Limits: Taxing Nigerian residents who remotely present numerous companies to non-residents


When Covid-19 landed in Nigeria in the first quarter of 2020, many Nigerians got a taste of remote work for the first time in their careers. However, this was common in some sectors such as information technology (IT), data analysis, copywriting and the like. The new reality is that remote or location-independent work arrangements that use technology are the order of the day, a situation that is likely to take on an increasing dimension in the years to come; mainly because they avoid or minimize the mobility costs for expatriates.[1] While the regulatory issues associated with “offshoring” can be considered insignificant, this may not always be the case.

This article examines, at a “high level”, tax issues related to the profits and profits derived from the provision of such services to non-residents regardless of the existence of an employer-employee relationship.

Tax base

The basis for collecting and collecting taxes in Nigeria is twofold: residence and origin. The withholding tax base grants the tax authority of the country or jurisdiction from which the income originates a right to tax; while the residence base assigns the right of taxation to the country of residence of the person with taxable income. In Nigeria under the Income Tax Act[2] (PITA BREAD), the residence and source base also apply. Per section 2 (1) (b) (iv) PITA, a non-resident is taxable (source basis) on any income or gain from Nigeria and under Section 2 (1) (a) PITA, a Nigerian resident is subject to tax on all of his income.[3]

Collection of taxes

PITA BREAD the income of natural persons is taxed, and for each assessment year the total amount of the income of each taxpayer is taxed from a source inside or outside Nigeria including: “(a) gain or gain from any trade, business, occupation or occupation for whatever period of time that trade, business, occupation or occupation was engaged or exercised; (b) any salaries, wages, fees, allowances or other gain or gain from employment, including remuneration, bonuses, awards, inducements, granted, granted or granted to a temporary or permanent employee. “[4]

Essentially, any person resident in Nigeria for tax purposes is subject to taxation by the relevant tax authority (RTA) on their worldwide income; however, subject to certain exceptions (discussed later in this article) and the provisions of the applicable ones Double taxation treaty (DTAs).

Residence as the basis of income tax in Nigeria

Section 108 PITA states that with regard to an individual, the RTA for an assessment year (YoA) is the tax authority of the territory in which the individual is considered to be resident in that year.

PIT, can be determined from the table in Sixth schedule PITA BREAD, is payable in each YoA on the total income of each person deemed to be a resident of that state for that year.[5] Hence, though PITA BREAD is federal legislation, its administration is under the jurisdiction of the states in Nigeria and therefore the RTA is the State Boards of Internal Revenue (SBIRs) for the purposes of PIT. However, for residents of the Federal Capital Territory, Abuja, the RTA is the Federal Capital Territory Internal Revenue Service (FCT-IRS), not the Federal Inland Revenue Service.[6]

Determination of tax residence

It will be under the authority of. submitted Sections 2 and 108 PITA that in Nigerian tax law, the resident taxpayer counts for PIT purposes. It makes sense at this point to point out that although the PIT is collected by the RTA of the assumed place of residence of a person, PITA BREAD does not define the “presumed place of residence”.

The Court of Appeal (CoA) in Ecodrill Nigeria Limited v Akwa Ibom Board of Internal Revenue[7] provided clarity per Nweze JCA, (as it was then) like this:

“Instructively, there is no specific provision in the PITA that expressly or precisely defines the term“ respected residence ”… 1) (a) (ii) and paragraph 3 of the first appendix to the PITA; Paragraph 4 (3) of the second timetable to PITA; and paragraph 6 (2) of the third appendix to the PITA. From these provisions We conclude that a person is deemed to be resident in Nigeria for a tax year if they reside in Nigeria for a period of 183 days or more in a period of twelve months that begins and either ends in the calendar year in the same year or in the following month. ”(Emphasis added).

This means that a natural person is expected to pay tax to the tax authorities of the state in which they are staying for a total of 183 days or more within a twelve-month period. However, the question that needs to be asked is: what is the applicable RTA for a person who is a Nigerian resident but who does not reside in any state in Nigeria for at least 183 days?

For purposes of determining residence, a “remote worker” is classified as a Nigerian worker, per Paragraph (paragraph) 1, First schedule PITA;[8] Likewise, PITA BREAD gives the term “employment” a very broad definition, whereby Section 3 (2) (d) PITA defines employment as: “’Employment’ includes any service provided by an individual in return for profit or gain.” This means that persons who provide services to non-residents and businesses are considered to be gainfully employed.

