Federal Republic of Nigeria

Nigeria operates a progressive income tax system under the Nigeria Tax Act (NTA) 2025, effective from 1 January 2026, which replaced the Personal Income Tax Act (PITA) and other tax legislation. Residents are taxed on their worldwide income and non-residents are taxed only on income earned within the country through the Pay As You Earn (PAYE) system. Taxable income includes salaries, wages, bonuses, allowances and other employment benefits, with certain exemptions and reliefs available, such as consolidated relief allowance and deductions for pension contributions. Under the NTA 2025, a revised progressive tax structure applies, with rates ranging from 0% to 25%, including a 0% tax band on the first NGN 800,000 of annual chargeable income. The previous Consolidated Relief Allowance (CRA) has been abolished. Allowable reliefs and deductions include qualifying pension contributions and rent relief equal to 20% of annual rent paid, capped at NGN 500,000 per year, as well as other deductions permitted under the Act. Employers remit PAYE to the State Internal Revenue Service (SIRS) of the state in which the employee resides. Personal income tax for certain categories of individuals subject to federal jurisdiction is administered by the appropriate federal tax authority, while the FCT Internal Revenue Service administers personal income tax for individuals resident in the Federal Capital Territory. Tax administration is coordinated between state revenue authorities and the Nigeria Revenue Service (NRS), which replaced the Federal Inland Revenue Service (FIRS) under the 2025 reforms.

Payroll taxes include PAYE tax, Contributory Pension Scheme (CPS) contributions, National Housing Fund (NHF) and National Health Insurance Authority (NHIA) contributions, the Industrial Training Fund (ITF) levy and Employee Compensation Scheme (ECS) contributions. Employers deduct tax from employees’ salaries and remit it to the relevant authorities. CPS contributions are mandatory, with 10% paid by the employer and 8% by the employee under the Pension Reform Act of 2014. The NHF requires a voluntary 2.5% deduction from the employee’s basic salary from private sector employees, while the deduction is mandatory for qualifying public sector employees. The NHIA operates under a reformed framework in which contributions are generally shared between employers and employees. Contribution rates are often structured around a benchmark of approximately 10% for employers and 5% for employees, depending on the scheme. Employers also contribute 1% of total annual payroll to the ECS, which covers work-related injuries. The National Social Insurance Trust Fund (NSITF) is responsible for managing the ECS. Employers with five or more employees must also contribute 1% of annual payroll to the ITF. These statutory deductions support social security, housing, healthcare, work-related accidents or injuries and training systems.

Employers must remit PAYE tax to the relevant tax authority by the 10th of the month following salary payment. They are also required to file returns to the ITF by 28 February each year, containing the actual staff earnings for the preceding year and projected earnings for the current year. Contributions to the ITF are due by 1 April of the following year. The ECS contribution to the NSITF is paid monthly or annually, depending on the employer’s arrangement – typically not later than the last day of the month if paid monthly. Additionally, CPS contributions must be remitted to the employee’s Pension Fund Administrator (PFA) within seven working days after the payment of salaries. NHF contributions are required within 30 days of deduction, while NHIA contributions are typically remitted monthly, with payment recommended by the 10th of the following month, depending on the scheme. Annual employer returns, detailing employee earnings and PAYE deducted (Form H1), must be submitted to the relevant SIRS by 31 January each year. Employees and self-employed individuals are required to file their annual tax returns and settle any tax liabilities by 31 March each year. These deadlines ensure compliance with both monthly and annual payroll tax obligations.

Payroll providers and employers must maintain accurate and up-to-date records of all employee earnings, statutory deductions and remittances. This includes documentation for PAYE tax and pension contributions, as well as NHF, NHIA, ITF and ECS contributions, employment contracts, attendance registers, leave and workplace incidents. Tax-related records and supporting documentation must generally be retained for at least six years and be made available to the relevant tax authority when required. Records relating to pension contributions, the Industrial Training Fund (ITF), Employees’ Compensation Scheme (ECS) and other applicable statutory schemes must be maintained in accordance with the requirements of the respective legislation and regulatory authorities. Failure to register, file returns, remit PAYE or statutory contributions, or maintain required records may result in penalties, interest, recovery proceedings and other enforcement measures under the applicable legislation. Penalties vary depending on the nature of the non-compliance and the statutory obligation concerned.