Nigeria: Determination Of Expatriate Tax Status: Relevance Of Entry Visas & Work Permits

Last Updated: 24 February 2014
Article by Yomi Olugbenro
Most Read Contributor in Nigeria, July 2017

The Immigration Act cap I1, Laws of the Federation of Nigeria (LFN) 2007 provides the framework for the employment of expatriates in Nigeria and sets the basis of their entry into, stay in and exit from Nigeria. The principal regulatory agencies responsible for immigration in Nigeria under the Act are the Nigerian Immigration Service (NIS) and the Federal Ministry of Interior (FMI).

Since the return to democratic rule in Nigeria, the country has witnessed increase in foreign direct investment (FDI). Closely associated with the flow of capital is the flow of skilled manpower and other requisite intangibles.

The Immigration Act cap I1, Laws of the Federation of Nigeria (LFN) 2007 provides the framework for the employment of expatriates in Nigeria and sets the basis of their entry into, stay in and exit from Nigeria. The principal regulatory agencies responsible for immigration in Nigeria under the Act are the Nigerian Immigration Service (NIS) and the Federal Ministry of Interior (FMI).

To ensure that Nigerian companies (whether or not they are subsidiaries of foreign companies) are able to access specialist skills or expertise that are not locally available in the Nigerian market for their lines of businesses or operations and to allow easy migration of foreigners into Nigeria, several categories of visas and entry permits have been introduced. These include:

  • Business visas cover entry into Nigeria for purposes of business meetings, conferences, workshops, seminars and other similar purposes. A business visa does not entitle the expatriate to live or work in Nigeria.
  • Tourist visa covers entry into Nigeria for purpose of tourism or visit to family members and friends resident in Nigeria. A holder of this form of Visa is not entitled to exercise duties of employment in Nigeria.
  • Temporary work permit (TWP) covers entry into Nigeria to carry out activities on short term basis. A TWP allows its holder to work and reside in Nigeria, usually for 90 days and subject to renewal or until he or she exits Nigeria before the expiration of the visa.
  • Subject to regularization (STR) visas cover entry of expatriates who have been offered permanent employment with a Nigerian company. An expatriate that enters into Nigeria on an STR visa will usually be placed on the expatriate quota of a Nigerian company and therefore considered to be a full time employee of such company. STR visa is usually given for an initial period of 90 day period, during which an application must be made to the Comptroller- General of Immigration, for regularization of stay. This will involve issuance of a Combined Expatriate Residence Permit and Alien Card (CERPAC), otherwise referred to as "Green Card".

The Personal Income Tax Act cap P8 LFN, 2007, as amended (PITA) forms the legal basis for taxation of employment income including those earned by expatriates working in Nigeria. The concept of residence forms the basis for taxation of these individuals in Nigeria. An expatriate who comes into Nigeria on an STR visa is expected to have a Nigerian employment, due to have a CERPAC and consequently deemed to be tax resident in Nigeria. Such expatriates are liable to tax in Nigeria irrespective of the length of their stay.

Generally, an expatriate is deemed to have derived income from Nigeria and therefore liable to personal income tax thereon if the employment is performed wholly or partly in Nigeria, unless the following joint conditions are satisfied:

  • the employer is a non-Nigerian company and the remuneration is not borne a fixed base of the employer in Nigeria; and
  • the employee is in Nigeria for a period below 183 days in any 12 months period, including period of annual leave or temporary absence; and
  • the employee is liable to tax in another country with which Nigeria has a Double Tax Agreement

The Internal Revenue Service (IRS) of the various states have improved collaboration with the NIS to facilitate access to immigration records/information on expatriates employed by Nigerian companies as a way of verifying information received in the course of their annual tax audit exercises.

Expatriates who come into Nigeria on Business Visas are not entitled to perform or exercise duties of employment in Nigeria and therefore should not be liable to PAYE tax in Nigeria. However, where such expatriates have performed duties of employment in Nigeria, income derived from the employment will be liable to tax in Nigeria irrespective of the class of visa.

Similarly, expatriates who come into Nigeria on TWP and fail to satisfy the conditions earlier outlined would be considered liable to tax in Nigeria.

It is imperative for the Nigerian company, given the connection between the tax status of the expatriate and his entry documents into Nigeria, to properly track the movement of the expatriates in and out of Nigeria by implementing the following steps:

  • Ensure that details of the expatriates (location, duration of stay etc.) are properly set out in the relevant returns (EQ/TWP)
  • Ensure that copies of tickets and relevant stamped passport pages (entry/departures) of the expatriates are obtained and filed together with file copies of expatriates' letter of employment
  • Schedule of rotation of each expatriate is maintained and updated where applicable
  • Prompt processing of deletion slips for expatriates upon completion of their employment with the company in Nigeria. The deletion slips will be filed together with the existing documents for the relevant expatriates.

The above steps will enable the Nigerian company to have relevant documentation to support the tax returns filed and to defend itself in the event of a future enquiry by relevant authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Yomi Olugbenro
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