Categorization of income from remote work

Taking into account the above blanket definition of employment, Section 10 (1) (a) PITA essentially states that the profit or the profit from an employment, the tasks of which are carried out in whole or in part in Nigeria, is considered to come from Nigeria unless – (i) the duties are performed for a non-resident natural person; (ii) the employee is absent from Nigeria for a period of up to 183 days in a twelve month period; and (iii) the wages of the worker in the source country after that. is taxable DTA with Nigeria. All of these conditions must coexist Be considered to be from outside Nigeria for income.

Again, Section 10 (3) PITA provides that: “The profit or gain from employment carried out in Nigeria shall be deemed to originate in Nigeria, regardless of whether the profit or gain from employment is in Nigeria or not.”

These provisions are no doubt broad enough to cover Nigerian residents who provide services to non-resident individuals and businesses.

Payment of tax

Nigerians in paid employment are usually initially taxed through the Pay-As-You-Earn (PAYE) system, in which the employer deducts tax on behalf of the employee and pays it to the RTA.

However, as it is practically impossible to get non-residents to register for PAYE purposes in Nigeria, individuals who earn income from remote work must conform to themselves, taking into account the consolidated relief allowance Sixth schedule PITA and other exceptions Section 19 (1) PITA. For the sake of clarity, the RTA is the tax authority of every state in Nigeria where he / she spends at least 183 days in a 12 month period.[9]

It is instructive to note that the law does not provide a solution unless the individual resides in a state in Nigeria for at least 183 days. It is suggested, however, that the RTA should be that of the state in which the person has a place for home use or the place close to their place of work if they had more than one place of residence prior to taking up “foreign” employment.[10]

Is there a tax exemption for remote workers?

As already said, Section 1 (a) PITA tax the income of natural persons and determine the taxable income, Section 3 (1) PITA states that “subject to the provisions of this Act, for each tax year the total amounts, each of which is the income of each taxpayer, are taxable for the year, of a Source inside or outside Nigeria“(Emphasis provided).

Section 19 PITA BREAD in expressly exempt from tax, all income in his Third schedule. Interesting, Section 29, third appendix, PITA exempts income that a temporary guest, lecturer, teacher, nurse or other professional has earned outside Nigeria and brought to Nigeria from tax, provided that this income is deposited in a domiciliary account with an authorized bank in Nigeria.[11]

PITA BREAD, but does not define the word “professional”. Whether or not a profession / vocation qualifies as a “profession” in Nigeria obviously depends on whether the practice or entry into it is regulated by law. That is, whether there is a piece of legislation that stipulates this as such.[12] For example, Section 1, Schedule, Trade association law (special provisions)[13] which gives the federal government the power to enable foreigners to pursue certain professions in Nigeria, lists as professions “law, medicine, dentistry, midwife and nursing, engineering, surveying, architecture, accounting and any other technical or scientific discipline”.[14] Besides, the Dictionary of the Black Law defines the term “specialist” as “a person who belongs to a learned profession or whose profession requires a high level of training and qualification”.[15]

With a clear and sober reading of the provisions of PITA BREAD,[16] It is humbly stated that Nigerian residents who work remotely for non-residents will not enjoy this exemption. This is because the income from such employment comes from Nigeria and not from overseas. Thus the answer to the above question is negative.


The difference between PAYE transfers and self-assessment in all Nigerian states illustrates the difficulties Nigerian tax authorities are facing in relation to collecting taxes from persons outside the scope of the PAYE system.

However, the tax liability is not voluntary also not necessarily subject to a request by the RTA, although the latter could be the case if compliance with the regulations is not adhered to. Thus, Nigerian residents who earn income or profits from providing services to non-residents are not thereby shielded from tax liability. Since compliance is cheaper for taxpayers than non-compliance, it stands to reason that these workers should endeavor to fulfill their civil responsibilities without coercion. This is more so that it would be quite difficult for the RTAs to tax every resident in any YoA.[17]

Undoubtedly, after Covid-19, offshoring and remote work arrangements will increase. Nigerian revenue is likely to pay more attention to revenue from these agreements, particularly those in foreign currency, which could generate potentially significant revenue to prevent tax losses. Again, there would be no surprises as Nigeria has sent a strong signal in recent years that it will no longer ignore digital taxation Finance Act 2020 Changes.[18]

According to the Igbo proverb popularized by the revered Chinua Achebe of the blessed keepsake in his classic ‘Things are falling apart’Since the hunters have learned to shoot without missing, it is imperative that the birds (the RTAs) also learn to fly without sitting!