REVENUE HEADS · TAXES

State taxes

The taxes a State may lawfully collect are listed in Part II of the Schedule to the Taxes and Levies (Approved List for Collection) Act. Personal income tax, in its PAYE and direct assessment forms, accounts for just over half of everything the Service collects.

What a State tax is

A tax is a compulsory contribution to State revenue imposed on income, transactions or property, for which the taxpayer receives no specific service in return. That last point distinguishes a tax from a fee: you pay a fee for a search of the land register and you get a search; you pay income tax and you get roads, schools, clinics and the machinery of Government, in common with everyone else.

The State’s taxing rights are narrow and closed. We may tax the income of individuals resident in the State, gains on the disposal of chargeable assets by those individuals, consumption in hotels and restaurants, instruments executed between individuals, betting and lottery, property under the land use charge, and road use through the motor licensing schedule. Company income tax, value added tax, excise, customs and the taxation of residents of the Federal Capital Territory, of the armed forces and of the police belong to the Federal Inland Revenue Service and are not collected here.

Personal income tax reaches the taxpayer by one of two routes. If you are employed, your employer deducts it from your salary each month under the Pay As You Earn scheme and remits it by the tenth of the following month. If you are self-employed, in partnership, or earn income from which no deduction is made at source, you file an annual return by 31 March and are assessed directly. Both routes use the same reliefs and the same graduated bands.

Approved State taxes

Code, collecting MDA, amount or rate and statutory basis. Rates are those in force for the current year of assessment.

Code	Revenue head	Collecting MDA	Amount / rate	Statutory basis
11010001	Pay As You Earn (PAYE)	State Internal Revenue Service	Graduated PITA bands, 7% – 24%	Personal Income Tax Act (as amended), s.81
11010002	Direct Assessment — self-employed	State Internal Revenue Service	Graduated PITA bands, 7% – 24%	Personal Income Tax Act, s.41
11010003	Presumptive tax — informal sector	State Internal Revenue Service	₦12,000	PITA s.6(6); State Presumptive Tax Regulations
11010004	Withholding tax on rent (individuals)	State Internal Revenue Service	10% of gross rent	PITA s.70; WHT Regulations
11010005	Withholding tax on contracts & supplies	State Internal Revenue Service	5% of contract sum	PITA s.70; WHT Regulations
11010006	Withholding tax on professional & technical fees	State Internal Revenue Service	5% of fee	PITA s.70; WHT Regulations
11010007	Withholding tax on dividends, interest & royalties	State Internal Revenue Service	10% of gross	PITA s.70
11010008	Withholding tax on commission, consultancy & agency	State Internal Revenue Service	5% of gross	PITA s.70
11010009	Capital gains tax (chargeable individuals)	State Internal Revenue Service	10% of chargeable gain	Capital Gains Tax Act, s.2
11010010	Stamp duty — instruments between individuals	State Internal Revenue Service	Ad valorem 0.75% – 1.5%, or fixed duty	Stamp Duties Act, s.4(2)
11010011	Stamp duty — tenancy & lease agreement	State Internal Revenue Service	0.78% of annual rent (under 7 years)	Stamp Duties Act, Schedule
11010012	Stamp duty — deed of assignment / conveyance	State Internal Revenue Service	1.5% of consideration	Stamp Duties Act, Schedule
11010013	Stamp duty — power of attorney (fixed)	State Internal Revenue Service	₦1,000	Stamp Duties Act, Schedule
11020001	Consumption tax — hotels, restaurants & event centres	State Internal Revenue Service	5% of the bill	State Hotel Occupancy & Restaurant Consumption Law
11020002	Land use charge — residential	Urban Planning & Development Authority	0.076% of assessed capital value	State Land Use Charge Law
11020003	Land use charge — commercial	Urban Planning & Development Authority	0.394% of assessed capital value	State Land Use Charge Law
11020004	Land use charge — industrial	Urban Planning & Development Authority	0.256% of assessed capital value	State Land Use Charge Law
11020005	Pools betting & lottery tax	State Lotteries & Gaming Board	7% of gross gaming revenue	Taxes and Levies (Approved List) Act, Part II
11020006	Road taxes	Motor Licensing Authority	By vehicle category — see the motor schedule	Taxes and Levies (Approved List) Act, Part II

The PITA graduated bands

Applied to taxable income — that is, gross income after the Consolidated Relief Allowance and statutory deductions have been taken out.

Band	Taxable income in the band	Rate	Tax in the band	Cumulative tax
1	First ₦300,000	7%	₦21,000	₦21,000
2	Next ₦300,000	11%	₦33,000	₦54,000
3	Next ₦500,000	15%	₦75,000	₦129,000
4	Next ₦500,000	19%	₦95,000	₦224,000
5	Next ₦1,600,000	21%	₦336,000	₦560,000
6	Above ₦3,200,000	24%	On the balance	—

Reliefs and deductions before tax is computed

Every taxpayer is entitled to these before a naira of tax is charged. If your assessment does not show them, object.

Consolidated Relief Allowance — the higher of ₦200,000 or 1% of gross income, plus 20% of gross income.
Pension contribution — 8% of basic, housing and transport, under the Pension Reform Act.
National Housing Fund contribution — 2.5% of basic salary.
National Health Insurance Authority contribution, where the scheme applies.
Life assurance premium paid on the taxpayer’s own life or that of a spouse.
Gratuities and compensation for loss of office, to the extent exempted by law.
Interest on a loan taken to develop an owner-occupied residential house.
Income already taxed at source as a final tax, such as dividends and franked investment income.

Common questions about State taxes

I work in this State but live in another. Who taxes me?

Personal income tax is payable to the State in which you are resident, not the State in which you work — with the exception of the armed forces, the police, officers of the Nigerian Foreign Service and residents of the Federal Capital Territory, who are taxed by the FIRS. Residence is determined by where you have a place of abode available for your use during the year of assessment.

My employer deducts PAYE. Do I still file a return?

Yes. Section 41 of the Personal Income Tax Act requires every taxable person to file a return of income by 31 March, whether or not tax has been deducted at source. Where PAYE has been correctly deducted the return normally results in no further liability, but the filing obligation stands and carries a penalty if ignored.

Is company income tax paid to the State?

No. Company income tax, value added tax and petroleum profits tax are federal taxes collected by the FIRS. What a company pays the State is the PAYE of its employees, withholding tax where the recipient is an individual or unincorporated body, business premises registration, land use charge, consumption tax where it operates a hotel or restaurant, and the fees and levies of the MDAs it deals with.

What is the difference between withholding tax and PAYE?

Both are advance collections of income tax. PAYE is deducted by an employer from employment income. Withholding tax is deducted by whoever pays an individual or enterprise for rent, contracts, professional services, commission, dividends, interest or royalties. Withholding tax deducted is credited against the recipient’s final liability, except on dividends and interest, where it is a final tax.

How is consumption tax different from VAT?

Value added tax is federal and applies across the economy. State consumption tax applies only to goods and services consumed in hotels, restaurants and event centres within the State, is charged at 5 per cent of the bill, and is collected from the consumer by the operator, who acts as a collection agent and remits by the 20th of the following month.

Can the Service change my assessment after it has been issued?

An assessment may be amended where additional information comes to light, including through a tax audit or an investigation. The amended assessment is served on you and carries the same right of objection within thirty days. Assessments that have become final and conclusive may only be reopened where fraud, wilful default or neglect is established.

Work out what you owe before we tell you

The PAYE calculator applies the Consolidated Relief Allowance, pension and NHF deductions and the six graduated bands, and shows the full computation.

Open the tax calculator File a direct assessment