The personal income tax pit is the most common tax type in the country. This page provides the latest reported value for nigeria personal income tax rate plus previous releases, historical high and low, shortterm forecast and. Personal income tax in nigeria employees simply pay their income tax through the pay as you earn paye system, whereby employers deduct the due tax at source from the salaries and transfer it directly to the firs on a monthly basis, while independent workers and beneficiaries of additional income are required to file their own tax returns. However, going by historical antecedents, there should be no highly disruptive. Nigeria adopts a payasyouearn paye system in calculating personal income tax of employees.
Every taxpayer in nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside nigeria, the salaries, wages, fees, allowances, and. The rate of personal income tax payable is dependent on the amount of taxable income which the person is liable for. In nigeria, taxpayers are all people who earn salaries or gain any kind of profit out any other sources of money. A significant share of the tax revenue increase in africa stems from natural resource taxes.
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. Governments in all parts of the world and at all points in history have faced similar. Personal income tax in nigeria is a tax levied on all incomes of an individual employed by a business or organization. It also includes the tax on the profits of nonresident companies carrying on business in nigeria. Personal income tax pit is a compulsory tax charged on the income earned by an individual. The local governments are not entitled to tax collections in any forms, however, local levies, fines, and license fees are payable to local government administrations. Introduction companies income tax cit is tax on the profits of incorporated entities in nigeria. Taxation and fiscal regulations in nigeria nigerian law guru. P8 lfn 2004 and related matters connected therewith. T axable income refers to the base upon which the income tax system imposes and decides on how much tax. The most commonly used ones in nigeria are the proportional tax system and the progressive tax system.
Nigeria uses payasyouearn paye system of calculating personal income tax which is called paye tax. The petroleum profit tax is subject to any resident company or person in charge of a nonresident company who are exploring for petroleum or producing it in nigeria. The problems of nigeria personal income tax administration a case study of ministry of education abstract this project work is carried out on problem of personal income tax generation and administration taxation can be simply defined as a compulsory contribution by individuals and organizations to a statutory authority. The minimum pit rate is 1% if the annual income is less than. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960.
The choice of the study period provides an opportunity for. This book discusses the evolution of taxation in nigeria within the framework of eight broad themes i. In other words, it is a contravention of tax laws whereby a taxable person. Community tax became operative through the revenue ordinance of 1904. Self employed individuals are expected to file annual returns annually and pay the taxes due. Corporate tax 2020 laws and regulations nigeria iclg. The study period spans economic cycles for about 66 percent of the life of.
The emirs created a system of taxes throughout the north. Where actual profits cannot be determined, the federal inland revenue in practice, profit is deemed at 20% which is then taxed at the income tax rate of 30%, resulting in an effective tax of. It is a method of collecting personal income tax from employees salaries and wages through deduction at source. Nonresident companies are liable to tax on the profit or income derived from nigeria. The annual paye tax rate progresses from this tax rate progresses from 7 percent to 24 percent of taxable income. The personal income tax rate in nigeria stands at 24 percent. Understanding companies income tax the guardian nigeria. Today, few taxpayers enjoy paying taxes voluntarily, although many regard it as a. A comprehensive tax history of nigeria researchgate. Northern nigeria history and development of taxation.
The regressive tax system is not commonly used,even in developed countries since this will mean revenue from taxes to the government will only continue to reduce. Personal income tax act is the amendment of the personal income tax cap p8, lfn 2004. They are individual or body of individuals having in a year of assessment, any income chargeable to tax. These studies could be designed to examine the tax rates within a singlemultiple tax regimes, the reliefs available to the taxpayers. The study focuses on the impact of petroleum profit tax, company income tax, personal income tax, value added tax revenue on nigerias economic growth between 1980 and 20. The amount charged is 30% o the profit earned in the year preceding assessment. As a general rule, income on a property rent, hire or lease payments or rights royalties situated in nigeria is liable to tax in nigeria, the place of payment not withstanding. Personal income tax act arrangement of sections part i imposition of tax and income chargeable section 1.
