Nigerian Tax Glossary

Yearly tax filing submitted by taxpayers detailing their income, deductions, and tax liabilities for the previous year. Required for both individuals and businesses.

Tax deduction granted to businesses for wear and tear on capital assets like machinery, equipment, and buildings. Rates vary by asset type and are specified in tax regulations.

Tax imposed on the profits of companies registered in Nigeria. The standard CIT rate is typically 30% for large companies, with reduced rates for small and medium enterprises.

A combination of various tax reliefs granted to taxpayers. It includes allowances for housing, transport, meals, and other expenses. CRA is calculated as the higher of ₦200,000 plus 20% of gross income, or 1% of gross income.

A tax levied on companies at 2.5% of assessable profit, used to fund educational development in Nigeria. Administered by the Tertiary Education Trust Fund (TETFund).

The percentage of total income actually paid in taxes, calculated as total tax divided by total income. It provides a realistic view of your tax burden.

The agency responsible for assessing, collecting, and accounting for tax and other revenues accruing to the Federal Government of Nigeria. FIRS administers major taxes like CIT, VAT, and petroleum profits tax.

Total income earned before any deductions, including salary, bonuses, allowances, and other forms of compensation. This is the starting point for tax calculations.

Premiums paid for life insurance policies that qualify for tax relief. The relief is typically 20% of the premium amount or 10% of gross income, whichever is lower.

Businesses classified based on size, with specific tax incentives and reduced rates. MSMEs with annual turnover below ₦25 million may qualify for special tax regimes.

A mandatory contribution scheme (2.5% of monthly basic salary) designed to provide affordable housing for Nigerian workers. Contributions are tax-deductible.

The amount remaining after all taxes and deductions have been subtracted from gross income. This is your actual take-home pay.

A tax deduction system where employers deduct income tax directly from employees' salaries and remit to the relevant tax authority. This is the most common form of personal income tax collection in Nigeria.

Mandatory retirement savings deducted from employee salaries under the Contributory Pension Scheme. Employees contribute a minimum of 8% while employers contribute 10% of monthly emoluments.

A tax system where the tax rate increases as income increases, implemented through tax brackets. Nigeria's PAYE system uses progressive taxation with rates ranging from 0% to 25%.

Tax relief granted to employees who pay rent, calculated as 20% of annual rent or ₦500,000, whichever is lower. This reduces taxable income.

A system where taxpayers calculate their own tax liability and file returns without waiting for assessment from the tax authority. Common for businesses and high-income individuals.

The process by which the tax authority determines the amount of tax a taxpayer owes based on their income, assets, and applicable tax laws.

An official document issued by tax authorities confirming that a taxpayer has fulfilled all tax obligations for a specific period. Required for many business transactions and contracts.

A direct reduction in the amount of tax owed, as opposed to a deduction which reduces taxable income. Tax credits are granted for specific activities or investments.

A unique number assigned to every taxpayer in Nigeria for identification and tracking purposes. It is required for all tax-related transactions and filings.

The portion of gross income that is subject to taxation after all allowable deductions and reliefs have been applied. It forms the basis for calculating the actual tax liability.

A simplified tax regime for small businesses with annual turnover below ₦25 million. Charged at a flat rate on gross turnover instead of profits.

A consumption tax levied on goods and services at each stage of production and distribution. The current VAT rate in Nigeria is 7.5%, charged on taxable goods and services.

An advance payment of income tax deducted at source from certain types of transactions such as contracts, rent, dividends, and professional fees. Common WHT rates range from 5% to 10%.