Transcription
Hello everyone. As promised, I am back again talking about this new Nigerian tax law that will come into effect come January 1, 2026.
This matter, this tax matter concerns us as investors. It concerns you if you live in Nigeria, you're working in Nigeria, earning income in Nigeria. So it doesn't matter if you don't like this government. It doesn't matter if you have misgivings about how they came into power. They are now in power and knowledge is the only way to make sure that you remain on the right side of the law.
I see all your comments. I see all your questions. We will get to them all. I promise. How many times have I ever made a promise on this channel and I did not keep it? But always bear in mind that I am just an investor like you. I am not a tax man. Neither am I a Nigerian tax expert.
I may know where to find the information I need about this new Nigerian tax law better than you do because I've been investing in Nigeria a long time for more than 20 years and I've been using Nigerian tax laws, you know, to apply to my investments for over 20 years. But that's about it.
This new Nigerian tax law, have you seen it? It has more than 400 pages of information to consume. So please uh if you know better than I do politely leave it in the comments below. I will come and watch too because this is the time for us to take in information gain knowledge so that we can come for the government from the right place. Yeah. You can you you can't come for the government with ignorance. So you first of all listen to them know about this new tax law.
Yes, I know in Nigeria they have good laws but it's implementation that is a problem. Yes, we know for other laws if they don't implement it maybe you feel that it doesn't concern you but this time around this tax law if they don't implement it it like if they don't use the money well it affects you more than 100%. Because it's your money that they are taking. So, you have to pay attention. You have to listen up. You have to grab every and any information that you you see flying around about this new Nigerian tax law.
Me, too. I'm learning. I've been running around gathering as much information as I can, asking my senior colleagues, you know, I have senior colleagues when it comes to investing in Nigeria. As soon as I know it, you will know it. If you haven't subscribed to this channel, subscribe because we are in for a long-term learning. Yeah. About this new Nigerian tax law. affects you one way or the other.
In this video, I'm going to talk about what will not be taxed. Yeah, I think we want to hear some good news first. Number one, contrary to popular belief, this tax will not be applied to your gross income. >> So, when you go to the tax laws and you see first 800,000 are 0%, next this percent, those amounts are not the gross income that you earn. They call taxable income. Um, how do you derive taxable income? If my salary is 100,000 NRA in a month, that means in a year my gross salary is 1,200,000, 1.2 million. Um, you don't take that amount into the tax table and start taxing it. You start by taking out what we call deductions. So, when you take out all of those, whatever is left is what we call taxable income. You then take the first 800,000 and this applies to everyone. The first 800,000 that you earn is at 0%. So which means even though I earn 1.2 million era a year, by the time I take out all deductions and relief, h I'm likely to end up with something that is even less than 800,000. I don't pay any tax even though I earn 1.2 million NRA in a year.
>> Now let me show you an illustration of what he just said in Excel. Up here you can see the gross salary of this employee which is 1.2 million naira per year. Down here all the deductibles, pension, health insurance, housing fund, rent relief, this one is a new one in this new tax law. Life insurance where applicable, interest on mortgage where applicable. All these will be deducted before tax is applied down here. So at the end of the day, the person will pay only 17,100 naira on taxes. Don't worry, I'll explain this spreadsheet in detail in another video. I'm still working on it.
As a followup to number one, any taxable income that is less than 800,000 naira per year will not be taxed. That is why in this tax ban table, you can see that I have that 0% tax is applied on the first 800,000 naira taxable income. Then 15% tax is applied on the amount that spilled over into the next tax band.
Money that comes into your bank account is not automatically taxed. Note the key word automatically. Even though they will be looking at it, but they're not just going to swoop in and come and start taxing every money that comes into your account. If your relative abroad sends you money, they come and tax it. If your friend gifts you money, they come and tax it. If somebody sends you money, buy something for me at Balogu market, they come and tax it. No, but it's your responsibility to do the self assessment. You have to selfdeclare as an individual, as a small business. Yeah. If you register your business in a business name, you're not a company. You're going to pay taxes as an individual if you run your business on a business name. Let's say you have a rental property. You registered the business name. Use that business name to open an account to be collecting rent. You are an individual. You're going to do self assessment. So at the end of every tax year, tax year in Nigeria is January to December. You have till March or April to file for your taxes. So you have to do that on your own before the government swoops in to come and be checking your account saying that you receive payment for goods and services but you did not remit it as tax. So you have to be proactive. You have to keep your receipts so that you will be able to claim anything that is due to you so that you can prove all expenses, all deductibles. I'm telling you from my experience, keep all proofs. It's better that you keep proof of a receipt or an expenditure and you later turn out that is not a an approved deductible than it's something that is approved to be deducted but you did not keep proof of that. If you cannot prove that it's not an income, you will not get the benefit of you know all the tax reliefs that is available to you as an individual or as a business.
