Understanding the types of taxes in Nigeria is crucial for every individual, business owner, or investor who wants to operate legally and avoid penalties. Nigeria runs a three-tier tax structure—federal, state, and local governments—each with its specific tax types and collection responsibilities.
This guide explores the complete list of taxes in Nigeria, organized by level of government and taxpayer category, including individuals, companies, and nonprofit entities. Whether you’re a small business owner, a tax consultant, or a multinational investor, this article will give you clarity on tax obligations in Nigeria.
Overview of the Nigerian Tax System
Nigeria’s tax system is governed by laws enacted by the National Assembly, State Houses of Assembly, and Local Government Councils. The major tax collection agencies include:
Federal Inland Revenue Service (FIRS) – for federal taxes
State Internal Revenue Services (SIRS) – for state taxes
Local Government Revenue Committees – for taxes collected at the local government level
Types of Federal Taxes in Nigeria
These taxes are collected by the Federal Inland Revenue Service (FIRS):
- Company Income Tax (CIT)
Rate: 30% for large companies; 20% for medium companies; 0% for small companies
Applicable to: All registered companies in Nigeria (excluding sole proprietors and partnerships)
Law: Companies Income Tax Act (CITA)
- Value Added Tax (VAT)
Rate: 7.5%
Applicable to: Sales of goods and services except those exempted under the VAT Act
Law: Value Added Tax Act
- Petroleum Profits Tax (PPT)
Applicable to: Companies engaged in petroleum operations
Rate: Between 50% and 85%
Law: Petroleum Profits Tax Act
- Capital Gains Tax (CGT)
Rate: 10%
Applicable to: Profits made from the disposal of chargeable assets (real estate, shares, etc.)
Law: Capital Gains Tax Act
- Stamp Duties
Applicable to: Legal documents (contracts, agreements, etc.)
Collected by: FIRS (corporate bodies) and State IRS (individuals)
Law: Stamp Duties Act
- Education Tax (EDT)
Rate: 2.5% of assessable profit
Applicable to: All Nigerian companies
Law: Tertiary Education Trust Fund Act
- National Information Technology Development Levy (NITDL)
Rate: 1% of profit before tax
Applicable to: Specified companies such as banks, telecoms, oil & gas companies, etc.
Law: National Information Technology Development Agency (NITDA) Act
- Nigeria Police Trust Fund Levy
Rate: 0.005% of net profit
Applicable to: All companies in Nigeria
Law: Nigeria Police Trust Fund Act
- National Agency for Science and Engineering Infrastructure (NASENI) Levy
Rate: 0.25% of profit before tax
Applicable to: Companies operating in the ICT, oil and gas, aviation, banking, and telecoms sectors
Law: NASENI Establishment Act (as amended)
Types of State Taxes in Nigeria
These are collected by the State Internal Revenue Services (SIRS) in each state:
- Personal Income Tax (PIT)
Rate: Graduated between 7% and 24%
Applicable to: Employees, sole proprietors, partners, freelancers
Law: Personal Income Tax Act (PITA)
- Withholding Tax (WHT)
Applicable to: Payments such as rent, royalties, consultancy fees, etc.
**Collected on behalf of FIRS or SIRS depending on the taxpayer category
- Business Premises Levy
Applicable to: Businesses operating within the state
Rate: Varies by state and business size
- Development Levy
Applicable to: All taxable individuals (often a fixed annual sum)
Law: Imposed by state revenue laws
- Road Taxes and Motor Vehicle Registration
Applicable to: Vehicle owners and commercial drivers
Includes: Registration, renewal, road worthiness, etc.
