How To Calculate Taxes In Nigeria

How To Calculate Taxes In Nigeria

How To Calculate Taxes In Nigeria

For individuals and enterprises operating in Nigeria, understanding tax calculation is essential. The tax system in Nigeria is quite complex with many different kinds of levies and rules. Having a thorough understanding of how to calculate taxes in Nigeria can assist you in staying within the law and enhancing your financial planning, regardless of whether you are an employee, a self-employed professional, or a business owner. We will walk you through the necessary steps to compute taxes in Nigeria in this article.

Steps on how to calculate your tax in Nigeria.

1. Determine Your Taxable Income in Nigeria

The first step to take to calculate your taxes in Nigeria is to first estimate your taxable income to appropriately compute your taxes. Individuals’ employment income, company profits, rent, and any other sources of income are included in this. Your net profit is often what remains after deducting acceptable costs from the gross income.

2. Identify the Appropriate Tax Types

Nigeria has a variety of taxes, including Capital Gains Tax, Value Added Tax (VAT), Personal Income Tax, Corporate Income Tax, and many others. The specific taxes that apply to you will depend on your status and business structure. To maintain compliance, it is essential to stay current with tax rules and regulations. This is the second step on how to calculate your tax in Nigeria.

3. Estimate Your Income Tax (PIT) 

Personal Income Tax (PIT) is a progressive tax system for people with different tax rates based on income levels. Tax tables and guidelines are provided by the Federal Inland Revenue Service (FIRS) in Nigeria to help establish the appropriate tax rate. The relevant tax rate is applied to each income bracket in the PIT computation, and the results are then added. Let’s move to the fourth step on how to calculate your taxes in Nigeria.

4. Determine the corporate income tax (CIT) 

In Nigeria, registered firms and companies are subject to corporate income tax. While most businesses pay CIT at a standard rate of 30%, other sectors, like agriculture and small businesses, have lower tax rates. Choose the taxable profit and use the appropriate tax rate to determine CIT. For precise calculations, it is crucial to seek advice from a tax expert or study the applicable tax rules.

5. Calculate Value Added Tax (VAT)

In Nigeria, products and services are subject to the Value Added Tax (VAT), which is a consumption tax. VAT is now 7.5%. Add the taxable sum to the appropriate VAT rate to determine the VAT. Businesses are required to register for VAT and submit the VAT they have collected to the proper tax body.

6. Take into Account Other Taxes

In addition to the principal taxes described above, there are additional taxes that can be relevant depending on certain situations. These comprise taxes on capital gains, withholdings, education, and other things. To ensure compliance, it is essential to grasp the particular rules and specifications for each kind of tax.

7. Subtract Allowed Tax Credits and Reliefs 

To help people and businesses pay less in taxes, Nigeria offers several tax credits and reliefs. Allowable expense deductions, tax exemptions for particular businesses or activities, and tax credits for investments in particular industries are a few examples. To determine and claim the appropriate reliefs and credits, seek the advice of a tax expert or consult the pertinent tax regulations.

8. Maintain Accurate Records

Accurate financial records must be kept to calculate and file taxes. To assist with your tax calculations, keep track of your income, expenses, and other pertinent financial information. Maintaining accurate records will also be beneficial if you ever face an audit or other tax-related queries.

9. Calculate Your Tax Liability In Nigeria

To figure out how much tax you owe in Nigeria, multiply your taxable income by the applicable tax rate. The progressive nature of the tax rates means that various amounts of your income are subject to various rates of taxation. The most recent tax brackets can be found on the IRS website, or you can seek advice from a tax expert.

10. Estimate Your Tax Liability

To determine how much tax you owe, multiply your taxable income by the current tax rate. Because tax rates are progressive, different portions of your income are subject to different rates of taxation. You can consult a tax specialist for guidance or look up the most recent tax brackets on the IRS website.

File your tax return as soon as you have determined your tax liability. You have two options for completing this: online using tax preparation software or with the help of a tax expert. The deadline date for filling out tax returns is usually provided by the Federal Inland Revenue Service (FIRS).


Our lives entail paying taxes because they provide funds for public services and governmental initiatives. Understanding how to calculate taxes in Nigeria is crucial whether you’re a business owner or an individual taxpayer to maintain compliance and prevent any needless fines. Although calculating taxes in Nigeria might be challenging, by having a thorough understanding of the different tax categories, rates, and rules, you can maximize your financial planning and assure compliance. For current and precise tax calculations, it is advisable to seek the advice of a tax expert or to refer to the official instructions published by the Federal Inland Revenue Service (FIRS). You can manage your taxes and correctly compute your taxes by following the instructions in this article.


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