only)

It is a tax on the profit made from the sale or exchange of capital assets like land shares, machinery.

Hotel occupancy and Restaurant Consumption Tax:

It is a tax imposed on goods and services consumed in hotels, bars, restaurants and event centres within Lagos State. This tax is payable by the consumers who purchase these goods and services. The hotels, bars, restaurants and event centres serve as collecting agents for LIRS.

Withholding Taxes:

It is the specified amount deducted at source from payment accruing or made to individuals or corporate entities in respect of income receivable for service(s) rendered or from investment and remittance of same to the Relevant Tax Authority in line with the provisions of Personal Income Tax (PITA) and Companies Income Tax Acts (CITA).

Taxation Of Non-Nationals:

A “Non-National with a Temporary Work Permit” (TWP) is an individual who is a national of another country with a visa which allows him/her to work in Nigeria.read more »

Taxation Of Employees Shares:

Share/Stock options agreement gives employees the right to a company's shares based on prices agreed on the initiaon date (grant date). However, the employees must wait for an agreed period (known as the vesting period) before they can exercise the right.read more »

Taxation Of Employee Loan:

Employee loans are loans given by an employer to an employee for specific reasons with the expectation that such loan will be repaid in full to the employer through a pre-agreed deduction from the employee's net salary, with or without any interest.read more »

Tax Relief On Voluntary Pension Contributions:

Voluntary Pension Contributions are extra fund contributions in addition to the mandatory pension contributions made by an employee through his/her statutory pension scheme which allows an employee to save additional amounts for retirement. An employee can opt to make withdrawals, at any me, from such contributions which is a tax free benefit.read more »

Allowable Interest Deductions:

An “owner-occupied residential house” is any residential property (i.e. not a commercial property) which an individual has incurred expenditure on the purchase, construction, or conversion for his/her occupation. It excludes all the temporary fixture components such as paintings, furniture, electricals etc. It must be qualifying residential property that is used by the individual as his or her sole/main residence.read more »

Exemption Of Compensation For Loss Of Employment:

Compensation for loss of employment could either be a termination benefit or terminal benefit. An employee will receive compensation for loss of employment when any of the following occurs:.read more »

Witholding Tax On Employee Outsourcing:

In an employee outsourcing arrangement, workers who are not part of the employer's regular work force, may be hired through an outsourcing firm or labour broker. Employee outsourcing arrangements can take the form of traditional leasing arrangements, where the ultimate employer hires all or substantially all of its employees from another company (outsourcing firm), with the employees remaining on the payroll of the outsourcing firm. The ultimate employer pays the outsourcing firm a fee for procuring the staff on its behalf, while the outsourcing firm pays the staff salaries.read more »

What Constitutes "Reasonable Removal Expenses":

“Reasonable removal expenses” constitutes any expense which an employee incurs to move to a new employment location and the payment made by the employer towards the expenses results in no net overall benefit to the employee. It is also any payments made to or on behalf of an employee taking up employment with a new employer such as relocation allowance. The reasonable amount should not be more than the amount incurred by the employee in relocating.read more »

Valuation Of Accommodation Provided By Employers:

An employer provided accommodation” will constitute a taxable benefit to the employee in any of the following situations.read more »

Treatment Of Savings Element On Insurance Premium:

A life insurance is a contract where the insurer promises to pay a beneficiary a designated sum of money in exchange for a premium, upon the death of an insured person. An annuity life contract provides for the annuitant to be paid a fixed monthly amount until death or benefits are exhausted.read more »

Pay Tax

Make payments of
All kinds of Tax
HERE

Contact Us

Feel free to call us on
0 (700) 225-55477
Monday - Friday, 8am - 7pm

Our Address

Drop us a line anytime at
info@lirs.gov.ng,
and we'll get back soon.