Nigerians living and working abroad may no longer be shielded from domestic tax obligations as the Nigeria Tax Act, 2025, introduces far-reaching changes to how individual tax residence is determined.
Under the new law, residence is no longer based solely on physical presence in the country, as economic connections and family relationships are now recognised as critical factors in deciding whether an individual is liable to tax in Nigeria.
This marks a sharp departure from the previous regime under the Personal Income Tax Act, where residence mainly determined which state tax authority could assess an individual, rather than whether the person was taxable in Nigeria.
The NTA now sets out specific conditions under which an individual may be regarded as resident in Nigeria, including being domiciled in the country, having a permanent home available for domestic use, maintaining a habitual place of abode, or having substantial economic and immediate family ties in Nigeria.
Other conditions include spending an aggregate of at least 183 days in Nigeria within a 12-month period or serving as a Nigerian diplomat or diplomatic agent abroad.
With these expanded criteria, Nigerians in the diaspora who retain family homes, have spouses or children living in Nigeria, or maintain significant business or investment interests in the country may now fall within the Nigerian tax net.
Once classified as Nigerian tax residents, such individuals could become liable to pay income tax on their global earnings, not just income sourced from Nigeria, a development that has raised concerns among overseas Nigerians.
Experts have warned that the new rules could lead to dual-residence disputes and double taxation, particularly where individuals are considered resident in both Nigeria and countries without double taxation agreements with Nigeria.
Concerns have also been raised over the lack of clarity around what constitutes “substantial economic ties,” with fears that the subjective nature of the test could fuel tax disputes and litigation.
While the changes are aimed at broadening Nigeria’s tax base, analysts say clearer guidance from tax authorities and judicial interpretation will be crucial as the provisions begin to take effect from 2026.
The article was published first on Mondaq