Types of Local Government Taxes in Nigeria
These are collected by Local Government Councils:
- Tenement Rates
Applicable to: Owners or occupiers of buildings
Based on: Value of the property
- Shops and Kiosks Rates
Applicable to: Small-scale traders and shop owners
- Marriage, Birth and Death Registration Fees
- Parking Fees and Market Levies
Applicable to: Traders in public markets and commercial vehicle operators
- Bicycle, Wheelbarrow and Cart Fees
Applicable to: Operators within the local government
Other Taxes, Levies, and Contributions in Nigeria
While not classified strictly under federal, state, or local tiers, there are other statutory contributions including:
- Pension Contributions
Rate: Minimum 10% employer and 8% employee
Law: Pension Reform Act 2014
- National Housing Fund (NHF) Contribution
Rate: 2.5% of monthly basic salary (for eligible employees)
Law: NHF Act
- Industrial Training Fund (ITF) Contribution
Rate: 1% of annual payroll
Applicable to: Companies with 5+ employees or annual turnover of N50 million+
- Employee Compensation Scheme (NSITF)
Rate: 1% of annual payroll
Law: Employee Compensation Act
Tax Identification Number (TIN): Your Key to Compliance
Every individual and company liable to tax in Nigeria must register and obtain a Tax Identification Number (TIN) from FIRS or SIRS, depending on the nature of the taxpayer. Without a TIN, you cannot:
Open a corporate bank account
File returns
Obtain tax clearance certificate
Participate in government contracts
Penalties for Tax Evasion in Nigeria
Failure to comply with tax laws attracts serious consequences, including:
Monetary penalties
Interest charges
Seizure of assets
Prosecution
For example:
Failure to file VAT returns attracts a daily fine of N50,000 and N5,000 in each of the subsequent months as long as the default continues.
How to Stay Compliant with Nigerian Tax Laws
- Register your business with CAC
- Obtain a TIN
- Understand your tax obligations
- File tax returns accurately and timely
- Remit taxes to the appropriate tax authority
- Engage a qualified tax consultant if necessary
Conclusion
Navigating the types of taxes in Nigeria may seem overwhelming, but with the right knowledge and guidance, it becomes manageable. Understanding your tax obligations ensures compliance, avoids penalties, and builds a solid reputation for your business.
Whether you’re dealing with company income tax, personal income tax, VAT, or local levies, staying informed and proactive is key.
Need Help with Tax Compliance or Business Registration?
At TaxClearanceCertificate.com we assist individuals and companies with:
CAC business registration
TIN application
Tax filing and returns
Obtaining tax clearance certificates
Annual returns and statutory filings
Contact us today to stay compliant and grow your business the right way.
Frequently Asked Questions (FAQs)
- Who is responsible for collecting taxes in Nigeria?
Taxes are collected by FIRS (federal), State IRS (state), and Local Government Revenue Committees.
- Is VAT the same as sales tax in Nigeria?
No. VAT is a consumption tax on goods and services, while sales tax is not currently in use in Nigeria.
- Do I need to pay taxes if I run a small business?
Yes. Even sole proprietors and small businesses must file and pay Personal Income Tax and other applicable levies.
- What happens if I don’t file taxes?
Non-compliance can lead to fines, interest penalties, and even prosecution.
- What is the difference between PIT and CIT?
PIT is paid by individuals and sole proprietors, while CIT is paid by registered companies.
- Can I register for TIN online?
Yes, individuals and companies can apply for TIN through the FIRS or State IRS portals.
- Are religious organizations taxed?
No, religious and charitable organizations are generally tax-exempt, but they must still file annual returns.
- What taxes do employers need to deduct?
Employers must deduct PIT (PAYE), Pension, NHF, and NSITF contributions.
- What is withholding tax used for?
WHT is an advance payment of income tax deducted at source and remitted to the tax authority.
- How do I get a tax clearance certificate in Nigeria?
You must file returns and settle all outstanding taxes before applying through FIRS or SIRS.
Need Help With Your Financial & Tax Compliance?
We prepare and file Statement of Affairs, Audited Accounts, Tax Returns, and process Tax Clearance Certificates for individuals and companies across Nigeria.
Chat with us on WhatsApp: +234 815 555 4892