Introduction:
Expatriates, or foreign nationals working in Nigeria, have long been an essential part of the country’s diverse workforce, contributing their skills and expertise to various industries. To ensure fair and efficient taxation of this group, the Nigeria Finance Act 2019 introduced several changes to the taxation of expatriates working in Nigeria. These changes have implications for both individuals and organizations employing expatriates. In this article, we will explore the key updates on expatriate taxation brought about by the Finance Act 2019 and their practical implications.
1. Definition of Expatriates: The Finance Act 2019 provides a clear definition of expatriates for tax purposes. It defines an expatriate as an individual who is not a Nigerian citizen and is employed in Nigeria. This definition helps differentiate expatriates from local employees for tax assessment purposes.
2. Withholding Tax on Benefits: One significant change introduced by the Act is the imposition of withholding tax on certain benefits provided to expatriates. These benefits include non-monetary benefits such as accommodation, meals, and transportation. Employers are now required to deduct withholding tax on the value of these benefits provided to expatriate employees and remit it to the tax authorities.
3. Tax Relief for Expatriate Employees: The Finance Act 2019 also provides tax relief for expatriate employees in the form of tax exemptions on certain income categories. Income earned by expatriates from services rendered outside Nigeria for a non-resident employer is exempt from Nigerian tax. This exemption is aimed at attracting foreign expertise and encouraging investments in Nigeria.
4. Determination of Tax Residency: The Act clarifies the criteria for determining the tax residency of individuals in Nigeria. It establishes that an individual is considered a tax resident in Nigeria if they stay in Nigeria for 183 days or more in any 12-month period or if their income is derived from Nigeria. This definition helps tax authorities assess the tax liability of expatriate workers more accurately.
5. Reporting Requirements: Expatriate employees and their employers are now subject to reporting requirements. Employers are required to furnish the tax authorities with the details of expatriate employees, including their income and benefits. Expatriate employees are also required to provide relevant information for tax assessment purposes.
6. Professional Guidance: Navigating the complexities of expatriate taxation in Nigeria, especially in light of the Finance Act 2019 changes, requires professional guidance. Employers and expatriates should engage tax experts who are well-versed in the new regulations to ensure compliance and optimize tax planning.
Conclusion:
The Nigeria Finance Act 2019 has introduced significant changes to the taxation of expatriates working in Nigeria. These changes aim to create a fair and transparent tax framework for both foreign employees and the government. It is essential for expatriate employees and their employers to stay informed about these changes, understand their implications, and seek professional guidance to ensure compliance and efficient tax planning. By adhering to the new regulations and leveraging available tax incentives, expatriates can contribute to the growth and development of Nigeria while ensuring responsible tax practices.
For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
