Taxation of Expatriates in Nigeria



An expatriate is an individual living in a country other than his or her own native country or country of citizenship, most reasons are related to work or education. Take for example, Mr. A has been living in Canada since birth which means that he has acquired citizenship by birth. A firm seeking to expand its horizon to other continents appoints Mr A as the managing director of the organization in Nigeria. Mr A in this case can be called an expatriate. The natural resources, political stability and business opportunities in Nigeria and Africa as a region attracts lots of foreign investors to diverse opportunities in the country.

Organizations may often require the services of an expatriate who is more skilled, knowledgeable and experienced in the business to oversee the activities of the initial business or they can also serve as the head of the indigenous staffs or as an understudy to them. Multinationals often send employees to branches in other countries for business purposes. Statistics gathered from the Nigerian Immigration Service (NIS) in 2017 showed that the number of expatriates that come into the country is higher than those leaving in the last 5 years (2013-2017).  According to the report about 3.51 million foreigners arrived Nigeria compared to 3.24 million that has left the country during the specified years


Taxation in Nigeria falls under the residency rule. According to the Personal Income Tax Act (PITA), a place of resident can be defined as a place available for their domestic use in Nigeria on a relevant day. This excludes places such as hotels or rest house except if there is no permanent place available for use that day. An individual is said to be resident if the individual exercises the duties of his or her employment in Nigeria. It is very cogent that the expatriate is physically present in Nigeria in order to ascertain his or her tax residency. The taxation of such expatriates in Nigeria falls under the Nigerian Personal Income tax act (PITA) although there are no specific provisions that are dedicated only to taxation for expatriates. According to Sections 37 and 54 of the Personal Income Tax Act,CAP P4, LFN, 2004, as amended herein referred to as ‘’’the Act”, states the state government as the relevant authority is empowered to collect personal income tax from every employee resident within its geographical territory. This includes indigenes and foreigners who are referred to as ‘’expatriates’’.

Where an individual has more than one place of residence. The following procedures will be applicable:

  1. Where an individual with no source of income other than a pension in Nigeria, that place or those places in which he usually resides
  2. In the case of an individual who has a source of earned income other than a pension in Nigeria , that place or those places which on relevant day is nearest to his usual place of work
  3. In the case of an individual who has a source or has sources of unearned income in Nigeria, that place or those places in which he usually resides
  4. In the case of an individual who works in the branch office or operational site of a company or other body corporate, the place at which the branch office or operational site is. (operational site shall include Oil terminals, Oil platforms, Flow stations, Factories, Quarries, Construction site with a minimum of 50 workers e.t.c.)

However, an expatriate will not be entitled to pay tax if

  • The duties of employment are not performed for a Non-Nigerian employer and that the expatriate income is not borne by a fixed base of the employer in Nigeria. This simply means that expatriates hired by Indigenes will not be liable to pay tax
  • The expatriate is not in Nigeria for an aggregate of 183 days (this includes annual leave or temporary period of absence.
  • The expatriate is liable to payment of tax in another country under the provisions with avoidance of double taxation treaty

Note that all the 3 conditions mentioned above must be jointly met in order for an expatriate to be exempted from tax payment in Nigeria and expatriates who have permanent resident permit in Nigeria are liable to tax even if they spend less than 183 days.


The residency rule is still the basis of assessing an expatriate taxable income in Nigeria.

Personal allowances:

The following personal reliefs are allowed against an expatriate taxable income:

Consolidated Relief allowance (CRA) Higher of N200,000 or 1% gross emolument plus 20% of gross emolument
Child( must be under 16 years of age or receiving full time education) N2,500 per child( to a maximum of 4 children)
Dependant relative N2,000 per relative( to a maximum of 2 relatives)
Life Insurance or deferred annuity premiums Actual amount of premium for self and spouse
Employed tax payer with disabilities Greater of 20% of earned income or N3000
Gratuity paid by employer Actual amount of gratuity received
National Housing Fund Contribution 2.5% of his basic salary
Contribution Pension 8% of gross monthly emolument subject to minimum of basic + housing allowance + transport allowance
Loan Interest paid on owner-occupied residential houses Actual interest paid


The taxable income left after deducting the relevant allowances shall be subjected to tax.The tax rates are as follows



First N300,000 7% 21,000 <N300,000 N21,000
Next N300,000 11% 33,000 N300,001 – 600,000 N54,000
Next N500,000 15% 75,000 N600,001 – 1,100,000 N129,000
Next N500,000 19% 95,000 N1,100,001- N1,600,000 N224,000
Next N1,600,000 21% 336,000 N1,600,001 – 3,200,000 N560,000
Over N3,200,000 24%


Employers can source out tax planning tools that will help reduce the tax paid by such expatriates under their firm. Examples of such tax planning tools are

  1. Introduction of Employee’s equity based incentives schemes as a form of employment benefit. This includes stock option, stock award, stock purchase agreement, pseudo stock option e.t.c
  2. A properly managed asset acquisition scheme or deferred lump sum payment


