What Is Tax?
Think of tax as a collective contribution. Everyone who earns income or buys goods sets aside a small portion for the government. The government then pools all these contributions and uses them to fund public services that benefit everyone — roads, schools, hospitals, security, and more.
You Earn Money
Salary, business profit, or sales
Tax is Calculated
A percentage goes to government
Government Collects
FIRS & state revenue services
Money is Reinvested
Roads, schools, hospitals, security
In one sentence: Tax is how we all chip in so the government can build and maintain the things we all use every day.
Where Does It Go?
When you pay tax, the money doesn't just disappear. Here's a simplified look at where your contributions go:
Education
22%Schools, teachers, textbooks
Healthcare
18%Hospitals, clinics, vaccines
Security
15%Police, military, safety
Infrastructure
20%Roads, bridges, power
Public Services
15%Water, sanitation, admin
Debt & Other
10%Loan repayments, reserves
Good to know: Percentages shown are illustrative for educational purposes. Actual budget allocations vary each year based on government priorities.
Types of Taxes
Nigeria has several types of taxes, but don't worry — you probably only deal with one or two. Here are the main ones explained simply:
Personal Income Tax (PIT)
PITWho pays
Individuals who earn income
Rate
7% – 24% (progressive)
When
Monthly (PAYE) or Annually
💡 Example: If you earn ₦100,000/month, your employer deducts tax before paying you
Company Income Tax (CIT)
CITWho pays
Registered companies & businesses
Rate
0%, 15%, or 27.5% (by size)
When
Annually
💡 Example: A company making ₦50M profit pays tax on that profit
Value Added Tax (VAT)
VATWho pays
Everyone who buys goods/services
Rate
7.5%
When
At point of purchase
💡 Example: Buy a ₦10,000 phone? ₦750 goes to VAT (already included in the price)
Capital Gains Tax (CGT)
CGTWho pays
Anyone selling an asset at profit
Rate
10%
When
When you sell land, shares, etc.
💡 Example: Buy land for ₦1M, sell for ₦2M? Pay 10% on the ₦1M profit
Withholding Tax (WHT)
WHTWho pays
Anyone receiving certain payments
Rate
5% – 10% (varies)
When
When payment is made to you
💡 Example: Rent or contract payments have tax deducted before you receive them
How It Affects You
Your tax obligations depend on how you earn money. Find the scenario that fits you:
If you are an employee
Main tax: PAYE (Personal Income Tax)
- Your employer handles most of it for you
- Tax is deducted from your salary before you receive it
- This is called PAYE — "Pay As You Earn"
- You may need to file an annual return if you have other income
If you are self-employed
Main tax: Personal Income Tax (direct)
- You calculate and pay your own tax
- You file an annual return with your state tax authority
- You can deduct business expenses before calculating tax
- Register for a TIN (Taxpayer Identification Number) first
If you buy goods or services
Main tax: VAT (Value Added Tax)
- VAT is already included in the price you pay
- You don't need to do anything — the seller handles it
- Currently 7.5% on most goods and services
- Some essentials like basic food are exempt
If you sell property or assets
Main tax: Capital Gains Tax (CGT)
- You pay 10% on the profit, not the full amount
- Applies to land, shares, and other assets
- Your main home is usually exempt
- File and pay within the tax year of the sale
Myths vs Facts
Let's clear up some common misconceptions about tax. Tap each card to reveal the truth.
Getting Started
New to taxes? Here's a simple 5-step roadmap to get you from zero to fully compliant:
Get a TIN
Register with your State Internal Revenue Service or FIRS to get your Taxpayer Identification Number. It's free and required for everything tax-related.
You can often register online through your state revenue service website
Keep Records
Save receipts, payslips, invoices, and bank statements. Good records make filing easier and help you claim all the deductions you're entitled to.
A simple folder on your phone or computer works fine to start
Calculate Your Tax
Figure out your taxable income (income minus allowed reliefs like pension and NHF). Apply the tax rates to know what you owe.
Use our free Tax Calculator — it does the math for you!
File Your Return
Submit your tax return form to the relevant tax authority. This tells the government how much you earned and how much tax you owe.
Filing deadlines are usually March 31st of the following year for individuals
Pay Your Tax
Pay the amount due through your bank or the tax authority's payment platform. Keep your receipt as proof of payment.
If you're an employee, PAYE handles steps 3–5 automatically each month
That's it! Once you've completed these steps, you're tax-compliant. Remember to repeat steps 2–5 every year.