Taxation in nigeria and history of taxation in nigeria a tax in nigeria is a compulsory levy imposed by the federal government of nigeria on individuals and corporate entities in respective of return of service expected from the government. In other words, it is a contravention of tax laws whereby a taxable person. Looking at the history of taxation in nigeria, the beginning of the colonization period was connected with various trading posts and companies in the west africa. P8 lfn 2004 and related matters connected therewith. How to calculate personal income tax in nigeria legit. The emirs created a system of taxes throughout the north. Northern nigeria history and development of taxation. Aug 09, 2016 taxation in nigeria and history of taxation in nigeria a tax in nigeria is a compulsory levy imposed by the federal government of nigeria on individuals and corporate entities in respective of return of service expected from the government. The bill also seeks to provide clarity and efficiency in the administration of the individual income taxes in nigeria.
Nigeria tax system is historical odusola, 2006 dates back to 1904 when the personal income tax was introduced in northern nigeria before the amalgamation, through the native revenue ordinances 1917 the west, the direct taxation ordinance no. The problems of nigeria personal income tax administration a case study of ministry of education abstract this project work is carried out on problem of personal income tax generation and administration taxation can be simply defined as a compulsory contribution by individuals and organizations to a statutory authority. In nigeria, the personal income tax rate is a tax collected from individuals and is imposed on different sources of income like labor, pensions, interest and dividends. The chargeable person is a person on whom certain tax is imposed. A significant share of the tax revenue increase in africa stems from natural resource taxes. Nigeria uses payasyouearn paye system of calculating personal income tax which is called paye tax. The new act would provide more disposable income to the lower income earners following the amendment of the income tax table and adjustments in the applicable income tax incremental bands, which brings it in line with current income levels. Here,the tax payable decreases as income increases. The history of taxation in nigeria started with personal income tax in 1904, when lord lugard introduced income tax to northern nigeria.
Download as docx, pdf, txt or read online from scribd. Governm ents in all parts of the world and at all points in history have faced similar. The state governments are responsible for the collection of. In the federal territory of lagos, the income tax ordinance, 1943, remained in force until the personal income tax lagos act 1961. Many of them have covered all its ramifications while some have effectively appraised the problem of tax administration in.
Download citation a comprehensive tax history of nigeria this book discusses the evolution of taxation in nigeria within the framework of eight broad themes i. In nigeria, taxpayers are all people who earn salaries or gain any kind of profit out any other sources of money. According to soyode and kajola 2006, the problems of tax administration in nigeria are as follows. Companies income tax act arrangement of sections part i repealed part 11 imposition of tax and profits chargeable section 9. Personal income tax failed in nigeria for lack of equitability.
This tax rate progresses from 7 percent to 24 percent of taxable income. Personal income tax in nigeria employees simply pay their income tax through the pay as you earn paye system, whereby employers deduct the due tax at source from the salaries and transfer it directly to the firs on a monthly basis, while independent workers and beneficiaries of additional income are required to file their own tax returns. Overview of personal income tax in nigeria explained. Nigeria personal income tax rate 20112018 data 20192020. Withholding tax in nigeria administration and rates. Every taxpayer in nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside nigeria, the salaries, wages, fees, allowances, and. Under companies income tax act you have to pay companies income tax if you are a resident or nonresident company incorporated in nigeria. There is a need to conduct a comparative study of personal income tax in nigeria and other developing countries and possibly, a comparative study of personal income tax in nigeria and developed countries. The impact of personal income tax on state governments revenue profile in nigeria article pdf available in ssrn electronic journal november. It is a model of collecting income tax from employees by deducting from their source which is their employer as stipulated in section 81 of the personal income tax act cap p8 lfn 2011. Unfortunately, we are far behind on tax law reform in nigeria as the last time any business tax legislation was enacted or. Taiwo oyedele is a partner in the tax and corporate advisory services unit of pwc nigeria and a regular paper presenter on professional tax matters.
