This is from the Federal Inland Revenue Service Nigeria website (
http://www.firs.gov.ng/tax_payers/individual.aspx).
President, Vice President, Gorvernors and Deputy Gorvernors are exempt from personal income tax in Nigeria
What is PIT?
PIT is Personal Income Tax. It is a tax that 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 PIT 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, however, also collects this tax but only from residents of the Federal Capital Territory as well as what may be described as highly mobile federal workers – staff of the Ministry of Foreign Affairs and 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 forms of PIT
Two forms of taxes are administered under Act, namely (a) Pay-As-You-Earn (PAYE) i.e. taxes from employment, and (b) taxes from self employed persons.
Who Collects Personal Income Tax?
Every individual who earns income in Nigeria either from employment or from doing a business is subject to tax under the PIT Act.
(a) State Boards of Internal Revenue collect taxes of
• individuals in their various states of residence
• Body of individuals such as communities, families that run a business
• Business names and partnerships;
• Executors of estates of deceased persons and trustees of trusts.
(b) Federal Inland Revenue Service also collects Personal Income Taxes of
• Persons employed in the Nigerian Army, the Nigerian Navy, the Nigerian Air Force and the Nigerian Police other than in a civilian capacity;
• Officers of the Nigerian Foreign Service;
• Non-residents who derive income or profit from Nigeria.
Who is exempted from this Tax?
The law exempts the following incomes from tax:
• Official emoluments of the President, Vice President, State Governors and Deputy Governors;
• Income of any Trade Union registered under the Trade Union Act, provided such income is not derived from a trade or business carried on by such Trade Union;
• Income of any Statutory or registered Friendly Society in so far as such income is not derived from a trade or business carried on by such Society; and
• Income and profits of Cooperative Societies.
Which parts of a person’s income are subjected to Tax?
Tax is calculated for each year of assessment on the aggregate amounts of the income of every taxable person, for the year. The following incomes are subject to tax under the law:
a. Gains or profits from any trade, business, profession or vocation for whatever period of time it may have been carried on by the taxable person;
b. Dividends, interests or discounts
c. Any pension, charge or annuity
d. The gains or profits including any premiums arising from a right granted to any other person for the use or occupation of any property
What expenses can I deduct before paying personal income tax?
In calculating income tax, the law allows deduction of all expenses and outgoings from emoluments of the fiscal year in which they are incurred, on the condition that they are:
• incurred in the production of income i.e. the performance of duties and
• “wholly, exclusively, necessarily and reasonably” so incurred
Which are the Allowed & Disallowed Expenses?
The law allows certain expenses but disallows others. Expenses specifically allowed under the law in calculating income tax include:
• Interest paid on borrowed money employed as capital in acquiring the income;
• Rent and premiums in respect of land and buildings occupied for the purposes of acquiring profits;
• Expenditure on repairs of premises, plant, machinery and fixtures and for the renewal, repair or alteration of such items used in acquiring income;
• Bad and doubtful debts, any recoveries being treated as income when received;
A list of disallowed trading expenses include: -
• Domestic or private expenses;
• Capital withdrawn from a trade, business, profession or vocation and any expenditure of a capital nature;
• Any loss or expense recoverable under an insurance or contract of indemnity
• Taxes on income or profits levied in Nigeria or elsewhere except as provided in s.13 of the PITD.
• The depreciation of any asset.
What Reliefs & Allowances are available under PIT?
With effect from 1 January 1999, the following reliefs and allowances were incorporated in the law.
• Tax Free Earned Income: Annual income of N 30,000 and below is exempted from tax, although a minimum tax of 0.5% will be charged.
• Tax Free Allowances: The following allowances which have been granted under the recent salary reviews will be tax exempt subject to the following limitations:
Allowable Allowances Upper limit of Tax Exemption (N)
i. Rent subsidy/Allowance N100,000 Per annum
ii. Transport Allowance N15,000 Per annum
iii. Meal subsidy/Allowance N5,000 Per annum
iv. Utility Allowance N10,000 Per annum
v. Entertainment Allowance N6,000 Per annum
vi. Leave Grant 10% of annual basic salary
Personal Income Tax Rate Structure as at 1st January 1998
Taxable Income (N) Rate (% )
First 20, 000 5
Next 20, 000 10
Next 40, 000 15
Next 40, 000 20
Over 120, 000 25
How to pay PIT
The law requires a taxable person to file the returns of income or a declaration of his annual income/remuneration for the current year with the relevant Tax Authority where he is resident. For each year of assessment, you are required to file a return of income in the prescribed form and containing necessary information, with the relevant Tax authority where the taxable person is deemed to be resident. This return is to be accompanied by a true and correct statement in writing containing:
a) the amount of income from every source during the year preceding the year of assessment,
b) such particulars as may be required for the purpose of the Act with respect to any such income, allowances, reliefs, deductions etc.
c) a declaration by him or on his behalf that the return contains a true and correct statement of the income disclosed on the form, in accordance with the provisions of the Act.
Do Nigerian Leaders Pay Tax? 
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