Key Considerations on Employment and Remuneration of Expatriates in Nigeria


The natural resources and the economic opportunities in Nigeria continue to attract foreign direct investments (FDI) by investors across the world. Based on the National Bureau of Statistics, capital inflow to Nigeria in 2018 was $19.07 billion of which $7.78 billion represents FDIs while capital inflows from January 2019 to May 2019 amounts to $14.2 billion of which $2.87 billion represents FDIs.

Closely related to such foreign direct investment is the need for skilled manpower and specialized labor to ensure the profitability of these investments. Without doubting the capabilities of the local workforce in Nigeria, some of these investors require the services of foreign workforce or expatriates especially in the initial phases of their business in Nigeria, due to the nature or technicality of such businesses. In these instances, the common practice which is also enforced by the respective authorities is to assign local employees to understudy any expatriate employed in any organisation for a period of time. In addition, businesses that employ expatriates have certain regulatory requirements which must be complied with in order to avoid sanctions and penalties, which will ultimately hinder their business process.
This article examines the various regulatory and tax considerations/obligations for organisations that employ expatriates for their businesses in Nigeria.

Tax Considerations for Employment of Expatriates

Taxation in Nigeria is generally based on the residency rule. An individual is deemed resident in Nigeria, if that individual exercises the duties of his employment in Nigeria. Hence, physical presence of an expatriate in Nigeria is one of the basis of ascertaining the tax residency of such expatriate.

An expatriate is deemed to have derived income from Nigeria and therefore liable to tax thereon if the duties of the expatriate’s employment is performed wholly or partly in Nigeria. However, the expatriate will not be subjected to tax on such income if the duties of the employment are performed for a Non-Nigerian employer and the expatriate’s income is not borne by a fixed base of the employer in Nigeria. Such income will also not be taxable in Nigeria if the expatriate is not in Nigeria for a period or periods amounting to an aggregate of 183 days (inclusive of annual leave or temporary period of absence) or more in any twelve month period, and if the remuneration of the expatriate is liable to tax in a country with a double tax treaty with Nigeria.

Taxation of individuals fall under the purview of the State Internal Revenue Service (SIRS) as provided in the Personal Income Tax Act 2011 (as amended). Based on the recent effort to enhance internally generated tax revenue in Nigeria, the State tax authorities have been quite aggressive in ensuring that tax due to the State are correctly collected and remitted to the State coffers. It is a general notion that expatriates are generously compensated by their employers in Nigeria. To this end, where the income declared by expatriate seems unjustifiable, the State Tax Authorities are quick to assess such expatriate on a deemed income or best of judgement basis.

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