Remote Workers in Nigeria Face New Tax Rules Under Tinubu’s Latest Reform

• President Bola Tinubu signed new tax reform legislation that brings remote workers' earnings in Nigeria into the tax bracket, requiring freelancers, tech workers, and digital entrepreneurs to register
• The law broadens the tax net by clarifying the definition of "residence" and ensuring that employment income is taxed in Nigeria if the individual is a resident or works within the country without paying tax elsewhere
• The reforms also aim to digitise the tax system, making it harder to evade taxes, with data and location tracking helping to identify those who should be exempt from taxes

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

President Bola Tinubu recently signed new tax reform legislation into law, bringing the earnings of remote workers in Nigeria into the tax bracket.

As with all Nigerian income earners, the new provisions require freelancers, tech workers, and digital entrepreneurs who work for foreign clients or companies to register with their state tax authorities, declare their foreign earnings in Naira (N), and pay the relevant taxes.

“Prior to now, there had been varied interpretations due to a lack of proper definition of ‘residence.’ With the definition extending to individuals with substantial economic and immediate family ties in a year of assessment, this law broadens the tax net,” the President stated.

“Employment income will be taxed in Nigeria if the person is resident in the country or performs duties in Nigeria without paying tax in their country of residence.”

In addition, the President highlighted Nigeria's growing potential in the global outsourcing market. He said,

“We are engaging with many countries to see how legitimately our young ones can provide outsourcing services from where they are and participate in business processing. We have seen demand for software engineers from different countries. The Japanese ambassador told me that Nigeria is the first call for Japanese companies now seeking software engineers.”

Even though the National Bureau of Statistics reported that Nigeria's unemployment rate decreased from 5.3% in the first quarter of 2024 to 4.3% in the second, the country still has one of Africa's highest youth populations.

According to the Nigeria Labour Force Survey, the working-age population's labour force participation rate rose from 77.3% in Q1 2024 to 79.5% in Q2 2024.

Tax evasion will now be more difficult, according to Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, who made this announcement following the signing of the laws.

He explained,

“We are going to digitise everything now. There is a new name now, from FIRS to NRS, and that revenue service will now work with sub-nationals. If you live in Ekiti State, you can’t go and tell them that you live in FCT when you are not. This misrepresentation occurs frequently in Nigeria. We will find out that the system will show it. You know your phone can tell us where you are. So data will tell us who is truly poor, and we will protect them and exempt them from paying taxes. It is pro-poor, pro-business, pro-growth, and committed to equity and fairness.”

Key tax changes explained

Legit.ng reported that President Bola Tinubu has recently signed the most talked-about tax reform bills into law. On Thursday, June 26, the signing ceremony was held at the presidential villa.

The Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill are the four bills that have been signed into law.

This action comes after months of policy evaluations, consultations, and work to modernize a tax system that has long been criticized for being complicated, unjust, and onerous for small firms.

Source: Legit.ng