Social Security and Income Taxes in Nigeria
In Nigeria, the tax year begins on January 1 and ends on December 31.
The acquisition of TINs (Taxpayer Identification Numbers) and registration with tax authorities are required of all businesses. The enrollment interaction requires half a month to be finished.
The due date for each month’s contributions is the last day of the applicable month.
You must sign up with the statutory authorities listed below:
Registration with Federal Inland Revenue Service (FIRS)
Registration with Lagos State Internal Revenue Service (LIRS) – Provided operations will predominantly be in Lagos State.
Registration with National Pension Commission (PenCom)
Registration with Nigeria Social Insurance Trust Fund (NSITF)
Registration with National Housing Fund (NHF)
Registration with Industrial Trading Fund (ITF) – (this can be put off to a future date as the Minimum threshold for an employer to become liable under this scheme is when the employer has in its employ a minimum of 5 employees and/or if its annual turnover is in the region of N50 million.)
Social Security and Income Taxes in Nigeria
Keep in mind that some of these processes may overlap, such Except for registrations with FIRS and LIRS, where the former is required for the latter, they can be processed simultaneously.
Additionally, please be aware that some of these registrations may be subject to unspecified statutory fees.
Income Tax in Nigeria
Employees in Nigeria are subject to income tax, which applies to all wages, gains, profits, bonuses, and benefits derived from employment. The PAYE system is used to collect income tax, which is then reported to the State Internal Revenue Service (SIRS) each month. All tax “residents” in Nigeria, that is, employees whose duties are performed entirely or partially in Nigeria for up to six months per year, are subject to income tax. Residents of Nigeria are subject to taxation on all global and Nigerian income.
In Nigeria, income bracket-based tax rates range from 7 to 24 percent. The following income thresholds apply:
Social Security and Income Taxes in Nigeria
Up to 300,000 naira: 7%
Up to 600,000 naira: 11%
Up to 1,110,000 naira: 15%
Up to 1,600,000 naira: 19%
Up to 3,200,000 naira: 21%
Over 3,200,000 naira: 24%
Social Security in Nigeria
To approve provident funds, employees and employers both contribute. Employees may fail to contribute to pension funds in some instances. A worker’s ability to take advantage of retirement, pension, and other benefits varies from job to job. Contracts of employment typically contain the terms. The Joint Tax Board approves social security plans, which must be renewed annually.
A minimum contribution of 8% of a worker’s earnings is required.
Social Security and Income Taxes in Nigeria
Reporting Taxes in Nigeria
The 31st of January each year is the due date for annual returns. Individual noncompliance carries a N50,000 fine, while corporate noncompliance carries a N500,000 fine.
New Employees in Nigeria
A new employee is required to register as a self-employed individual or as a payee agent with his or her state of residence.
Leavers in Nigeria
When an employee leaves a company, the tax authority must be informed.
Payroll in Nigeria
As part of the payroll process, employers in Nigeria are required to withhold income tax and social security contributions from their employees at the source. A PAYE system can be used to process tax and social security contributions and report them to the state’s Internal Revenue Service.
Revenue tax:
In Nigeria, deductions for income taxes are graduated across income brackets. The rates of income tax range from 7% to 24%.
Social security:
In Nigeria, benefits for retirement, disability, sickness, and pregnancy are covered by contributions to social security. Employers are required to contribute around 10% to the various benefit programs, while employees are required to contribute a minimum of 8% of their salary.
Social Security and Income Taxes in Nigeria
Payslips for each pay cycle must be given to employees—these can be done online—and payroll reports must be kept for at least six years.
The substance of this article is planned to give a general manual for the topic.
You can reach out to our Expert for guidance and Tax services.
Email: tax@siao-ng.com
