Federal Republic of Nigeria
Navigating international regulations with confidence
Currency
Naira – NGN
Official Language
English
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Fiscal Year
1 Jan - 31 Dec
Payroll Frequency
Weekly, Bi-weekly & Monthly
Tax System and Regulations
Income Tax Structure
Nigeria operates a progressive income tax system, where tax rates increase with income levels. 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. Employers in the private sector and state civil service must register and remit the PAYE to the relevant State Internal Revenue Service (SIRS) of the state where the employee resides. PAYE and other personal income taxes for federal government employees, including members of the armed forces and police, officers of the foreign service and residents of the Federal Capital Territory (FCT) are remitted to the Federal Inland Revenue Service (FIRS). The SIRS is responsible for administration and enforcement under the Personal Income Tax Act (PITA).
Payroll Taxes
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 SIRS. 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 public sector employees. NHIA contributions comprise 10% from the employer and 5% from the employee on basic salary. 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.
Tax Reporting and Payment Deadlines
Employers must remit PAYE tax to the relevant SIRS 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 Pension Fund Administrator (PFA) not later than seven working days after the payment of salaries and NHIA is typically due monthly, with payment recommended by the 10th of the following month. Annual employer returns, detailing employee earnings and PAYE deducted (Form H1), must be submitted to the SIRS by 31 January each year. Employees and self-employed individuals are required to file their annual tax returns (Form A) and settle any tax liabilities by 31 March. These deadlines ensure compliance with both monthly and annual payroll tax obligations.
Compliance and Record-keeping
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 administered by the NSITF, employment contracts, attendance registers, leave and workplace incidents. These records must be retained for at least six years and be readily available for inspection by the SIRS, National Pension Commission (PenCom), Nigeria Social Insurance Trust Fund (NSITF), ITF and the Federal Ministry of Labour and Employment. Non-registration, late or inaccurate filings, underpayment of taxes or failure to remit deductions can result in penalties such as a 10% surcharge on unpaid amounts, interest at the Central Bank of Nigeria (CBN) rate, exclusion from government contracts and legal action.
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