Tax Residency in Nigeria
1. Criteria for Determining Tax Residency in Nigeria
According to Section 10 of the Personal Income Tax Act (PITA), an individual is considered a tax resident in Nigeria if they meet any of the following conditions:
- Physical presence in Nigeria for 183 days or more in a calendar year.
- Maintaining a permanent home in Nigeria.
- Carrying out business in Nigeria.
- Employment in Nigeria.
For companies, tax residency is determined based on the place of incorporation or management and control. A company is considered resident in Nigeria if it is incorporated in Nigeria or if its management and control is exercised in Nigeria.
2. Impact of International Tax Treaties on Tax Residency Criteria
Nigeria has entered into several double taxation agreements (DTAs) with other countries. These DTAs may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
The primary purpose of these DTAs is to prevent double taxation and promote cross-border trade and investment. They typically include provisions that determine the tax residency of individuals and companies involved in cross-border activities.
For example, the Nigeria-United Kingdom DTA provides that an individual is considered a resident of Nigeria if they have a permanent home in Nigeria or if their habitual abode is in Nigeria. The DTA also includes tie-breaker rules for individuals who are considered residents of both Nigeria and the United Kingdom under each country's domestic law.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Nigeria and the other country to facilitate tax compliance and enhance economic cooperation.
If delving into the depths of Nigerian tax rules and regulations isn't your style, and you'd rather have experts take the reins, then Heavnn is here to help.
Let us simplify your tax planning journey. Access Heavnn's blend of professional expertise and cutting-edge technology by clicking the button below.
