Federal or State: which tax office deals with you
Which Nigerian taxes a business settles with the NRS and which with a State revenue service, from company tax and VAT to PAYE and stamp duty.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
Nigeria has one federal revenue service and a revenue service for each State and the Federal Capital Territory. A growing business soon finds itself dealing with more than one of them, sometimes for the same kind of tax. Withholding tax goes to one office for one supplier and to another for the next. PAYE for staff in the same office can end up in different States.
Sending a payment to the wrong authority is not a small mistake: the right authority still treats the tax as unpaid. This article sorts the common business taxes by who collects them, based on what the Nigeria Revenue Service (NRS), the Lagos State Internal Revenue Service (LIRS) and PwC say.
Company income tax and VAT: the NRS
PwC says company income tax is payable only to the federal government. For a company, that means the NRS: the annual self-assessment return, the tax and the development levy all go there.
VAT is federal too. The NRS says every business above the exemption threshold that supplies taxable goods and services in Nigeria must register for VAT, charge it and file a return with the NRS on or before the 21st day of the month following the transaction.
Individuals and unincorporated businesses: the State
PwC says State governments collect the income taxes of individuals and unincorporated entities, and local governments may collect only levies and rates. A sole trader, a partnership or a business name registered at CAC deals with the revenue service of its State for its own income tax, not with the NRS.
The NRS says individuals file personal income tax returns on Form A, B or H, electronically through the NRS or their State Internal Revenue Service e-filing portal, on paper at the nearest NRS or State office, or through a tax professional acting for them. The NRS's tax calendar page says the same channels apply to filing and paying generally: online through the NRS or State e-filing portals, or on paper at the nearest office.
Withholding tax: it depends on who you paid
Withholding tax is where businesses most often send money to the wrong place, because the authority depends on the recipient, not on you.
The LIRS FAQs say withholding tax deducted from payments to individuals and business names is payable to the State Internal Revenue Service of the State where the recipient is resident. Withholding tax deducted from payments to corporate entities, or to non-resident individuals and corporate entities, is payable to the NRS. The LIRS sets this out, with its PAYE guidance, in its frequently asked questions.
In words: a Lagos company pays a plumbing firm registered as a limited company, a freelance designer who lives in Ogun State, and a consultant based abroad. The tax withheld from the plumbing company goes to the NRS. The tax withheld from the designer goes to the Ogun State revenue service. The tax withheld from the foreign consultant goes to the NRS. The subject has its own article: withholding tax, State or NRS.
Stamp duty: it depends on who signed
Stamp duty follows a similar logic, based on the parties to the document. The NRS says it charges and collects stamp duty on instruments between a company and another company, an individual, a group of individuals or any other corporate entity. The State or FCT tax authority administers stamp duty on instruments between individuals or groups of individuals and another individual, partnership, group of individuals or unincorporated business.
So a lease between a company and a landlord who is an individual is a matter for the NRS, because a company is a party. A lease between a sole trader and an individual landlord goes to the State.
PAYE: the employee's State
PAYE is a State tax, but not necessarily the State where your office is. An employee's PAYE goes to the State where the employee lived on 1 January of the tax year, or on the day the employment started. A company in Abuja with staff living in Nasarawa and Niger States may remit PAYE to three different authorities.
What Achekam computes, and the State channels it leaves to you
Achekam's coverage follows the same split.
- Federal taxes. Once its rules are approved, Achekam's Revenue Service Centre computes Nigerian company income tax with the development levy and the minimum effective tax rate check, VAT, withholding tax, capital gains and stamp duty.
- PAYE by State. Achekam runs Nigerian payroll with PAYE assigned to each employee's State of residence, together with pension, NHF, NSITF and ITF, and prepares the schedules per State revenue service, pension fund administrator and fund for the employer to file and pay. See PAYE by State and the annual return.
- State channels. Achekam lists all 36 State Internal Revenue Services and the FCT-IRS, gives a website only for the FCT-IRS and Kaduna (KADIRS), and leaves every State filing and payment to the State's own channel. You still log in to each State's portal, or visit its office, yourself.
A map of who you file with
| Tax | Who collects it |
|---|---|
| Company income tax and development levy | NRS |
| VAT | NRS |
| Income tax of sole traders and partnerships | State of the taxpayer |
| PAYE | State where the employee lived on 1 January, or on starting |
| Withholding tax on payments to companies or non-residents | NRS |
| Withholding tax on payments to resident individuals and business names | State where the recipient lives |
| Stamp duty where a company is a party | NRS |
| Stamp duty between individuals or unincorporated businesses | State or FCT |
Copy the table, add the States your staff and individual suppliers live in, and keep it with your monthly filing calendar. When a new supplier or employee joins, the first question to ask is which line of the table they fall on.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
