The charging section section 3 of the amended personal income tax act pita defines income chargeable to include any salary, wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given. If your income is larger than that, here are the rates you need to know about for your calculations. Income that qualifies as termination benefits compensation for loss of office in line with the capital gain tax act will be subject to cgt on the portion of the income above n10,000,000. As a result of the increase in minimum tax rate, the tax to be paid by those who were hitherto paying minimum tax would double. Personal income tax in nigeria free download as word doc. Nigeria personal income tax rate 20112020 data 2021.
The personal income tax pit act, provides the conditions for deeming income taxable in nigeria. The new legislation effectively abolishes the tax exemption granted under the petroleum profit tax act for such income or dividends. Nigeria with a view to affording relief from double taxation in relation to tax imposed under the provisions of this act, any tax of a similar character imposed by the laws of that country, and that it is expedient that the agreement have effect, the agreement shall have effect upon ratification by the national assembly. Companies income tax act an act to consolidate the provisions of the companies income tax act 1961 and to make other provisions relating thereto.
Assessing the productivity of personal income tax system in nigeria. Tax credit allowable against tax payable on income derived from outside nigeria. Personal income tax in nigeria is a tax levied on all incomes of an individual employed by a business or organization. Ppt personal income tax powerpoint presentation free to. Deletion of provisions that grant certain personal reliefs it is unclear if the amendment seeks to eliminate claim of child benefit or other surrounding provisions. Te tax law regulating taxation of individual is the income tax management act itma of 1961 which was replaced with the personal income tax decree pitd 104 of 1993. Taxpayers in nigeria heaved a sigh of relief when the news of the amendment to the personal income tax act pita spread across the length and breadth of the country. Overview of personal income tax in nigeria explained. Individuals are subject to tax under the personal income tax act as amended.
The countrys legal system is based on the english legal tradition. Assessable profit is obtained prior to deducting capital allowances. The minimum pit rate is 1% if the annual income is less than. Personal income tax pit is a compulsory tax charged on the income earned by an individual. Federal republic of nigeria official gazette tax matters nigeria. Pdf assessing the productivity of personal income tax system in. The chartered institute of taxation of nigeria chartered. In nigeria, taxpayers are all people who earn salaries or gain any kind of profit out any other sources of money.
Any amount deemed to be income under a provision of the act or, with respect to any benefit arising from a pension or provident fund of the personal income act vi. Types of organizations nigeria is a federal republic. Establishment and constitution of the board 1 there shall continue to be a board of which the official name shall be the federal board of inland revenuehereafter in this act referred to as the board. Pdf nigeria personal income tax amendment act 2011. The new act supports the use of taxation as a tool for income redistribution and wealth creation by imposing lower tax burden on low income earners and higher tax burden on the higher income earners. Petroleum profits tax act an act to impose a tax upon profits from the winning of petroleum in nigeria, to provide for the assessment and collection thereof and for purposes connected therewith. How to calculate personal income tax in nigeria legit. Where a taxpayer has no taxable income because of personal reliefs and allowances or total income produces a tax lower than the minimum tax, a minimum tax rate of 1% of the total income is payable. The personal income tax rate in nigeria stands at 24 percent. Failure to deduct personal income tax persons, employers or corporations are obligated to deduct tax under the 2011 pit act, and having deducted pit and fails to remit the tax deducted to the relevant revenue authorities within thirty 30. Administration of the tax 1 the tax shall be administered and managed by the federal board of lnland revenue in this act referred to as the board.
The rate is 30% of total profit for income tax and 2% of assessable profit for education tax. An expatriate is now liable to tax in nigeria if his employment costs are recharged to a nigerian company or borne by a fixed base. By taiwo oyedele the personal income tax amendment act 2011 was officially gazetted on tuesday 31 january 2012 with an effective date of 14 june 2011. Jul 23, 2018 personal income tax pit is a compulsory tax charged on the income earned by an individual. An act to consolidate the provisions of the companies income tax act 1961 and to make other provisions relating thereto. Assets situated outside nigeria without prejudice to the foregoing provisions of this act, as respects any chargeable. For the purpose of this calculation, it is assumed that pension is calculated at 7. Printed and published by the federal government printer. Act was replaced with the personal income tax act, cap 8 lfn, 2004 okezie, 2003. Act 2015, which establishes a new tax authority for the federal capital. Resident companies pay tax on their worldwide income. Business or trade only partially carried on or deemed to be carried on in nigeria. Tax provisions in finance act, 2020 kpmg united states.
Nigeria personal income tax rate data, historical chart, and calendar of releases was last updated on february of 2020 from its official source. Personal income tax act is a topic everyone should know, whether you are an employee or an employer. These entities may be required to register for taxes and file income tax returns in nigeria. A personal income tax act amendment bill 2018 was presented before the house of representatives for deliberation. Any amount of profits or gains arising from acquiring or disposing short term. Federation of nigeria, 2004 6 section 22 of the companies income tax act, cap c21.
