The Federal Inland Revenue Service (FIRS) has, through a Public Notice (“the Notice“), announced the creation of a new tax office to exclusively attend to the tax affairs of non-resident persons in Nigeria.

The Non-Resident Persons’ Tax Office (NRPTO) is located within the International Tax Department of FIRS in Ikoyi, Lagos. However, the office would not commence operation until January 1, 2020, as FIRS, in a press release directed that from 1st January 2020, all non-resident persons liable to tax in Nigeria shall submit every return, correspondence or enquiry relating to all the taxes administered by FIRS to the Office. The release further stated that the files of non-resident persons shall thenceforth be domiciled at the NRPTO.

NRPTO would be devoted solely tax matters concerning non-resident persons liable to tax in Nigeria, including all tax treaty operational issues, cross-border transactions, inter-company transactions and income derived by non-resident individuals in Nigeria.


The Public Notice clarified that a “non-resident person” for its purpose, is a foreign company as defined in the Companies Income Tax Act Cap C2, LFN 2004 as amended (CITA) or an individual (who is resident outside Nigeria and derives income or profit from Nigeria) as defined in the Personal Income Tax Act Cap P8, LFN 2004 as amended (PITA). This creates two broad categories of taxation to which the office relates, namely, corporate and individual taxation.

  Corporate Taxation

CITA in its Section 105(1) defines a “foreign company” as any company or corporation (other than a corporation sole) established by or under any law in force in any territory or country outside Nigeria. Under CITA, companies which though not incorporated in Nigeria but derive profit from Nigeria, are liable to tax in Nigeria. This Act provides the following circumstances under which the profit of a non-resident company can be deemed to have been derived from Nigeria, and hence taxable in Nigeria:

  1. If the company has a fixed base of business in Nigeria, as much of the company’s profit as is attributable to the fixed base is taxable in Nigeria.
  2. If the company habitually does business through its dependent agent authorized to conclude contracts or deliver goods or merchandise on its behalf in Nigerian, as much of the company’s profit as is attributable to the business, trade or activities carried on through that agent is taxable in Nigeria.
  3. When the company executes a turnkey project (i.e. a single contract for surveys,deliveries, installations or construction) in Nigeria, the profit of the company from the project is taxable in Nigeria.
  4. When the company transacts business with its related company in Nigeria, the profit of the company from the business to the extent that FIRS has adjusted it to reflect arm’s length principle, is taxable in Nigeria.

Section 55 of CITA mandates every company (including the non-resident companies earning income from Nigeria) to file a self-assessment return at least once in a year, disclosing among other things, the amount of profit from each and every source. This requirement applies even when the company does not bear any tax liability for a year of assessment.However, the absence of such actual profit returns from the foreign entities as mandated by Section 55 has led FIRS to assessing them to tax on turnover basis pursuant to Section 30 (1)of CITA. That Section empowers FIRS to assess the company to a fair and reasonable percentage of the part of the company’s turnover attributable to its Nigerian operations where the Nigerian profit of the company cannot be ascertained. What FIRS deems fair and reasonable is 20% of the company’s turnover, which it subjects to the CIT rate of 30%, to arrive at 6%tax. The remaining 80% is excluded as expenses.

Several litigious conflicts between FIRS and the multinationals have arisen from this assessment mode. It has also been severely criticized for the unfair disparity it creates between the deemed tax of 6% and the tax of companies with returns built on full financial statements.

Again, the 80% deducted expenses is perceived as playing no role if a cost-plus transaction is considered. In a cost plus arrangement, the company recoups its direct costs on the project, and then earns a mark-up on the cost.

The deluge of conflicts and criticisms of the turnover assessment apparently led FIRS to start discouraging returns based on deemed profit, and rather insisting on actual profit returns in line with Section 55 of CITA by all companies doing business in Nigeria including the non-resident companies. In fact, FIRS in 2014, released a public notice mandating all resident and non-resident companies to ensure compliance with Section 55 of CITA from the assessment year commencing 1 January 2015 (2014 financial year). The conclusion of the Notice states thus:

“All non-resident companies that had misconstrued acceptance of deemed profit returns by FIRS as replacement for filing income tax returns in compliance with Section 55 of CITA are by this notice directed to ensure that filing requirements as per Section 55 of CITA are complied with, as from the assessment year commencing 1 January 2015. All Nigerian companies and non-resident companies that have been complying with this provision should continue with compliance.”

  • Individual Taxation

The authority to administer Personal Income Tax is shared by FIRS on the one hand and the tax authorities of the states on the other hand. The Residency Rule in PITA places individuals resident in each state under the taxing authority of the state for personal Income Tax. Sections2(1)(b) and 108(f) of PITA then created categories of persons whose Personal Income Tax goes to FIRS. These include persons resident outside Nigeria who derives income or profit from Nigeria (i.e. non-resident individuals). The other categories are: members of the Nigerian armed forces and the Nigerian Police (excluding those working for these force authorities in civilian capacities); officers of the Nigerian Foreign Service; and residents of the Federal Capital Territory, Abuja.

Section 10(1)(a)(ii) of the PITA marks the criteria of Nigerian residency and non-residency for Personal Income Tax purposes with what has come to be known as the 183 Day Rule. By that provision, an employee, in order to be considered resident in Nigeria, must be so resident 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 commencing in a calendar year and ending either within that same year or the following year.

A non-resident employee is liable to tax in Nigeria if the duties of the employment are wholly or partly performed in Nigeria, except if:

  1. The duties are performed on behalf of an employer who is in a country other than Nigeria, and the employee’s remuneration is not borne by a fixed base of the employer in Nigeria;
  2. The employee’s remuneration is liable to tax in that other country under the provisions of a Double Taxation Avoidance Agreement (DTA) between Nigeria and that country.

Employees do not relate directly with tax authorities for the purposes of their Personal Income Tax. Rather, the Pay As You Earn (PAYE) system requires employers to deduct the due tax at source from the salaries of the employees for remittance to the relevant tax authority on monthly basis.


The creation of a sole unit for tax administration of non-residents is a laudable innovation by FIRS, considering the complexities and numerous conflicts from taxation of non-resident entities in Nigeria. It is also very strategic to annex the office to the International Tax Department of FIRS which is the most relevant department of FIRS for the tax affairs of non-residents.

Until this development, tax returns, assessments, and the overall administration of non-residents’ taxation followed the pattern of routine administration of Companies Income Tax and Personal Income Tax. The negative consequences of these structural and process defects weighed on both the revenue and the tax payers. Government lost tax, for want of keen attention on the transactions of non-residents that yielded income from Nigeria. As for the captured transactions, the inequities of turnover assessment, and issues of double taxation were points of constant complaints. Enforcement of actual profit returns based on Section 55 of CITA was also hampered.

With this first step of centralizing non-residents’ tax affairs in the new office, it is hoped that FIRS would build strong manpower and structure to tackle the common issues arising from this aspect of taxation for the benefit of both sides. A concentrated system and the affiliation to the International Tax Department would engender more efficiency in resolving issues of double taxation, transfer pricing, the residency rule, and similar intricacies, as well as facilitate the processes of returns and records on non-residents. It is also expected that the concerned non-residents would take ample advantage of this development.

About The Author

Dr. Jerome Okoro is a tax lawyer and the partner in charge of Litigation, Tax and Energy & Natural Resources practice groups at Hermon Legal Practitioners, Lagos. E-mail:

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