Personal income tax the legal basis for this tax is found in the provisions of the personal income tax decree now act. In the context of personal income tax, a person means an individual, a sole proprietorship nonjuristic person, communities and families and on executors and trustees of an undivided estate. This follows many years of agitation for the personal income tax law in nigeria to be brought in line with presentday economic realities. Structural adjustment and tax yield in nigeria 19701990. If your income is larger than that, here are the rates you need to know about for your calculations. As a result, the gb exploited the resources and people of africa. We had highlighted some of the salient provisions of the act in our tax news flash of 3 july 2014. Taxation and economic growth in a resourcerich country. This tax was repealed and replaced by another income tax in 1862. As africas most populous country, nigeria boasts of the continents second largest oil reserves and has a very promising growth outlook.
Where a person rents or hires propertyservices from another, wht at the rate of 10% will apply. The taxable income band ranges from ngn300,000 to above ngn3. Many employers are yet to commence implementation while some. Understanding companies income tax the guardian nigeria. Individuals are subject to tax under the personal income tax act as amended. All the regional tax laws later formed the basis of personal income taxation in all the states that were created out of the regions. The regressive tax system is not commonly used,even in developed countries since this will mean revenue from taxes to the government will only continue to reduce. These studies could be designed to examine the tax rates within a singlemultiple tax regimes, the reliefs available to the taxpayers. The origin of the pit can be traced to the personal income tax act no 30 of 1996. However, the northern region did not pass its own personal income tax law until 1962. Companies are mandated by law to pay company income tax cit in nigeria based on the profit. Government, tax administrators, practitioners and academics alike. They are individual or body of individuals having in a year of assessment, any income chargeable to tax.
A section on other taxes varies by jurisdiction but often includes estate, inheritance. The personal income tax act, 2004 is now amended by the personal income tax amendment act, 2011. Payasyouearn paye direct self and government assessment withholding. The finance bill proposes changes to limit the application of the tax only to untaxed profits that are not exempt from tax. Personal income tax act arrangement of sections part i imposition of tax and income chargeable section 1. Finally, our compendium is wider in scope because it chronicles not just tax, but related laws as well. The choice of the study period provides an opportunity for. Nonresident companies are liable to tax on the profit or income derived from nigeria. The benchmark we use refers to the top marginal tax rate for individuals. It is a method of collecting personal income tax from employees salaries and wages through deduction at source. Personal income tax rate in nigeria varies depending on the annual income of a person. The basis for the taxation was the islamic religion. Personal income tax in nigeria indirect tax progressive tax.
We start with the personal income tax, explaining who is liable for tax and, at some length, what types of income are considered taxable and which rates, deductions and credits apply. In spite of the fact that the in spite of the fact that the selfemployed outnumber paid workers and that they earn as much as four. The nigeria income tax calculator nitc shows in one click a summary of incomes, allowances, deductions and net income both monthly and annual. The rate of personal income tax payable is dependent on the amount of taxable income which the person is liable for. The personal income tax rate in nigeria stands at 24 percent. As a general rule, income on a property rent, hire or lease payments or rights royalties situated in nigeria is liable to tax in nigeria, the place of payment not withstanding. This paper therefore described the situation of taxation in nigeria and. The minimum pit rate is 1% if the annual income is less than. Nwanyanwu and others published assessing the productivity of personal income tax system in nigeria.
This paper examines the problems associated with the assessment and administration of personal income tax on motorcycle riders in umuguma owerri west lga metropolis. Company income tax, value added tax, import duties and have used same to create prosperity oluba 2008. Personal income tax in nigeria is a tax levied on all incomes of an individual employed by a business or organization. Nigeria adopts a payasyouearn paye system in calculating personal income tax of employees. Companies income tax cit overview and general implications 4 nigerias finance bill insights series.
