When Foreign Income Meets Nigerian Tax

Nigeria’s new tax framework places individual taxation largely on the basis of residency. A person who is tax resident in Nigeria is generally subject to Nigerian income tax on income from Nigeria and outside Nigeria, whether or not the foreign income is brought into Nigeria. Non residents are generally taxed on income sourced from Nigeria.

That makes tax residency the first question for anyone earning across borders.

Living in Nigeria while earning abroad

Consider a Nigerian resident who works remotely for a company in the United Kingdom and receives a monthly salary in pounds.

The fact that the employer is abroad does not, by itself, remove the income from the Nigerian tax framework. Under the new rules, a Nigerian resident’s worldwide income falls within the Nigerian tax base, subject to applicable exemptions and reliefs.

The same consideration can apply to freelancers, consultants, creators and other professionals earning from international clients while operating from Nigeria.

The important information to establish is where the individual is resident, the nature and source of the income, and whether another country has also taxed the same income.

What happens when the income is in foreign currency?

Foreign currency creates another layer of the calculation.

The Nigeria Tax Administration Act provides for tax assessed in a currency other than naira to be paid in that currency or in naira using the prevailing exchange rate in the official foreign exchange market.

For someone receiving regular dollar income, proper records of the foreign currency amounts and the relevant naira treatment therefore matter when determining the Nigerian tax position.

This is particularly relevant where income fluctuates because of exchange rates. A person may receive the same contractual amount in dollars each month while its naira equivalent changes.

Keeping records in both the original currency and the corresponding naira value can make the eventual tax calculation and supporting documentation easier to establish.

What if tax has already been paid abroad?

Cross border income can create a second issue when another country has already taxed the same income.

Nigeria provides foreign tax relief for Nigerian residents in certain circumstances. Where foreign income has been taxed both in the source country and Nigeria, the foreign tax paid can generally be credited against the Nigerian tax attributable to that same income, subject to the applicable limits. Double taxation treaties can also provide relief where the relevant treaty applies.

This means receiving foreign income does not automatically mean paying the full tax twice. The individual’s circumstances and the rules applicable to the other country determine what relief is available.

Some foreign income has specific exemptions

The new framework also contains specific exemptions that should not be overlooked.

For example, certain foreign dividends, interest, rent and royalties brought into Nigeria through government approved channels in convertible currency can qualify for exemption.

That is why the source and nature of foreign income matter. A foreign salary, consulting fee, dividend or interest payment can have different tax treatment.

The practical question for foreign earners

For anyone earning across borders, four details should be established:

Where am I tax resident?

What type of foreign income am I receiving?

How should the foreign currency income be treated for Nigerian tax purposes?

Has another country already taxed the income, and is relief available?

These questions become increasingly relevant as remote work and international payments become part of everyday income for Nigerians.

The new tax framework has made residency a central part of determining an individual’s Nigerian tax position. For Nigerians earning from outside the country, understanding that position and keeping clear records of foreign income can prevent avoidable problems when it is time to account for tax.

LessaTax helps you keep your income and supporting financial records organised, including the documents that can help you properly account for income earned across different sources and currencies