Lagos tax authorities issue guidance on taxation of foreigners with temporary work permit

The Lagos State Internal Revenue Service (LIRS) has issued a public notice regarding the taxation of non-nationals with temporary work permit (TWP), according to Deloitte Nigeria blog.

Based on the notice seen by businessamlive, a non-national employee who pays income tax in a country that has a double tax treaty (DTT) with Nigeria only becomes liable to income tax in Nigeria after 183 days or in accordance with the DTT existing between Nigeria and the home country.

On the other hand, non-nationals who are not liable to tax in a country with which Nigeria has a DTT become liable to tax in Nigeria from the first day they arrive in Nigeria in line with the provisions of Section 10(1) of PITA.

The notice, which defines a non-national with a TWP as ‘an individual, who is a national of another country, working in Nigeria on a TWP visa for a period not longer than 90 days, at each instance’, cites reliance on section 10(1) of the personal income tax Act (PITA), which states three conditions that must be jointly satisfied before a non-resident employee is exempted from income tax in Nigeria, as well as Section 6 of PITA, which provides guidance on taxation of independent contractors.

Further, the notice provides guidance on taxation of non-national independent contractors, who are liable to tax in Nigeria, clarifying that a fixed base may be created where the contractor requires work permit, other than a business visa, to carry out duties in Nigeria.

It also stated that profit is shifted from a Nigerian business using non-commercial pricing that is not supported by a transfer pricing documentation in contracts involving components of installation or construction work in Nigeria and if the contractor has a warehouse from which deliveries are made to customers.

However, applicable double tax reliefs would be granted to independent contractors who are resident in countries that have a DTT with Nigeria.