Nigerians earning salaries in dollars, pounds or euros from foreign companies while living in Nigeria may now find their income firmly within the Nigerian tax net under the Nigeria Tax Act, which came into effect on January 1, 2026.

The new framework shifts the focus from where an employer is located to the tax residency status of the individual. This means that a Nigerian tax resident may be liable to tax on worldwide income, including salary earned from an overseas employer and paid in foreign currency.

Under the residency rules, an individual who is physically present in Nigeria for 183 days or more within any 12-month period may be regarded as a Nigerian tax resident. Once an individual falls within the residency threshold, the fact that the employer is based in the United States, United Kingdom, Europe or another jurisdiction does not, by itself, take the income outside Nigeria’s tax system.

The development has particular implications for the growing number of Nigerians working remotely for foreign companies while remaining physically resident in the country.

Unlike employees of Nigerian companies, whose employers generally deduct personal income tax through the Pay-As-You-Earn (PAYE) system, workers employed directly by foreign companies may not have an employer in Nigeria to make the deductions and remit the tax on their behalf.

Consequently, affected taxpayers may have to take responsibility for determining their tax obligations, registering with the tax authorities, declaring their income and paying any tax due.

Tax experts say this places a greater compliance burden on remote workers receiving foreign currency income, particularly those who may have previously assumed that income earned from an overseas employer was outside the Nigerian tax system.

However, the new regime provides some relief for taxpayers.

The tax-free threshold has been raised to N800,000 annually, meaning income within the applicable tax-free band is not subject to personal income tax, subject to the detailed provisions and applicable tax computation rules.

Another potential relief is available through Nigeria’s double taxation agreements with certain countries. These agreements are designed to prevent taxpayers from being taxed twice on the same income where both Nigeria and another country have taxing rights.

However, taxpayers cannot simply assume that double-tax relief will apply automatically. The relevant treaty conditions must be satisfied and the taxpayer may need appropriate documentation to establish taxes paid or liabilities arising in the other jurisdiction.

The increasing sophistication of tax administration is also expected to make non-compliance more difficult to conceal.

The Nigeria Revenue Service is expanding its use of technology and data analytics to identify potentially undeclared income, while financial reporting requirements and the growing ability of authorities to cross-reference taxpayer and financial information are increasing the visibility of transactions.

For foreign currency earners, tax experts say the key issues to establish include their residency status, Tax Identification Number (TIN), source and nature of income, applicable deductions or exemptions, and whether a double taxation agreement is relevant to their circumstances.

The changes are particularly significant for software developers, consultants, digital professionals, freelancers and other remote workers who receive regular salaries or professional income directly from foreign companies while living in Nigeria.

Experts therefore advise taxpayers in this category to review their obligations rather than wait for tax authorities to identify discrepancies in their declarations.

They stress that determining tax liability depends on individual circumstances and the specific provisions of the law.

The new regime effectively means that for Nigerian tax residents, earning income in dollars, pounds or euros from a foreign employer does not, by itself, place that income beyond the reach of Nigerian taxation. (Nigerian Tribune)