When an expatriate pay income tax, he or she is liable to receive benefits that are not cash related such as a car, paid vacation and accommodation. Such items are regarded to as benefits in kind and are subject to personal income tax. While benefits in kind are provided for all level staffs. It is of topmost priority that senior staffs and expatriates receives this in high value. Such benefits in kind are liable to a tax of 5% of the cost value of the asset otherwise the market value if the cost value cannot be ascertained

The following are the Benefits-in-kind that are taxable

Company provided accommodation Taxable rent
School fees paid (within or outside Nigeria) Taxable
Utility (water, electricity etc.) Taxable
Family medical Where paid as an allowance, it is fully taxable. However, where the company provides hospital, the employee will not be taxed
Car and Driver The tax treatment under this caption depends on the structure in place. Where the arrangement is structured in a manner where cars and drivers are available in pool for every expatriate’s use, this items would be regarded as Benefits in kind and would subsequently be subjected to tax. 5% of coast of the car per annum and the salary of the driver represent the Benefits in kind in the hands of the employee that enjoyed the benefits
Use of company’s asset 5% of cost of the asset per annum
Car maintenance Taxable
Rotation ticket(Reimbursement) Not taxable. Although third party supporting requirements would be required for this item to be excluded from tax.
Group Insurance scheme Not taxable
Use of assets rented or hired by employer specifically for employer’s use Cost of rental or hire



Double taxation is a situation where an individual’s income is subjected to tax by more than one tax authority. This mostly occurs when an individual is earning income outside the jurisdiction of his residence. The country of residence and the country where the source of the expatriate income is coming from exercise taxing rights over an expatriate. The impact of this is that it leads to excessive tax on the income of an individual which may thereby lead to tax evasion or the discouragement to invest in some countries with a high tax rate

The tax treaty which can also called ‘’avoidance of double taxation Agreement” provides the relief from double taxation for individuals under section 38 and 39 of the Personal Income Tax Act (PITA). The treaty is an agreement between two countries that reduces the tax that an expatriate must pay so that the expatriate does not have to pay tax twice on the same income. Where there’s am existence of a tax treaty between Nigeria and an expatriate’s country, credit shall be provided by the Nigerian tax authority to the extent of the amount paid on the income derived or earned in Nigeria. The tax authority from the expatriate’s country shall deduct the value of the tax paid in Nigeria, from the tax liability which the expatriate would have paid on such income in his or her residence country. Hence, the relief would be acknowledged and claimed by the expatriate in line with the provisions of the relevant tax authority.

However, in a situation where there is no tax treaty between the resident country of the expatriate and the country where the expatriate is earning his income from, then the expatriate will have to suffer taxation in the two countries.


Tax audit is carried out to examine whether an individual or a company are compliant with the provisions of the relevant tax authority. It helps to develop and maximise compliance by those who don’t want to adhere to the rules. The following are what leads to suspicion and ensures tax audit is carried out on an expatriate

  1. Low tax paid compared to the last income paid
  2. Non-filing of expatriate returns
  3. Non- disclosure of expatriate quota in employment
  4. Information that is passed to the revenue by the banks on foreign payee remittances
  5. Inadequate income about the tax payer’s income
  6. Whistle blower petitions
  7. Forgery of tax clearance certificates
  8. Tax evasion
  9. Huge withholding tax credit for future tax offsets
  10. Record of persistent tax losses


Remuneration of expatriate employees should be considered in the base for the computation of remittance made by for social security contributions like the Nigeria Social Insurance Trust Fund (NSITF) and the Industrial training fund (ITF). Note that the Nigerian Pension reform act and other employee related regulation do not specifically apply to foreign employees in Nigeria. Expatriates may enjoy the applicable tax reliefs where reliefs where voluntary pensions are contributed to an approved Pension Fund Administrator (PFA) in Nigeria. But where the pension contributions are made to a Pension Fund Administrator outside the country, such contributed will be subjected to tax payment and not allowed as a relief


Expatriates in Nigeria are bound to all provisions of law guiding tax payments especially that of income tax payment. This includes the type of income susceptible to tax, deductions allowed by the law, the mode of calculating the income tax payable as well as the relevant tax authority at the receiving end of the payment in Nigeria. Organizations should ensure that expatriates working for them should adhere strictly to the tax provisions guiding their geographical area.

The Joint Tax board in Nigeria should also ensure that countrywide tax payer identification number should be issued to special cases of expatriates. This will foster togetherness and unity among states tax authority and will also create orderliness when it comes to dealing with expatriates. Companies should also provide all the relevant data by proper tracking of expatriates in order to provide relevant information such as the income, duration of stay and the location of the expatriate. Companies can also source for professional advice regarding expatriates.

About the author

Onamakinde Dare Daniel is a highly motivated accountant with knowledge in Accounting, Taxation, Management, Audit, Costing and Research. He is keen on tax matters due to its ever dynamic nature.

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