The Pension Act signed on 1 July 2014 provides that employers with at least 15 employees are required to participate in a contributory pension scheme for their employees. The minimum contribution under the Act is 18% of monthly emolument (with a minimum contribution of 10% by the employer and 8% by the employee). If the employer decides to bear all the contribution, the minimum contribution is 20% of monthly emolument. Mandatory and/or voluntary contributions by the employers and employees to schemes approved by the Pension Act are deductible for tax purposes.
The Act also requires every employer to take out life insurance coverage for its employees.
National Housing Fund (NHF) contributions
NHF contributions are applicable to Nigerian employees earning a minimum of NGN 30,000 per annum (national minimum wage and above). The employer is required to deduct 2.5% of the monthly income from employees and remit it to the Federal Mortgage Bank of Nigeria within one month of deduction. Private sector employees are now excluded from compulsory compliance with this obligation and may hence forth contribute the requisite 2.5% of their monthly income to the NHF voluntarily.
Capital gains tax (CGT)
Gains accruing to a chargeable person (individual or company) on the disposal of chargeable assets shall be subject to tax under the Capital Gains Tax Act at the rate of 10%. There is no distinction between long-term and short-term gains and no inflation adjustment to cost for CGT purposes.
All forms of assets, including options, debts, goodwill, and foreign currency, other than those specifically exempt, are liable for CGT.
The law amends the CGT Act to impose tax at 10% on gains from the disposal of shares in a Nigerian company worth NGN 100 million or above in any 12 consecutive months, except to the extent that the proceeds are reinvested in the shares of any Nigerian company. CGT will accrue proportionately on the portion of sales proceeds not reinvested in the above manner. Regulated securities lending transactions are exempt from CGT as well as government securities and gain on trading shares.
CGT is applicable on the chargeable gains received or brought into Nigeria in respect of assets situated outside Nigeria.
Capital losses are not allowed as an offset against chargeable gains accruing to a person from the disposal of any assets.
CGT will apply on compensation of loss of office that exceeds NGN 10 million.
There is a requirement to self-assess and remit CGT due no later than 30 June and 31 December of the same year upon the disposal of a chargeable asset.
Value-added tax (VAT)
The standard VAT rate is 7.5% (increased from 5% on 1 February 2020).
Zero-rated items include non-oil exports, goods and services purchased by diplomats, and goods and services purchased for use in humanitarian donor funded projects.
Exempt items include plants and machinery for use in export processing zones or free trade zones, basic food items, medical products and services, pharmaceutical products, books and educational materials, and exported services.
Net wealth/worth taxes
There are no net wealth/worth taxes in Nigeria.
Property taxes in Nigeria are usually levied annually by the state government with varying rates depending on the state and the location of the property within the state. The two major property taxes are governor’s consent fee and land registration fee. In Lagos (which is the economic hub of Nigeria), governor’s consent fee, land registration fees, and other levies payable to the state give rise to a total levy of 15% of the transfer value of the land. Also, Right of Occupancy fee and tenement rates are chargeable by state and local government authorities.
Excise duty is applicable on beer and stout, wines, spirits, cigarettes, and tobacco manufactured and sold in Nigeria and imported into Nigeria at rates ranging from 5% to 20%.