For people that work in organized establishments, this is not an issue because your HR will do all the job for you. I'm talking about individuals that are doing business, you know, informal business and individuals that even have a business name. You didn't register as a limited liability company. So, you are actually treated as an individual in this new Nigerian tax law. So, keep all proofs for filing your taxes.
While we allow you to make your self declaration, we will use intelligence within the system to validate whether what you are saying is correct and reliable. So I can easily declare to the government that life is hard and the whole of last year I only made 1 million NRA and government will say but we see on your payment card you went to malls, you went to restaurants and you spent all together for the year 3 million NRA. Where did you see the difference? So and it's not like government will ask you to pay tax on that difference immediately. They will ask you to explain it. So based on this thing we have in your bank account, we saw that you bought a new car that you registered, you built a new house and you connected to electricity. We saw that you traveled abroad. So it's just intelligence and this is what is done everywhere in the world. This is the only way to ensure that you reduce evasion and by reducing evasion you can increase government revenue without taxes.
And that leads me to the next one. Gifts, money gifts are not taxed. Upkeep, you send an upkeep to your parents. Even if you do it in the form that they receive it on a monthly basis, it comes into their account like a monthly salary. The same amount of money every maybe you say you're giving your your parents 100,000 naira every month. It's not taxed as long as it's marked as a gift. You know why? when you earn the income, no matter where you live in the world, even if you live outside Nigeria, it's believed that you work there, you paid your taxes there, and this time you're sending money to your parents, right? So, it won't be taxed again as long as you can prove that it's not for services rendered. I believe that from the knowledge I've gathered so far, if you're honest in this tax thing, you will not be taxed on things that are tax exempt. If you now pay somebody for a service and you call it a gift, it will not make it exempt because I saw on social media said from now on when you pay my fees, put gift in the description. I said Nigerian so something is not a gift because you say it's a gift. Something is a gift if it's no exchange of value to the person giving. Right? Once there's an exchange of value that's your gift, we will disregard it and tax it.
Another important tax exempt item, the one that the flow finance community members will be waiting for, FGN savings bond remain tax exempt. Yay. So you are safe. So government bonds, FGN savings bond, which is the most popular one. All the other federal government bonds remain untaxed. I can tell you now that treasury bills, all those short-term securities, commercial papers, you will continue to pay withholding tax on that. I am saying this based on the public notice released by FIRS in September, just this September. Accordingly, tax shall be deducted from all interest payments on investments in short-term securities on the date of payment at the applicable rate, which is 10% withholding tax. If you go to the next page, it says that short-term securities include but not limited to government bonds, treasury bills, promisory notes, corporate bonds, financial papers, bills of exchange. But number five, here you can see that interest on bonds issued by the federal government is exempt from tax deductions. So FGN savings bond remains tax exempt.
The next one which concerns this community a great deal. If you sell your shares on the Nigerian stock market, the money realized from that is tax exempt. But it has a condition as long as the money is less than 150 million naira in every given tax year and the gain realized from that is less than 10 million naira. This tax law says if that seller is selling not more than 150 million naira in a year they will not pay tax which means 99.99% of people in the stock market will not worry about this tax because they don't even have how many people sell 150 million in a year. Now the people who sell more than that are seen to be people who are wealthy and because we want the tax system to be progressive we say they should pay but if they don't want to pay there's another provision that says when they sell they should use it to buy another share in the in the Nigerian capital market so you can keep reinvesting it and not have to pay the tax so that anytime you sell you sell only enough that will not make you cross the threshold to pay tax.
The next one, crypto earnings. If you sell your crypto, it is tax-free as long as they calculate your losses, losses you've incurred previously and the current gain you made from selling today at a profit. And if you have net losses, they're not going to tax you on that amount. So now the the government is going to consider your losses as well as your profit when deciding on how to charge you on your crypto gains.
For Nigerians that live abroad that wonder if they will be taxed if they send money to Nigeria. I mean you send money to Nigeria for a project or you're coming for 30 December or for Christmas or just for summer holidays in Nigeria. you will not be taxed on that money because they believe that you already live somewhere else where you're paying taxes and there's a way of knowing where you are tax resident. If you spend more than 183 days in a year in Nigeria, you'll become tax resident in Nigeria and of course you know that one they know how to track your movements into and out of the country.
