Tax Obligations of an Average Person in Nigeria: Understanding Taxable Persons
By Abdulrazaq Sule, Esq.
Tax Obligations of an Average Person in Nigeria: Understanding Taxable Persons
Understanding tax obligations in Nigeria begins with identifying who is liable to pay tax and what income or transactions attract tax. Under the Nigeria Tax Act (NTA) 2025 and the Nigeria Tax Administration Act (NTAA) 2025, tax obligations differ depending on whether the taxpayer is an individual, company, non-resident person, or another taxable entity.Â
Importantly, tax is generally imposed on taxable income, not simply on every amount that enters a person’s bank account. Understanding this distinction helps taxpayers determine their actual liability and avoid unnecessary tax payments.
Types of Taxes Individuals and Businesses May Pay
Value Added Tax (VAT)
Value Added Tax (VAT) is a consumption tax imposed on taxable goods and services. Unlike Personal Income Tax and Companies Income Tax, VAT applies to consumption rather than income.
The standard VAT rate is 7.5%. Businesses that supply taxable goods or services are generally required to charge VAT and remit the amount collected to the relevant tax authority.
The NTA 2025 also distinguishes between zero-rated and VAT-exempt supplies. Zero-rated supplies attract VAT at 0%, while businesses may generally claim eligible input VAT relating to zero-rated supplies. VAT-exempt supplies, on the other hand, do not ordinarily provide the same input VAT recovery.
Stamp Duties
The NTA 2025 modernises Nigeria’s stamp duty framework and provides for duties on qualifying instruments and transactions connected with Nigeria.
Taxpayers should therefore consider stamp duty obligations when executing instruments such as leases, contracts, conveyances, and share transfers, subject to applicable exemptions.
Personal Income Tax
Individuals generally pay Personal Income Tax (PIT) on their chargeable income. The NTA 2025 provides various sources of income, including income from employment, business, professions, royalties, dividends, and other taxable gains.
However, not every payment received into a bank account constitutes taxable income.
For example, if a fashion designer receives ₦500,000 from a customer, the entire amount may not represent the designer’s taxable profit. The cost of materials and other allowable expenses may affect the amount ultimately subject to tax.
The NTA 2025 also provides for allowable deductions before applying the applicable progressive tax rates. Taxpayers should therefore distinguish between gross receipts, allowable deductions, taxable income, and final tax liability.
Companies Income Tax
Companies may also have corporate tax obligations in addition to their responsibilities as employers or VAT-collecting businesses.
Under the NTA 2025, small companies are subject to a 0% Companies Income Tax rate, while other companies are generally subject to the applicable corporate tax rate under the Act. The definition of a small company and the applicable conditions should be carefully considered, particularly for businesses providing professional services.
Tax Registration and Compliance
The NTAA 2025 requires taxable persons to register with the relevant tax authority and obtain a Taxpayer Identification Number (Tax ID).
Taxpayers must also comply with filing, record-keeping, and payment obligations. Failure to register, file required returns, maintain appropriate records, or pay tax when due may result in administrative penalties.
For example, the NTAA 2025 provides penalties for failure to register and for failure to file required returns. Businesses should therefore treat tax compliance as an ongoing obligation rather than a once-a-year exercise.
Taxpayer Rights and Dispute Resolution
Taxpayers have rights when they disagree with an assessment. Under the NTAA 2025, a taxpayer may submit a Notice of Objection within the prescribed period and challenge an assessment through the relevant dispute-resolution process.
Where necessary, further appeals may proceed through the Tax Appeal Tribunal and the courts, subject to the statutory requirements.
Conclusion
The new Nigerian tax regime places significant obligations on individuals and businesses. Understanding whether you are a taxable person, identifying your taxable income, registering appropriately, filing returns, and paying the correct amount of tax can help you avoid unnecessary penalties.
For individuals, the key lesson is simple: do not confuse total money received with taxable income. For businesses, compliance extends beyond corporate tax to obligations such as VAT collection, employee tax, record keeping, registration, and timely filing.
As Nigeria implements the NTA 2025 and NTAA 2025, taxpayers should understand both their tax obligations and their legal rights. Proper tax planning, accurate records, and timely compliance remain essential to navigating Nigeria’s changing tax system.
REFERENCES:Â
- The Nigeria Tax Act, 2025 (NTA)Â
- The Nigeria Tax Administration Act, 2025 (NTAA)Â
- Ori David Concept Tax webinar held on the 15th November, 2025.