TAX OBLIGATIONS FOR FOREIGN INVESTORS IN NIGERIA

In 2025, Nigeria introduced the Nigeria Tax Act and related tax reforms. These brought important changes to its tax and investment system. These reforms aim to modernize the tax system and improve transparency. They also seek to boost revenue and create a clearer investment environment for local and foreign investors. Therefore, understanding tax obligations for foreign investors in Nigeria is now essential. Notably, the reforms combine several older tax laws into one framework. In addition, they set clearer rules for foreign individuals, multinational companies, and foreign-owned businesses operating in Nigeria.

For foreign investors, these changes come with both risks and opportunities. The wider tax base means more compliance requirements and potential tax exposure in Nigeria. However, the new clear rules also create a more predictable and transparent environment for international transactions.

This article explores the main points of the Nigeria Tax Acts 2025 for non-resident companies and individuals. It also highlights the major changes from past tax practices. Furthermore, it discusses the broader effects on international investment and business strategies in Nigeria.

WHAT LAWS GOVERN THE TAX OBLIGATIONS OF FOREIGN INVESTORS IN NIGERIA?

Foreign investment is regulated by laws, including CAMA 2020 and the NIPC Act. These laws promote investment and permit full foreign ownership in most sectors.

1. Tax laws such as CITA, VAT Act, Capital Gains Tax, and the most recent Finance Acts establish Nigeria’s Tax regime.
2. Nigeria has double taxation treaties with several countries to prevent double taxation and facilitate relief.
3. Foreign investors must obtain a Certificate of Capital Importation (CCI) to evidence foreign capital and ensure repatriation rights.

NIGERIA TAX ACT, 2025

Below are key provisions, specifically guiding the taxation of Non-residents.

1. Section 17 of NTA, 2025- Permanent Establishment and Significant Economic Presence.
2. Sections 19 of NTA 2025 & Section 51 of NTAA 2025- Withholding Tax on Dividends and Service fees as it relates to Non-resident persons.
3. Section 13 (2): Employment Income of Non-Residents- Taxation rules for Non-resident individuals and remote employees.
4. Section 151: Taxable Supply by Non-Residents.
5. Section 18: Non-residents engaged in Shipping and Air Transport: Conditions for taxation, exemptions, and thresholds.
6. Section 124: Imposition of Stamp Duties on instruments signed outside Nigeria

MAJOR HIGHLIGHTS OF THE NIGERIAN TAX ACT

A “Foreign company” is defined in the NTA as a non-resident company or any company other than a Nigerian company. These are the major highlights of the Nigerian Tax Law as it bothers on foreign companies operating in Nigeria.