We had highlighted some of the salient provisions of the act in our tax news flash of 3 july 2014. Charge of tax on interest relating to foreign and agricultural loans and certain reliefs. However, the northern region did not pass its own personal income tax law until 1962. Taxation and economic growth in a resourcerich country. Nigeria tax system is historical odusola, 2006 dates back to 1904 when the personal income tax was introduced in northern nigeria before the amalgamation. Individuals are subject to tax under the personal income tax act as amended. Finally, our compendium is wider in scope because it chronicles not just tax, but related laws as well.
Company income tax, value added tax, import duties and have used same to create prosperity oluba 2008. The calculator is a very simple application that helps to calculate tax due in line with the nigerian income tax law. Payasyouearn paye direct self and government assessment withholding. The basis for the taxation was the islamic religion. Nigeria, with the specific objectives of examining the main tax reforms in the. If your income is larger than that, here are the rates you need to know about for your calculations. Tax evasion is a deliberate and willful practice of not disclosing full taxable income so as to pay less tax. This is understandable tax as we know is imposed by status and this constitutes the most important source of tax laws.
In spite of the fact that the in spite of the fact that the selfemployed outnumber paid workers and that they earn as much as four. The rate of personal income tax payable is dependent on the amount of taxable income which the. As africas most populous country, nigeria boasts of the continents second largest oil reserves and has a very promising growth outlook. There is a need to conduct a comparative study of personal income tax in nigeria and other developing countries and possibly, a comparative study of personal income tax in nigeria and developed countries. How to calculate personal income tax paye on excel duration. Pdf assessing the productivity of personal income tax. Tax and taxation in nigeria europeanamerican journals. The history of personal income tax law in nigeria is traceable to the raisman. This includes rental income on both real and personal property. The taxable income band ranges from ngn300,000 to above ngn3. The most important tax laws in nigeria include company income tax act cita, capital gains tax act and stamp duties act, all enacted in 1990. Personal income tax in nigeria indirect tax progressive tax. The state governments are responsible for the collection of.
As a result, the gb exploited the resources and people of africa. 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. Taxation in nigeria plus history of taxation in nigeria. Here,the tax payable decreases as income increases. Companies resident in nigeria are liable for cit on their worldwide income and nonresident companies are liable only to cit on their nigeriansource income. Many of them have covered all its ramifications while some have effectively appraised the problem of tax administration in. The finance bill proposes changes to limit the application of the tax only to untaxed profits that are not exempt from tax. How to calculate personal income tax in nigeria legit.
Under companies income tax act you have to pay companies income tax if you are a resident or nonresident company incorporated in nigeria. Corporate tax laws and regulations nigeria covers common issues in corporate tax laws and regulations including capital gain, overseas profits, real estate, antiavoidance, beps and the digital economy in 33 jurisdictions. It is a model of collecting income tax from employees by deducting from their source which is their employer as stipulated in section 81 of the personal income tax act cap p8 lfn 2011. Aug 09, 2016 taxation in nigeria and history of taxation in nigeria a tax in nigeria is a compulsory levy imposed by the federal government of nigeria on individuals and corporate entities in respective of return of service expected from the government.
The chargeable person is a person on whom certain tax is imposed. Personal income tax of residents through paye, capital gains tax, casino taxies, stamp duties, and road taxes. This follows many years of agitation for the personal income tax law in nigeria to be brought in line with presentday economic realities. The impact of personal income tax on state governments revenue profile in nigeria article pdf available in ssrn electronic journal november. This included income from production sharing, royalties, and corporate income tax on oil and mining companies pfister, 2009. Federal individual income tax rates history nominal dollars income years 1920 nominal married filing jointly married filing separately single head of household marginal marginal marginal marginal tax rate over but not over tax rate over but not over tax rate over but not over tax rate over but not over. Structural adjustment and tax yield in nigeria 19701990. Nwanyanwu and others published assessing the productivity of personal income tax system in nigeria. Every taxpayer in nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside nigeria, the salaries, wages, fees, allowances, and other gains or benefits, given or. Before the colonization period in nigeria, the tax system was traced to the northern parts of the country. 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. Nigeria personal income tax rate 20112018 data 2019. According to soyode and kajola 2006, the problems of tax administration in nigeria are as follows.
