Many Nigerians in the diaspora have raised certain questions regarding the new tax reform laws and the possible implications.
In a recent engagement with some Nigerians in the diaspora, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele explained the key provisions of the new tax laws, provided clarifications to the areas of concerns and explanation to the pressing questions. Here is an extraction from the dialogue:
Will the money I send to Nigeria (for family, upkeep, gifts, projects or other payment) be taxed under the new laws?
A: No, genuine personal transfers such as family remittances, gifts, refunds (e.g., flight tickets), or community savings contributions are not treated as taxable income. Only income earned or deemed to be income (e.g., wages, business profits, investment returns) is subject to tax. Every individual is required to self-report their income and pay tax where applicable. Tax authorities are expected to issue guidelines on how to distinguish taxable from non-taxable inflows.
Will I be taxed twice, abroad and in Nigeria, on the same income?
A: No. Income earned abroad and brought into Nigeria by a non-resident individual is now specifically exempted from tax in Nigeria regardless of whether tax was paid abroad or not, for instance those who reside in countries with no personal income tax. In addition, Nigeria has Double Taxation Agreements (DTAs) with several countries, and the new tax laws provide for a unilateral relief where a DTA does not exist to ensure that the same income is not taxed twice.
How is tax residency determined, and will non-residents with Nigerian assets or accounts be taxed? Any impact on dual-citizenship?
Residency is based on the 183-day rule (cumulative days of physical presence in Nigeria within a 12-months period). Non-residents are taxed only on income derived from Nigeria (e.g., rental income, dividends, business profits). Diaspora Nigerians living abroad who are not tax resident in Nigeria are not taxed on their foreign employment or business income. Dual citizenship has no impact on the tax status of an individual whether resident or non-resident in Nigeria.
How do the new laws affect investment (stocks, real estate,, bonds, treasury bills, Sukuk, etc.)?
Generally, income from investments in Nigeria are either exempt, subject to capital gains tax (CGT) or withholding tax as a final tax. Government bonds including Sukuk are tax exempt. CGT applies to the sale of real estate other than sale of owner occupied buildings. Shares are exempt up to proceeds not exceeding N150 million and N10 million gains in a year. Dividends, non-government bond interest and rental income are subject to withholding tax at 10% as final tax which may be reduced to 7.5% for recipients in certain countries such as the UK, South Africa and China.
Will incomes such as pensions, stipends, or remote work earnings of diasporans be taxed if received into a bank account in Nigeria or earned while temporarily present in Nigeria?
Only income that arises in Nigeria is taxable for non-residents. Pensions and stipends from abroad are not taxed in Nigeria unless received for work done in Nigeria. Remote workers are taxed based on the rules in the country where they are resident or earn such income, not merely where payment is made. For residents (see Q3), worldwide income applies, subject to reliefs, allowances, and exemptions e.g., low-income thresholds.
Do Nigerians abroad needs a Tax Identification Number (TIN) or to file annual tax returns in Nigeria?
It depends. A TIN is not required and there is no requirement to file tax returns unless you earn employment or business income from Nigeria. Non-residents without Nigerian-source income are not obliged to file annual returns. Those with taxable employment or business income in Nigeria are required to file returns. Simplified channels (e.g., TaxProMax, online TIN applications) are available to ease compliance. The same rule applies to the opening and continued operation of a bank account in Nigeria, a TIN is not required unless such an account is for business purposes or receipt of income.
How can Nigerians in the Diasporan who require a TIN obtain one?
For individuals, a TIN can be obtained from the Joint Tax Board via tin.jtb.gov.ng. For companies, TIN is now automatically assigned at the point of registration with the Corporate Affairs Commission. Those with existing companies without a TIN can obtain one from the FIRS.
How are NGOs and diaspora-owned small business in Nigeria affected?
NGOs are tax-exempt if they are registered and operate strictly for charitable purposes, and comply with reporting and filing requirements. Diaspora-owned SMEs in Nigeria are treated like local businesses, taxed on profits but eligible for incentives and reliefs available to small enterprises.
How will the government ensure accountability in the use of taxes collected?
The reforms mandate transparency measures, including public reporting, governance structure and independent oversight for tax revenues. Other fiscal measures are being strengthened to link tax revenues to visible infrastructure and service delivery with safeguards against corruption and framework to prevent and punish misuse of taxpayer data.
Are there incentives or special benefits for diaspora Nigerians under the new reforms?
Incentives under the new laws apply generally to certain investments including diaspora-led investments in key sectors (e.g., priority sector incentives in agriculture, creative sector, manufacturing, etc), SME corporate tax exemption threshold, exemption of VAT on real estate, etc.
Key Takeaway: The reforms make the tax system in Nigeria fairer and more friendly to Nigerians in the diaspora, address incidence of double taxation, align Nigeria with global best practice, simplify and provide clarity where tax is payable or filing obligation is applicable.
