RESIDENCE RULE

The Nigerian tax system is based on the principle of residence. Personal Income Tax Act defines an individual as resident in terms of his physical presence in Nigeria. While a Nigerian resident is liable to tax on his worldwide income, a non-resident is only liable to tax in Nigeria on the income derived from Nigeria.

The gain or profit from an employment will be deemed to be derived from Nigeria if:

(a)    the employer is in Nigeria or has a fixed base in Nigeria;

(b)   the duties of the employment are wholly or partly performed in Nigeria, unless:

i.                    the duties are performed on behalf of an employer in a country other than Nigeria, and the remuneration of the employee is not borne by a fixed base of the employer in Nigeria;

ii.                  the employee 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 commencing in a calendar year and ending either within that same year or the following year; and

iii.                the remuneration of the employee is liable to tax in that other country under the provisions of the avoidance of a double taxation treaty with that other country.

The remuneration of a non-resident will not be liable to tax if all the conditions listed in (b) above are met. This also implies that a non-resident employee from a country with no DTA with Nigeria is automatically liable to tax in Nigeria.