Tax Laws: How to Know If You Are Eligible to Pay Tax in Nigeria According to New Residency Rules

• Nigeria’s new tax law finally set out clear rules on who counted as a resident for tax purposes
• For decades, individuals had struggled with uncertainty over whether they were liable to pay taxes in the country
• The updated residency criteria now offered a straightforward checklist that determined if someone was taxable in Nigeria

For the first time, Nigeria’s new tax law clearly defined who counted as a resident individual, removing decades of uncertainty.

Cowrywise reported that the legislation aimed to simplify the rules and make it easier for people to understand whether they were liable to pay taxes in the country.

Who is a tax resident in Nigeria?

According to the new rules, an individual is considered a tax resident in Nigeria if any of the following applied during a tax year:

• They are domiciled in Nigeria.

• They maintain a permanent home for domestic use in Nigeria.

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• They spend 183 days or more in Nigeria, including short leaves or temporary absences.

• They have substantial economic or immediate family ties in Nigeria.

• They serve as a Nigerian diplomat or public servant abroad.

It was explained that these conditions were designed to capture both physical presence and personal ties, ensuring that residency was not judged solely on where someone lived but also on their economic and family connections.

Why residency matters for taxation

The law stated that residents will be taxed on worldwide income, which included earnings from foreign investments. However, double-tax treaties can apply, meaning individuals might not be taxed twice on the same income if Nigeria had agreements with other countries.

Non-residents, by contrast, will be taxed only on Nigeria-sourced income. This covers local salaries, rent, dividends, and other earnings generated within the country.

What this means for individuals

Tax analysts said the new clarity was significant because many Nigerians working abroad or maintaining ties at home had previously struggled to determine their obligations. The law now provided a straightforward checklist.

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Cowrywise explained:

“You’re considered a tax resident in Nigeria if any of the conditions apply. The new tax law clearly defines who counts as a resident individual, removing decades of ambiguity.”

The new residency rules marked a turning point in Nigeria’s tax system. By spelling out who counted as a resident, the government aimed to strengthen compliance and reduce disputes. For individuals, the message was clear: understanding residency law is the first step in knowing whether they were taxable in Nigeria.

Four categories of Nigerians exempted from paying tax

Legit.ng earlier reported that Nigeria’s Fiscal Reforms announced that from January 1, 2026, new tax laws would come into effect, offering relief and exemptions to low-income earners, average taxpayers, and small businesses.

Officials said the changes were designed to ease the financial burden on citizens and encourage compliance with tax regulations. Under the revised Personal Income Tax (PAYE) rules, four categories of Nigerians were identified as exempt from paying tax.

Authorities explained that the reforms were aimed at protecting vulnerable groups while ensuring fairness in the tax system. Officials noted that the exemptions would particularly benefit workers on minimum wage and small-scale earners.

Source: Legit.ng