Introduction the president of the federal republic of nigeria in line with national tax policy signed into law the bill for an act to amend the provisions of the personal income tax act, cap. Personal income tax rate in nigeria varies depending on the annual income of a person. Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as value added tax vat in nigeria. This, in relation to what they do, where they live or any other issues reconized by the law. In this act, unless the context requires otherwise adjusted assessment means an assessment adjusted in. The finance act includes provisions that create nexus for the taxation of income earned by foreign companies from technical, management, consultancy or professional services that are remotely provided to a person resident in nigeria.
The tax on these foreign companies will be limited to the tax withheld deducted from payments made to them. Company income tax cit the principal law is the companies income tax act cita which imposes cit on profits accruing in, derived from, brought into or received in nigeria. Self employed individuals are expected to file annual returns annually and pay the taxes due. This follows many years of agitation for the personal income tax law in nigeria to be brought in line with present day economic realities. The finance act, 2020 introduces changes to various tax regimes in nigeria. The president of the federal republic of nigeria, acting in consonance with the national. This act shall apply to mainland tanzania as well as tanzania zanzibar.
The income tax table in the sixth schedule to the principal act has been substituted with new tax income rates. It is payable by companies that are registered in nigeria and non resident entities carrying on business in nigeria. Itll seek to amend the personal income tax act or the principal act by providing that pit deduction on a workers income should be remitted to the tax authority of the state where the individual works. The income tax act hereinafter referred to as the principal act is amended in section 2 cap. Fourth schedule warrant and authority to levy by distress under the companies income tax act fifth schedule funds, bodies and institutions in nigeria to which donations may be made under section 25 of this act sixth schedule warrant and authority to enter premises, offices, etc. In the case of personal income tax act, a community reading of the personal income tax, chapter p8, lfn, personal income tax amendment act 2011 and finance act 2020 shows that dependent relative. Fees, dues and allowances whenever paid for services. This perspective is consistent with the provisions of the companies income tax act cita, the personal income tax act pita and the petroleum profit tax act ppta which prescribe that tax payers have an opportunity to recover any overpayment of tax within a six year period. Doc the effect of personal income tax amendment act on. Income tax amendment act, 2011 a 111 for an act to amend the personal income tax act, cap. Taxpayers in nigeria heaved a sigh of relief when the news of the amendment to the personal income tax act pita spread across the length and breadth of. It provides, among others, that the gain or profit from an employment shall be deemed to be derived from nigeria if the duties of the employment are wholly or partly performed in nigeria or the employer is in nigeria, unless the duties of the employment are wholly performed, and. P8, lfn 2007 as amended the bill also seeks to provide clarity and efficiency in the administration of the individual income taxes in nigeria.
Under nigerian personal income tax laws all taxable persons are entitled to a consolidated relief allowance of 20% of gross income plus higher of 1% of gross income or n200,000. Nigeria imposing tax on the income of persons other than companies, shall. P8 lfn 2004 and related matters connected therewith. The personal income tax act in this act referred to as the principal amendment of cap. Taxation is a crucial part of the everyday life of every person. The personal income tax act, 2004 is now amended by the personal income tax amendment act, 2011.
This act may be cited as the income tax act, 2004, and shall come into operation on the 1st july, 2004. The president of the federal republic of nigeria, acting in. Section 82 of personal income tax act, cap p8, lfn 2004 states that where an employer is required under a provision of this act to make deductions from. The rate of tax payable is not a fixed sum, depending on the gross income of the taxable employee, and the tax relief granted to him under personal income tax act pita. This act may be cited as the income tax amendment act 2014, and commences on the pt day of july 2014. Relevant tax authority may assess and charge tax on the turnover of a business, etc.
Companies resident in nigeria are assessable to tax on their worldwide income, whilst nonresident companies are subject to tax on profits accrued in or derived from nigeria, to the extent that the profits are not attributable to operations outside nigeria. Nigeria individual sample personal income tax calculation. The act also supports governments intention to implement a shift in focus from direct to indirect taxation, by lowering the overall income tax. Below is the basis of pay as you earn paye calculation for an individual whose gross income is ngn 4 million. The personal income tax pit is the most common tax type in the country. Overview of personal income tax in nigeria explained oasdom. Many employers are yet to commence implementation while some. The personal income tax act cap p8, lfn 2004, is now amended by the personal income tax amendment act, 2011. Income that qualifies as termination benefits compensation for loss of office in line with the capital.
Total profit is profit after deducting previous year losses carried forward and capital allowances. The personal income tax act is one of the three tax laws enacted by the national. This follows many years of agitation for the personal income tax law in nigeria to be brought in line with presentday economic realities. Personal income tax act is the amendment of the personal income tax cap p8, lfn 2004.