I'm sure you also be wondering what if I live abroad, I don't spend uh more than 183 days in Nigeria, but I invest in FGN savings bond and uh later I want to repatrate the money. Yeah, for those of you even though I don't advise that for those of you that come to Nigeria, invest in Nigeria and want to repatriate your FGN savings bond gains out of Nigeria. They're trying to say that if you live in a country that has a tax treaty with us. Yeah, those are a few countries I will show you. Now, if you live in such a country, if you're tax exempt on something in Nigeria, when you bring in that money, they say that because of that treaty, you will also be tax exempt. Yeah. You won't be made to pay tax for the gains you brought into that country that you live in. As long as it has been tax treated for you in Nigeria. And I'm sure that you're wondering, what if you invest in something that you pay tax on already in Nigeria? For instance, you have a rental property in Nigeria. If you live in a country that has a tax treaty with Nigeria, you've paid tax on that rent. When you repatrate the money to where you live, they're assuring you that because of that tax treaty, you'll get some tax credit. You will not be made to pay taxes. You know, that will be double taxation because you've already been taxed in Nigeria. So when you take the money abroad, you should not be taxed again.
>> I was speaking to some of the investors in London recently. Nigeria has a double tax due with the UK. When they pay all that tax in Nigeria, they get the full credit in the UK.
And here's the full list of countries that Nigeria has a tax treaty with. They're not a lot e. [Music]
The next group of people, companies that have an annual turnover of less than 100 million naira is tax exempt is now tax exempt in Nigeria. But be careful with this one. The company must be registered as a limited liability company to enjoy this tax exemption. If you're running your company on a business name, you register the business name with CAC, you'll be treated as an individual in this case. But if you want to enjoy this full benefits, you have to register the company as a limited liability company with the CAC. If you have not incorporated your business as a limited and the other forms of limited liability companies, if you have not operated it, register it like that, you will not be able to enjoy the company income tax rate of 0% because company income tax rate does not apply to you. In that case, for your business name or your enterprise that is not even registered as a business name, the regime that will apply to you is the informal sector presumptive tax. So that has some level of exemption for small businesses but not up to the level for a company. So I would advise that if you can just register a company
>> but don't go and run and register companies now unnecessarily if your business does not require a company limited liability company registration I don't suggest that you do that because under the company you may be exempt from tax but what if you want to pull out the money and spend as an individual there may be tax implications for that one will you regard it as a gift to yourself let me tell you you cannot run away from tax that's
In my last video, I suggested that you contact an accountant who will advise you on your own specific situation so that they will tell you what is best for you. You know, registering a limited liability company is not an easy thing. Even the registration alone, what you bring, declare shares, do this, do that, and then at the end of the day, you find out that the money in there, the money you're hiding in there, for you to bring it out, you will need to pay tax on it as an individual as well. So consider all these things before you run where you think you'll be avoiding tax.
If you're in the agric sector, you are VAT exempt. Yeah. No matter how big your company is, you are VAT exempt because they want to encourage more people to produce food in Nigeria. And then up to 5 years of starting the company, you are exempt from tax completely because they want to give you tax credit, you know, to start your company to settle down and all that. 5 years, a whole 5 years, you're exempt completely exempt from tax. You know, there's a difference between VAT and tax. VAT is forever. You're exempt from VAT forever. Tax is for the first 5 years after you registered or you started the agric production company.
If you're investing in foreign companies from Nigeria and you pay dividend there, you will be tax exempt as long as you bring it through the right channels. You're not trying to hide it. If you bring it in through the right channels, they say that you're exempt from tax because they know that, you know, just like in Nigeria, they take withholding tax from you before you they pay you dividends. So, as long as you bring it through the right channels, which is banks, you're exempt from tax.
If you sell your personal house, as long as the house is your personal house, so you're exempt from tax. So, this one is the capital gains tax.
If you're paid severance benefits, assuming you're sacked from your company and all that, you don't pay tax on that up to 50 million naira, right?
If you're on a pension, you're receiving pension, even though it's paid every month like a salary, you're exempt from tax. All your retirement benefits are exempt from tax because, you know, you've worked all these years. During your active years, you were paying tax, right? In fact, this pension contribution was tax exempt. Yeah. Because you deduct it first before taxing. So, you didn't pay for it when you were in active service. Why would you pay for it during your retirement? So, no, you've gone through your tax years. Your pension is tax exempt.
If you're working for the military, your salary is not taxed. Your retirement as well is not taxed, which is fair enough. You know, they're serving the country.
This list is not exhaustive, my people. It's not at all, but these are the main straightforward ones. Some of them have serious conditions attached to them. Keep the questions and comments coming. I'm paying attention. We are not going to rush this topic. It's a very vast topic that requires our attention and more to come as we get closer to the end of the year. Don't forget to like the video if you enjoyed it. Subscribe if you haven't done so so that you will not miss any notification on this new Nigerian tax.