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Personal Income Tax

Tax is imposed on individuals who are either in employment or are running their own small
businesses, under a business name or partnership.

Though collection of Personal Income Tax is a federal responsibility, this tax is generally
collected by state governments from those that are resident in their various states,
regardless of whether they are federal, state, local government, or private sector workers.
The Federal Inland Revenue Service, also collects this tax but only from residents of the
Federal Capital Territory as well as what may be described as highly mobile federal worker;
staff of the Ministry of Foreign Affairs, other Nigerians and foreigners outside the country but
earning income in Nigeria (non-residents), expatriate workers resident in Nigeria, Police
Officers, and Military Officers. Civilians working in Police and Military formations, however,
pay to their respective States of residence.

The current law guiding the taxation of personal incomes is the Personal Income Tax Act
(Cap P8 LFN 2004). Under the law, Federal and States’ tax boards are empowered to
identify persons living in or earning income from Nigeria who are required to pay tax, and to
assess incomes and tax their incomes using specified guidelines and rules. This law also
guides the tax official in identifying the residence of potential taxpayers, as well as the
sources and origins of their incomes for the purpose of taxing the income.

Two types of PIT

[1]
Pay-As-You-Earn (PAYE) i.e. taxes from employment
PAYE is an acronym for “Pay as You Earn”. It is a method of collecting personal income tax
from employees’ salaries and wages through deduction at source by an employer as
provided by the relevant sections of the Personal Income Tax Act (PITA). (S.81 of Personal
Income Tax Act Cap P8 LFN 2011).

[2]
Taxes from self employed persons (Direct Assessment)
Direct Assessment is an assessment raised directly on self-employed persons (eg.
Professionals, Contractors, Traders, Landlords etc).
The self employed person will without notice or demand, file a return of income earned in the
preceding year using Tax Form A.

Capital Gains Tax (Individuals only)

It is a tax on the proft made from the sale or exchange of capital assets
like land shares, machinery.
Stamp duties
It is a tax imposed on legal instruments/documents executed by
individuals, this tax is usually placed on the transfer of homes, buildings,
copyrights, land, patents and securities.

Business Premises levy

It is a tax on property used for the production of income including rental
houses, ofce buildings, factories etc. Business premises amounts to
N10,000 for registration and then N5,000 for renewal in subsequent years
for urban areas and N2,000 / N1,000 respectively in rural areas.

Capital Gains Tax (Individuals only)

It is a tax on the proft made from the sale or exchange of capital assets
like land shares, machinery.

Hotel occupancy and Restaurant

Consumption Tax:
It is a tax imposed on goods and services consumed in hotels, bars,
restaurants and event centres within Lagos State. This tax is payable by
the consumers who purchase these goods and services. The hotels, bars,
restaurants and event centres serve as collecting agents for LIRS.

Withholding Taxes:
It is the specifed amount deducted at source from payment accruing or
made to individuals or corporate entities in respect of income receivable
for service(s) rendered or from investment and remittance of same to the
Relevant Tax Authority in line with the provisions of Personal Income Tax
(PITA) and Companies Income Tax Acts (CITA).