Introduction to Nigerian Tax

Personal Income Tax (PIT) in Nigeria is governed by the Personal Income Tax Act (PITA) 2011, amended in 2021. It's applicable to individuals, partnerships, and unincorporated entities. Understanding its intricacies is crucial for compliance and financial planning.

The tax rates in 2021 range from 7% to 24%, depending on income levels. Interestingly, the first ₦300,000 of annual income is taxed at 7%, and income exceeding ₦3.2 million is taxed at 24%, creating a progressive tax system.

PITA 2021 allows various deductions, such as National Housing Fund contributions, pension funds, and life assurance premiums. These deductions can significantly reduce taxable income, encouraging savings and investments in social security systems.

Taxpayers are entitled to personal reliefs like the Consolidated Relief Allowance (CRA), which is 20% of gross income plus ₦200,000. Unique to Nigeria, this allowance aims to reduce the tax burden on low and middle-income earners.

Failure to comply with PITA 2021 can result in severe penalties, including fines and imprisonment. For instance, late filing attracts a ₦5,000 penalty for the first month and ₦100 for each subsequent day, emphasizing the importance of timely compliance.

Nigeria collects taxes even from traditional rulers receiving stipends, emphasizing the wide reach of its tax system.