1. Taxation of Non-Resident Companies: Before the NTA, non-residents were taxed in Nigeria based on income that was “accruing in,” “derived from,” “brought into,” or “received” in Nigeria. Now, the rules focus mainly on profits that are “accruing in” or “derived” from Nigeria. This applies if the person has a Significant Economic Presence (SEP) or a Permanent Establishment (PE), which includes digital and remote services. This means that income does not have to be earned or brought into Nigeria from abroad to be taxed in Nigeria.
2. Revised Taxation Rules for Non-Resident Persons (NRPs): The Act outlines the conditions for determining the income, profits, and gains of non-residents with permanent establishments in Nigeria. These conditions include factors like credit ratings, equity and loan capital, sales of goods, and services provided. If these conditions cannot be identified, the Nigerian Tax Authority (NTA) requires applying a profit margin to the total income earned in Nigeria. If the income is not subject to tax deductions, a flat rate of 4% will be applied to the total income generated in Nigeria. This rule helps secure Nigeria’s right to tax foreign companies operating in the country.
3. Taxation of Digital and Virtual Assets: The Act expands what is considered taxable income to include digital assets, prizes, honoraria, and grants. Non-residents who conduct virtual asset transactions, such as cryptocurrencies, utility tokens, security tokens, non-fungible tokens (NFTs), and similar digital forms, are now subject to tax in Nigeria. If these assets are sourced locally, they are also taxable in Nigeria.ria.
4. Development Levy- Exclusion of Non-residents: Section 59 of the NTA states that all companies in Nigeria must pay a development levy of 4% on their assessable profits. This levy combines all other fees into a special account and is distributed to various government agencies. However, non-resident companies do not have to pay this levy.
5. Minimum Effective Tax Rate (ETR): The new law sets a minimum effective tax rate (ETR) of 15% for companies with revenue over ₦50 billion and for members of multinational groups with a global revenue of €750 million or more. If Nigerian companies pay foreign taxes that are lower than this rate, they must pay an additional tax, called a top-up tax. This change brings Nigeria in line with the OECD’s BEPS Pillar II reforms. Previously, Nigeria did not have a minimum effective tax requirement, which allowed companies to reduce their taxes by using low-tax jurisdictions.
6. Introduction of Controlled Foreign Corporation (CFC) Rules: Relevant Section: Section 7(1) The law introduces rules for Controlled Foreign Corporations (CFC) that require Nigerian companies with foreign subsidiaries to report and pay tax on the profits that these foreign subsidiaries keep if they can pay those profits out without harming their operations. This helps to prevent profit shifting and deferring income, which Multinational Entities (MNEs) use to lower their tax bills. The new CFC rules align Nigeria with global standards to prevent tax avoidance. These rules are a significant change, as Nigeria did not have strong laws against deferring income before.
7. Interest Deductibility on Foreign Loan from Connected person: Relevant Section: Section 20 (1) (a) Section 92 (1)(g). The rule guiding the provision of deductibility of interest and similar expenses incurred by a Nigerian company, in respect of debt issued by a foreign connected person, will be limited to 30% of the Nigerian company’s earnings before interest, tax, depreciation and amortization (EBITDA) is retained in the NTA (the Act exempts a Nigerian subsidiary of a foreign company which is engaged in the business of banking or insurance from the provision) in a particular accounting year.
8. Increased Capital Gains Tax (CGT) rate– The Capital Gains Tax (CGT) rate for companies has gone up from 10% to 30%. This change aligns the CGT rate with the Companies Income Tax rate, reducing the possibility of tax advantages from how chargeable gains and trading income are classified. For individuals, capital gains will be taxed at their applicable income tax rate, based on their income band. Foreign investors should keep this in mind before making any transactional decisions.
9. Taxation of    Capital    Gains:   Relevant   Section:   Section   34 Capital gains from asset disposals, including shares and digital property, are now taxable unless specific exemptions apply. Non-residents disposing of Nigerian shares should consider reinvestment strategies or structuring to meet exemption thresholds.
10. Indirect transfer of ownership of companies or assets for CGT purposes: Section 46: Gains accruing to any person (including non-resident persons), in respect of an indirect disposal of shares or interest in any asset of a Nigerian company will now be considered a chargeable gain.
11. Shares: The shares of a foreign company would be deemed as situated in Nigeria, where, in any 365 days preceding the alienation, more than 50% of the value of the shares or other interest is derived directly or indirectly from a Nigerian company, in which such alienation will result in the change of ownership of such company, or an immovable property situated in Nigeria.
12. Incorporeal property: The new legislation has expanded the definition of incorporeal property to include digital assets, which will be deemed to be situated in Nigeria where the holder (with direct or indirect ownership) is resident in Nigeria or has a PE in Nigeria to which the digital asset relates.
13. Company Tax Rates for Non-Residents:  Relevant  Section:  Section  56 Non-resident companies are excluded from small company tax relief and taxed at 30% of Nigerian-source profits or a minimum of 4% of turnover. This ensures foreign entities contribute equitably to national revenue.
