Nigerian government has kicked off the implementation of the new tax law on January 1, 2026, as part of efforts to increase revenue.
Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, said that the changes are also intended to correct widespread misconceptions that taxation applies only to large corporations or wealthy Nigerians.
He noted that under Nigeria’s tax system, obligations are largely determined by income generation and profit, rather than social status or size of business.
Authorities say understanding eligibility is key to improving compliance and reducing penalties.
Here is a breakdown of persons expected to pay tax in Nigeria by law.
Salary earners (employees):
Individuals who earn regular income from employment in the public or private sector are required to pay personal income tax, usually through the Pay As You Earn (PAYE) system.
Examples: private sector workers, federal and state civil servants, contract staff on payroll, and workers paid monthly or weekly.
Self-employed individuals and freelancers:
People who earn income independently are also required to pay tax and must file returns themselves with their State Internal Revenue Service.
Examples: artisans, traders, consultants, online freelancers, POS agents, taxi or ride-hailing drivers, photographers, food vendors, hair stylists, and carpenters.
Registered businesses and companies:
Companies registered in Nigeria are legally required to file annual tax returns and pay company income tax on profits earned.
Examples: limited liability companies, partnerships, startups, manufacturing firms, hotels, logistics companies, trading businesses, and consulting firms.
Foreign companies earning income in Nigeria:
Non-Nigerian companies that operate in Nigeria or earn income from Nigerian sources are required to pay tax on profits linked to those activities.
Examples: foreign shipping companies, digital platforms charging Nigerian users, oil servicing contractors, and foreign consulting firms executing projects in Nigeria.
Asset owners earning capital gains:
Individuals who make profit from selling assets are required to pay capital gains tax on the gains realised.
Examples: sale of land, houses or real estate property, shares, investment assets, and business machinery sold at a profit.
Petroleum and oil-related companies:
Upstream oil and gas companies engaged in exploration and production are taxed under special rules, including the petroleum profits tax, due to the nature and scale of the industry.
Residents working for foreign employers:
Nigerians living in the country but earning income from foreign employers, including remote workers, are required to pay tax in Nigeria based on residency and income source.
Who is not required to pay tax
- Children with no income
- Individuals who earn no income or profit
- Unemployed persons with no earnings
- Minors, unless they legally operate a business
