How can an Umbrella Company Help with Contracting in Nigeria?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Nigeria. Even better, most are experts in Nigeria and expat tax law, meaning they’ll also help you optimise your earnings in Nigeria.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Nigeria.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Nigeria, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Nigeria and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Nigeria
One of the most consistently challenging aspects of contracting in Nigeria is complying with the country’s tax system. As well as paying tax in Nigeria, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Nigeria
If you’re working in Nigeria under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Nigeria for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Nigeria, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Nigeria through PAYE is left with the prospect of doing everything themselves.
Do you know much about Nigerian Tax Law? Does Nigeria have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Nigeria can range from 7 to 24 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Nigeria
| When Do You Need to Lodge Your Tax Return? | The tax year is the calendar year. Tax returns may be lodged from 1 January. |
| Tax Filing Deadline | 31 March |
| Can you file it online? | Yes, you can file online through the ITAS e-filing Portal. |
How to File Taxes in Nigeria as a Contractor
Individuals with a taxable income of NGN 30,000 or less are not required to file a tax return. Employers are obliged to file annual returns in respect of an assessment year no later than 31 January of the following year. The process for individuals to file tax returns involves:
Step 1: Register for a Taxpayer Identification Number (TIN) at your nearest Federal Inland Revenue Service (FIRS) office(link is external). Bring any of the following documents:
- International passport
- National Identity Card
- Utility bill
- Also provide a phone number and email.
Step 2: Obtain an ‘e-filing Access Application Form’ from any FIRS Office or download from the FIRS website(link is external). Complete the form by nominating an Officer or Tax Agent that will represent the organisation you work for on tax matters. Indicate on the form the type of access that the nominee should have, either to declare (file returns), view only or both.
Step 3: Return the form to the FIRS tax office to obtain a username and password that gives you access to the e-filing site.
Step 4: Log into the e-filing Portal(link is external) using your username and password.
Step 5: On the home page, click ‘view all tax declarations’ and then click the tax type, ‘personal income tax’ to file it.
Step 6: To fill out the amounts for the form lines relating to income, documents relating to the following should be collected:
- Statements of income, bonuses and allowances
- Gratuities and benefits
- Pension Income
- Rent
- Commissions
- Interest and dividends
Step 7: Fill out the form lines for any deductions (tax reliefs). Documents regarding the following will be relevant:
- Contributions to pension
- Contributions to health insurance
- Contributions to life insurance.
Step 8: Submit the declaration. You will be led to the View Filed Declaration page which gives you a summary of your declaration. You will also see a document number displayed at the top right hand corner of the summary document.
Step 9: To pay your tax, the following methods may be used.
- Pay online through any of these methods here(link is external).
- Pay at a bank by providing the document number of your summary.
FIRS website: https://www.firs.gov.ng/ (link is external).
Nigerian Immigration Department: https://immigration.gov.ng/#visa_category (link is external)
Tax Figures in Nigeria
| Currency | Nigerian Naira (NGN) | ||||||||||||||
| Tax-free Threshold in Nigeria | None | ||||||||||||||
| Income Tax Rates |
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| Notes | Where a taxpayer has no taxable income because of personal reliefs and allowances, a minimum tax of 1% of gross income is due. |
Tax Residency in Nigeria
When do you become a tax resident in Nigeria
You become a tax resident in Nigeria when:
Individuals are considered a resident if they fall into one of the following categories:
- Nigerian individuals who reside in Nigeria.
- Expatriate employees of a resident company who are present in Nigeria for employment purposes.
- You are present in Nigeria for more than 183 days in a 12-month period.
- Expatriate employees of a non-Nigerian company if their remuneration is recharged to a Nigerian company.
Does the 183 day rule apply in Nigeria
Yes
Am I taxed on my global income in Nigeria
Yes, if you are a resident. However, foreign earnings of Nigerian residents are tax exempt if the earnings are repatriated into Nigeria in convertible currency through a domestic account with an approved Nigerian bank. Non-residents are only subject to tax on their Nigerian-source income.
Can you set up your own Limited Company in Nigeria?
| How long does it take to set up | 18 days |
| How much does it cost | 21,500 + 5000 for every 1 million of share capital above NGN 1 million + 0.75% stamp duty on share capital |
| Is it easy? | Starting a Business Rank: 130 (Source: World Bank) |
Tax Calculator in Nigeria
If you are a contractor and want a calculation on your tax and net retention in Nigeria, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Nigeria
Contractors in Nigeria are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Nigerian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Nigerian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Nigerian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Nigeria
We work with numerous umbrella companies in Nigeria, many of whom are experts in tax and immigration laws. If you have any questions about tax in Nigeria, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Nigerian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Nigeria but without the overhead of directly dealing with the Nigerian tax authorities. Get in touch with us today for some reliable advice on tax in Nigeria!
A Contractor’s Guide to Work Permits in Nigeria
Immigration is one of the primary concerns for any contractor hoping to start working in Nigeria. Permanent employees will find it easy to get their Nigerian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Nigerian work permit, known more commonly as the Combined Expatriate Residence Permit and Aliens Card (CERPAC), is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Nigeria is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Nigeria (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Nigeria. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Nigeria and match contractors with the right company for them. If you’ve already secured a contract in Nigeria, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