14. Employment income: Employment Income is considered to be derived from Nigeria and thus taxable in Nigeria if the employee is a Nigerian resident or performs any duties in Nigeria, and the income is either paid by a Nigerian resident employer, charged to a Nigerian permanent establishment or fixed base of a non-resident, or not taxed in the employee’s home country. Non-resident employees will not be taxed in Nigeria if;their employer is a start-up or operates in the technology or creative sectors, and their income is taxable in their country of residence.
15. Introduction of New Graduated Rate: A person is considered a non-resident if they stay in Nigeria for less than 183 days within 12 months. Meanwhile, Non-residents pay tax on Nigerian-sourced income using the same progressive rate structure as residents.
16. Non-resident Persons employing Resident Employees: Section 17(9) (c) non- resident person shall not be deemed to have a permanent establishment or significant economic presence in Nigeria solely by reason of employing persons resident in Nigeria, to the extent that the duties of such employment are not performed primarily for customers in Nigeria.
17. Taxable Supply by Non-Residents for VAT purposes: If a non-resident person makes taxable supplies from outside Nigeria to people in Nigeria, the buyer in Nigeria must withhold the VAT (Value Added Tax) on that supply and send it to the tax authority. The Nigerian Tax Authority also has rules for transactions made through online platforms by non-resident businesses, where VAT has already been collected by the Federal Inland Revenue Service. In such cases, the transaction can be exempt from VAT if proof of this deduction is provided.
18. Input VAT Recovery: Relevant Section: Section 185. Foreign entities registered for Nigerian VAT can recover input VAT on assets and services used for taxable supplies. Before this Act, there was a limitation under the VAT Act that previously excluded non-goods inputs from being relieved from output VAT. This development improves efficiency for compliant foreign suppliers and service providers.
19. VAT Compliance and Fiscalisation: Relevant Sections: Sections 157 & 23 (Tax Admin Act) – All taxable persons must adopt fiscal tools (e.g., electronic invoicing) for VAT reporting once introduced by NRS. This aims to enhance compliance and reduce evasion. The measure reflects a shift to technology- driven tax systems but raises cost and cybersecurity concerns, especially for SMEs.
20. Expanded Definition of Interest: Relevant Section: Section 4(c) Interest now covers penal charges, foreign exchange differences, and payments tied to derivatives. This means that non-resident lenders and financiers receiving such payments from Nigerian borrowers could face withholding tax obligations under the new Nigerian tax law.
21. Broadened Definition of Dividend: Relevant Section: Section 5(2) The Act includes capital distributions during liquidation as dividends, thereby bringing the transaction to the tax net- withholding tax. This affects foreign investors exiting Nigerian companies through winding-up arrangements.
22. Definition of Royalty Introduced: Relevant Section: Section 6 Royalties now encompass any payments for the right to use intellectual property. Non-resident licensors of IPs, software, or trademarks to Nigerian companies should expect withholding tax on these payments unless relieved by a tax treaty.
23. Tax deducted at source: If tax is deducted at the source under section 51 of the Nigeria Tax Administration Act, 2025, from payments related to education, foreign permanent establishments, or risk premiums, that tax will be the final amount owed on that payment. This applies unless the recipient has a permanent establishment or significant economic presence in Nigeria that relates to the payment.
24. Stamp Duty on Transactions and Capital: Relevant Sections: 124 (b), 136. Foreign investors must stamp instruments within 30 days and pay duties on long-term debt instruments. This affects M&A, debt, and real estate transactions involving foreign capital.
25. Free Trade Zones and Tax Exemption Criteria: Relevant Section: Section 60 & Second Schedule. Non-residents operating in Export Promotion Zones [EPZ] enjoy tax exemption if all sales are export-based. From 2028, all sales to Nigeria’s customs territory will become fully taxable. This shifts the incentive structure for foreign exporters.
26. Economic Development Incentives (EDI): Relevant Sections:  164–172 The EDI replaces the PSI, offering a 5% tax credit annually on qualifying capital expenditures. Non-resident investors in priority sectors must meet minimum thresholds and comply with certification requirements. The EDI rewards investment scale and performance, not just presence.

CONCLUSION

In conclusion, the New Tax Laws of 2025 significantly reshape the obligations of foreigners investing in Nigeria. They do so by imposing stricter tax compliance requirements and expanding taxable activities. The laws also strengthen reporting obligations. Furthermore, they align Nigeria’s fiscal framework with global tax standards. Foreign investors are now expected to comply with enhanced corporate taxation rules and withholding tax obligations. They must also comply with transfer pricing regulations. Moreover, they must follow digital taxation provisions and revised investment incentive conditions. While these reforms aim to improve transparency and fiscal efficiency, their long-term success in attracting and sustaining foreign investment will largely depend on effective implementation. In addition, regulatory clarity will play a crucial role. The maintenance of an investor-friendly business environment is also important.

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