Tuesday, September 26, 2017 3:50PM / Deloitte
Lagos State Internal Revenue Service (LIRS) has issued a public notice (the Notice) regarding the taxation of non-nationals with temporary work permit (TWP).
The Notice defines a non-national with a TWP as ‘an individual, who is a national of another country, working in Nigeria on a TWP visa for a period not longer than 90 days, at each instance’. It also cites reliance on Section 10(1) of the Personal Income Tax Act (PITA), which states three conditions that must be jointly satisfied before a non-resident employee is exempted from income tax in Nigeria, as well as Section 6 of PITA, which provides guidance on taxation of independent contractors.
Based on the Notice, a non-national employee who pays income tax in a country that has a double tax treaty (DTT) with Nigeria only becomes liable to income tax in Nigeria after 183 days or in accordance with the DTT existing between Nigeria and the home country. On the other hand, non-nationals who are not liable to tax in a country with whom Nigeria has a DTT become liable to tax in Nigeria from the first day they arrive in Nigeria in line with the provisions of Section 10(1) of PITA.
Further, the Notice provides guidance on taxation of non-national independent contractors, who are liable to tax in Nigeria where:
· A fixed base is created in Nigeria. LIRS clarifies that a fixed base may be created where the contractor requires work permit, other than a business visa, to carry out duties in Nigeria
· Profit is shifted from a Nigerian business using uncommercial pricing which is not supported by a transfer pricing documentation
· The contract involves components of installation or construction work in Nigeria and if the contractor has a warehouse from which deliveries are made to customers.
However, applicable double tax reliefs would be granted to independent contractors who are resident in countries that have a DTT with Nigeria.
Visit Deloitte’s blog to keep yourself abreast of business alerts, subject matter expert perspectives and so on.
This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.
1. LIRS Issues Public Notice on Taxation of Employee Share/Stock Options
2. Reformed Pioneer Status Incentive in Nigeria: Any Contradiction to Tax Revenue Drive?
3. Joint Tax Board issues Public Notice on abuse of Voluntary Pension Contribution Scheme
4. LIRS clarifies the definition of reasonable removal expenses for the purpose of tax exemption
5. Microfinance banks and the VAT legislation: Is there a case for exemption?
6. Nigeria signs multilateral agreements to tackle international tax avoidance and evasion
7. Matters Arising - Implications of Pioneer Status Incentives on SMEs
8. Pioneer Status Incentive Scheme In Nigeria: Wider coverage with weightier conditions – any grey area
9. Tackling tax leakages in the 21st Century: What lessons can Nigeria learn from the OECD? (3)