Nigeria Payroll & Tax Regulatory Compliance

A. Update

The President of Nigeria signed the Finance Act 2020 into law on 30 December, 2020. This reaffirms the Federal Government of Nigeria’s commitment to enact fiscal policy annually. Following are the highlights of the salient provisions of the Act:

•  1. Introduction of Significant Economic Presence (SEP) rules to the taxation of certain categories of non-resident individuals, executors or trustees. The Minister of Finance will issue rules to define SEP from a Personal Income Tax Act (PITA) perspective.
•  2. Revision of commencement and cessation rules to prevent double tax. This is to align with the prior amendment to Company Income Tax Act (CITA) in this regard. Tax will be applied on the basis of the individual’s accounting year.
•  3. Introduction of a definition of gross income, which is the basis for calculating consolidated relief allowance. Gross income is defined as income from all sources, excluding non-taxable income, tax-exempt income, income on which no further tax is payable, allowable business expenses and capital allowances.
•  4. Minimum tax is no longer applies to persons who earn National Minimum Wage or less. This category of employment income earners are also exempt from Personal Income tax (PIT) under the Third Schedule to PITA.
•  5. Annual premium paid during the year preceding the year of assessment to an insurance company in respect of insurance on the individuals’ life or the life of his spouse shall be allowed as a deduction
•  6. Employers are mandated to deduct Capital Gains Tax (CGT) on any compensation for loss of office paid to their exiting staff and remit same on or before the 10th day of the following month to the relevant tax authority.