In the federal territory of lagos, the income tax ordinance, 1943, remained in force until the personal income tax lagos act 1961. The british empire tried to fight for economic dominance in the region. Many employers are yet to commence implementation while some. The history of taxation in nigeria started with personal income tax in 1904, when lord lugard introduced income tax to northern nigeria. It also analyzed the significant components of personal income tax on revenue. The origin of the pit can be traced to the personal income tax act no 30 of 1996. 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. Government, tax administrators, practitioners and academics alike. Find, read and cite all the research you need on researchgate. The legal basis for this tax is found in the provisions of the personal income tax decree now act. Where a person rents or hires propertyservices from another, withholding tax at the rate of 10% will. Governm ents in all parts of the world and at all points in history have faced similar. Personal income tax rate in nigeria varies depending on the annual income of a person. In nigeria, the personal income tax rate is a tax collected from individuals and is imposed on different sources of income like labor, pensions, interest and dividends.
Nigeria personal income tax rate 20112018 data 20192020. Basically, pit is deducted as a result of trade, business, profession, vocation for a period of time and applies to personal emoluments such as wages or salaries, gratuity, superannuation or pension schemes as well as any other income derived by reason of employment. The nigeria income tax calculator nitc shows in one click a summary of incomes, allowances, deductions and net income both monthly and annual. Where a person rents or hires propertyservices from another, wht at the rate of 10% will apply. Companies income tax cit overview and general implications 4 nigerias finance bill insights series. Taiwo oyedele is a partner in the tax and corporate advisory services unit of pwc nigeria and a regular paper presenter on professional tax matters. In nigeria, nobody can dispute the fact that though this taxes are been collected, they are. This paper examines the problems associated with the assessment and administration of personal income tax on motorcycle riders in umuguma owerri west lga metropolis. Companies income tax act arrangement of sections part i repealed part 11 imposition of tax and profits chargeable section 9. The personal income tax act, 2004 is now amended by the personal income tax amendment act, 2011. Personal income tax failed in nigeria for lack of equitability. In the context of personal income tax, a person means an individual, a sole proprietorship nonjuristic person, communities and families and on executors and trustees of an undivided estate.
This paper therefore described the situation of taxation in nigeria and. It is expected that the paye is remitted at the 10 th day of the month following the deduction. Looking at the history of taxation in nigeria, the beginning of the colonization period was connected with various trading posts and companies in the west africa. Download as docx, pdf, txt or read online from scribd. The benchmark we use refers to the top marginal tax rate for individuals. A section on other taxes varies by jurisdiction but often includes estate, inheritance. A delivering the lead judgement confirmed the position of the law on residency as follows. This tax rate progresses from 7 percent to 24 percent of taxable income. All the regional tax laws later formed the basis of personal income taxation in all the states that were created out of the regions. Overview of personal income tax in nigeria explained. This tax was repealed and replaced by another income tax in 1862. The new act would provide more disposable income to the lower income earners following the amendment of the income tax table and adjustments in the applicable income tax incremental bands, which brings it in line with current income levels. Companies are mandated by law to pay company income tax cit in nigeria based on the profit.
Nigeria s 2019 finance bill the bill was passed on 28 november 2019 by. The bill also seeks to provide clarity and efficiency in the administration of the individual income taxes in nigeria. Unfortunately, we are far behind on tax law reform in nigeria as the last time any business tax legislation was enacted or. Personal income tax the legal basis for this tax is found in the provisions of the personal income tax decree now act. Download citation a comprehensive tax history of nigeria this book discusses the evolution of taxation in nigeria within the framework of eight broad themes i. Taxation in nigeria and history of taxation in nigeria a tax in nigeria is a compulsory levy imposed by the federal government of nigeria on individuals and corporate entities in respective of return of service expected from the government. Withholding tax in nigeria administration and rates. Nigeria tax system is historical odusola, 2006 dates back to 1904 when the personal income tax was introduced in northern nigeria before the amalgamation, through the native revenue ordinances 1917 the west, the direct taxation ordinance no. Nigeria government needs to increase its tax revenues in order to achieve macroeconomic objectives. The tax is payable by all companies at the rate defined by the companies income tax act cita 1.
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