It has long been evident that personal income tax in nigeria has remained the. Introduction the president of the federal republic of nigeria in line with national tax policy signed into law the bill for an act to amend the provisions of the personal income tax act, cap. Nigeria personal income tax rate 20112018 data 2019. This book discusses the evolution of taxation in nigeria within the framework of eight broad themes i. Basically, pit is deducted as a result of trade, business, profession, vocation for a period of time and applies to personal emoluments such as wages or salaries, gratuity, superannuation or pension schemes as well as any other income derived by reason of employment. This page provides the latest reported value for nigeria personal income tax rate plus previous releases, historical high and low, shortterm forecast and. The study period spans economic cycles for about 66 percent of the life of. However, going by historical antecedents, there should be no highly disruptive. Federal individual income tax rates history nominal dollars income years 1920 nominal married filing jointly married filing separately single head of household marginal marginal marginal marginal tax rate over but not over tax rate over but not over tax rate over but not over tax rate over but not over. Before the colonization period in nigeria, the tax system was traced to the northern parts of the country. The tax is payable by all companies at the rate defined by the companies income tax act cita 1. It also includes the tax on the profits of nonresident companies carrying on business in nigeria. T axable income refers to the base upon which the income tax system imposes and decides on how much tax.
It is expected that the paye is remitted at the 10 th day of the month following the deduction. Find, read and cite all the research you need on researchgate. The legal basis for this tax is found in the provisions of the personal income tax decree now act. The most commonly used ones in nigeria are the proportional tax system and the progressive tax system. A delivering the lead judgement confirmed the position of the law on residency as follows. Personal income tax pit is a compulsory tax charged on the income earned by an individual. The rate of personal income tax payable is dependent on the amount of taxable income which the. The history of personal income tax law in nigeria is traceable to the raisman. Pdf assessing the productivity of personal income tax. This includes rental income on both real and personal property. Taxation in nigeria plus history of taxation in nigeria. This is understandable tax as we know is imposed by status and this constitutes the most important source of tax laws. A comprehensive tax history of nigeria researchgate.
Personal income tax pit can be described as the income tax payable for any year of assessment upon the chargeable income of an individual chargeable person. Introduction companies income tax cit is tax on the profits of incorporated entities in nigeria. The personal income tax pit is the most common tax type in the country. The annual paye tax rate progresses from this tax rate progresses from 7 percent to 24 percent of taxable income. It also analyzed the significant components of personal income tax on revenue. Self employed individuals are expected to file annual returns annually and pay the taxes due. Where actual profits cannot be determined, the federal inland revenue in practice, profit is deemed at 20% which is then taxed at the income tax rate of 30%, resulting in an effective tax of. Corporate tax 2020 laws and regulations nigeria iclg. Today, few taxpayers enjoy paying taxes voluntarily, although many regard it as a. Tax and taxation in nigeria europeanamerican journals. Every taxpayer in nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside nigeria, the salaries, wages, fees, allowances, and other gains or benefits, given or. The amount charged is 30% o the profit earned in the year preceding assessment. Nigeria government needs to increase its tax revenues in order to achieve macroeconomic objectives. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960.
Community tax became operative through the revenue ordinance of 1904. Charge of tax on interest relating to foreign and agricultural loans and certain reliefs. Tax evasion is a deliberate and willful practice of not disclosing full taxable income so as to pay less tax. The rate of tax payable is not a fixed sum, depending on the gross income of the taxable employee, and the tax relief granted to him under personal income tax act pita. Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as value added tax vat in nigeria. Nigeria tax system is historical odusola, 2006 dates back to 1904 when the personal income tax was introduced in northern nigeria before the amalgamation.
Taxation and fiscal regulations in nigeria nigerian law guru. Personal income tax act is the amendment of the personal income tax cap p8, lfn 2004. Governments in all parts of the world and at all points in history have faced similar. How to calculate personal income tax paye on excel duration. The british empire tried to fight for economic dominance in the region. Nigeria, with the specific objectives of examining the main tax reforms in the. The study focuses on the impact of petroleum profit tax, company income tax, personal income tax, value added tax revenue on nigerias economic growth between 1980 and 20. Where a person rents or hires propertyservices from another, withholding tax at the rate of 10% will. The local governments are not entitled to tax collections in any forms, however, local levies, fines, and license fees are payable to local government administrations.
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