NRS: Relief Provisions Will Prevent Double Taxation On Foreign Income
NRS Clarifies Double Taxation Relief
THE Nigeria Revenue Service (NRS) has assured taxpayers that the new tax law contains measures to prevent double taxation on foreign-sourced income. According to a Frequently Asked Questions (FAQ) report issued by the agency, Sections 120 to 123 of the Nigeria Tax Administration Act 2025 provide for unilateral relief and recognition of double taxation agreements.
“The Act provides for unilateral relief and recognition of double taxation agreements to avoid double taxation on foreign-sourced income,” the NRS noted. The provision allows Nigerian residents whose income has already been taxed abroad to claim relief, subject to the applicable Nigerian tax rate and within the statutory timeframe.
Treatment of Collective Investment Schemes and Foreign Income
The FAQs clarified that collective investment schemes are treated as companies for tax purposes. Income is taxed at the scheme level, while distributions to unit holders are treated as dividends. Dividends from wholly export-oriented businesses, along with foreign interest, rent, and royalties repatriated through approved channels, are exempt from Nigerian taxation.
“This framework is designed to encourage cross-border investment while preventing excessive tax burdens on taxpayers,” the NRS stated.
Promoting Innovation and Digital Tax Compliance
The law also incentivizes research and development, allowing companies to deduct up to five percent of turnover for eligible R&D expenses incurred locally. Non-resident digital service providers with significant economic presence in Nigeria are now liable for income tax and VAT on Nigerian-sourced income, in line with Sections 17 and 151 of the Act.
Registration, Filing, and Penalties
All taxable persons—including individuals, companies, ministries, and non-residents supplying goods or services in Nigeria—must register with the relevant tax authority and obtain a Taxpayer Identification Number (TIN). Special obligations apply to Virtual Asset Service Providers, who must file monthly transaction reports in addition to annual returns.
Non-compliance attracts penalties, including administrative fines, interest on late payments, and possible prosecution. Companies must file self-assessment returns within six months of their accounting year, while new firms have 18 months from incorporation or six months after their first accounting period, whichever comes first.
The report underscores a dual administration system: the NRS handles corporate, non-resident, VAT, petroleum, fossil fuel surcharge, and stamp duties, while State Internal Revenue Services oversee personal, estate, and local business taxes.
