FIRS circular on taxation of non-residents in Nigeria

The Federal Inland Revenue Service (FIRS) has issued guidance on the taxation of non-residents in Nigeria. FIRS Information Circular No. 2021/07 of 3rd June 2021 provides information on the Nigerian tax laws for non-residents (individuals or corporate) and their liability to taxes in Nigeria. It covers residence, non-residents, withholding tax, capital gains tax, jurisdiction, filing of returns, and illustrations.

1.0 Residence

A resident person of Nigeria will pay on the worldwide income. The income or profits accruing in, derived from, brought into, or received in Nigeria are liable to tax in Nigeria. A resident company is a company incorporated, constituted, or registered under any law in Nigeria. Offshore profits of a Nigerian company will be taxable in Nigeria.

2.0 Non-Residents

A non-resident company or individual is liable to tax on the profit or income derived from Nigeria.

2.1 Non-Resident Individual

A non-resident individual is a person who:
(i) is not domiciled in Nigeria;
(ii) has not been in Nigeria for a period or periods, in all, amounting to an aggregate of 183 days or more in 12 months (inclusive of annual leave or temporary period of absence);
(iii) does not have a permanent place available for his domestic use in any part of Nigeria; or
(iv) is not a diplomat or diplomatic agent of Nigeria in another country.

2.2 Non-Resident Company (NRC)

NRC is a company, other than a corporation sole, established by or under any law in force in any territory outside Nigeria. NRC is taxable in Nigeria if the NRC

  1. has a fixed base in Nigeria where the profit is attributable to it;
  2. habitually operates a business through a person in Nigeria or maintains a stock of goods in Nigeria from which deliveries are regularly made by a person on behalf of the company;
  3. derives income from Nigeria through digital activities to the extent that it has a significant economic presence in Nigeria;
  4. involves a single contract for surveys, deliveries, installations, or construction;
  5. provides remote technical, management, consultancy, or professional services to a Nigerian resident;
  6. has transactions with a related party that is not at arm’s length.

2.2.1 Passive Income

Where dividends, interests, royalties, or rents accrue in Nigeria to a non-resident, such income is liable to Nigerian tax. The payer will deduct and pay the taxes to the revenue authority. It is the final tax for a non-resident person. The income of the permanent establishment in Nigeria is subject to the provisions of the tax treaty.

2.2.2 Treatment of Corporate Expenses

Allowable expenses are wholly, reasonably, exclusively, and necessary expenses for generating income in Nigeria. For instance, actual expenses of the Nigerian operations, reimbursement of actual expenses, and interest payment to the company, where the foreign enterprise is a bank. It also covers deductible expenses specified under the relevant tax laws.

However, notional costs such as head office charges, royalty due to related persons are not deductible items. Other disallowable expenses include

  • interest on fund not being a specific loan;
  • interest on money lent;
  • fees for the use of patents or other rights owned;
  • commission or management fees charged.


2.2.3 Turnover Basis of Taxation

The FIRS may assess a company to tax based on its turnover by using a fair and reasonable percentage of 20% on the turnover.

3.0 Withholding Tax (WHT)

The withholding tax rate for director fees, interest, dividend, rent, and royalty is 10%. In treaty countries, the WHT rates range from 7.5% to 10%. WHT rates for contracts and specific services range from 2.5% to 10%. WHT is payable in the currency of the transaction.

4.0 Capital Gains Tax (CGT)

Capital gains from the disposal of chargeable assets is liable to CGT at the rate of 10%

5.0 Tax Jurisdiction

The tax authority for collecting taxes is local or international jurisdiction. 

5.1 Local Jurisdiction

  • Non-resident individuals, NRC, Nigerians with diplomatic status working in International Organisations, Nigerian Diplomats serving abroad: FIRS

  • Foreign Diplomats accredited to Nigeria: Tax Authority of the home country.

5.2 International Jurisdiction

Nigeria has the first right to tax income arising in or derived from Nigeria. For income brought into Nigeria, relief is available for tax payable on the foreign-sourced income.

6.0 Filing of Returns and Tax Payment

Income tax is payable in the currency of the transaction. Non-residents are required to file self-assessment returns with FIRS in the prescribed format.


The circular specifies the types of non-deductible expenses for corporate tax even though the item passes the WREN test. Digital activities of non-residents are taxable where there is a significant economic presence in Nigeria. Non-residents persons should, therefore, seek expert guidance on operations in Nigeria to address tax risks.

To download the FIRS information circular on the taxation of non-residents in Nigeria, click here.

Share this