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BACKGROUND
Essentially, the tax implication of a visa
or permit held by a foreigner may be dependent on the reason for which the visa
or permit was applied for and granted and whether the foreigner worked and
earned income in the course of that visit to Nigeria. In this regard, the
Nigerian Personal Income Tax Act as amended (“PITA”) and the Double
Tax Agreements (“DTA”) between Nigeria and several other contracting
States spell out rules in determining the liability of foreign individuals to
the Nigerian personal income tax and the quantum of their incomes that would be
so liable to tax though PITA provisions are not clear enough on all possible
instances when foreigners may be liable to Nigerian tax and thus, leaving room
for conjectures and speculations in certain instances.

However, the general position of the law as
encapsulated in section 3(1)(a) of PITA is that every individual that
derives income from any trade, business, profession or vocation, for whatever
period of time such trade, business, profession or vocation may have been
carried on or exercised in Nigeria is liable to the Nigerian personal income
tax on that income except those specifically exempted by law. This provision
contains no qualification as to whether the individual that derived the income
is a Nigerian resident or non-resident or otherwise attaches any importance to
the amount of time such person stayed in or outside Nigeria though residency
may be of crucial significance in determining the tax exposure of individuals
in Nigeria. Meanwhile, a non-resident individual is essentially one that has
spent less than 183 days (i.e. 6 months) in any 12-month period commencing in a
calendar year and ending either in the same year or the following year in
Nigeria – Ecodrill Nigeria Limited V. Akwa Ibom Board of Internal Revenue
(2014) LPELR-23502(CA) is instructive on this point. This however excludes
holders of Subject to Regularization (“STR”) visa or the Combined
Expatriate Resident Permit and Aliens Card (“CERPAC”) who are
generally deemed Nigerian residents irrespective of their period of stay in
Nigeria.
With specific regard to non-resident
individuals, section 6 of PITA provides that a foreign individual
that partly carries on a trade or business in Nigeria and derives income
therefrom will be liable to the Nigerian personal income tax if:
i.                  
He
carries on the trade or business through a fixed base in Nigeria (i.e. a fixed
place of business in Nigeria); or
ii.               
He
habitually carries on the trade or business through a dependent agent that concludes
contracts on his behalf in Nigeria; or
iii.            
He
habitually maintains a stock of goods or merchandise in Nigeria from which
deliveries are regularly made on his behalf; or
iv.            
He
executes a turnkey contract in Nigeria; or
v.               
He
carries on the trade or business with a connected person in a manner the tax
authority considers artificial or fictitious.
The categories of persons captured under
the above referenced section 6 of PITA are essentially foreign independent
contractors, sole proprietors/self-employed persons (other than those in the
employment of foreign organisations). These categories of persons are assessed
to tax on direct assessment basis.
On the other hand, for non-resident
individuals in the employment of foreign organisations/employers abroad who are
sent to Nigeria by their employers to perform the duties of their employment
(assessed to tax on Pay As You Earn basis), the provision of
section 6 of PITA above does not apply to them. Such persons are subject to 2
different legal regimes outlined below – depending on whether they are
residents of countries that have DTA with Nigeria or not.
1.    Foreign
Employees resident in non DTA countries
The taxation of a foreign employee that
comes under this category is guided by section 10 of PITA which
provides that such an expatriate shall be deemed liable to the Nigerian
personal income tax, if the duties of his employment are wholly or partly
performed in Nigeria, unless he can establish all of the
following joint conditions
:
a)    
The duties are
performed on behalf of an employer who is not resident in Nigeria and the
remuneration is not borne by a fixed base of the employer in Nigeria; and
b)    
The expatriate is
not in Nigeria for a period or periods amounting to an aggregate of 183
days (inclusive of annual leave
or temporary period of absence) in a 12-month period; and
c)    
The remuneration of
the employee is liable to tax in another country that has a DTA with Nigeria.
Essentially, such expatriates would be
deemed liable to the Nigerian personal income tax having failed to satisfy the
last condition above (i.e. 1(c)).
2.    Foreign Employees resident in DTA countries
By the combined provisions of section
38 of PITA (which gives the DTAs supremacy over PITA) and Article 15(1)
and (2) of the Nigerian DTAs with various countries, remuneration derived
by a resident of a DTA country in respect of an employment exercised in Nigeria
shall be taxable only in his country of residence if all of the
following conditions can be established
:
a)     the employee/expatriate is
present in Nigeria for a period or periods not exceeding in the aggregate 183
days in a year of assessment; and
b)    the
remuneration is paid by, or on behalf of, an employer who is not a Nigerian
resident, and
c)     the
remuneration is not borne by a permanent establishment or a fixed base which
the employer has in Nigeria.
Following from the above, it is important
to note that the computation of the 183 days rule in 2(a) above differs from
one Nigerian DTA with a contracting State to another. The Nigerian/United
Kingdom DTA was adopted above for the purposes of this article. Suffice it to
say also that the major difference between section 10 of PITA provision and
Article 15(2) of the DTAs lies on how the 183 days rule mentioned in both legal
documents are computed.
Thus, the DTA in its computation emphasizes
on the number of days the foreigner is physically present in Nigeria within the
period covered by an assessment while section 10 of PITA on the other hand focuses
more on the foreigner’s dates of first entry and exit from Nigeria in a
12-month period in determining whether he/she has exceeded the 183 days
threshold in Nigeria. For instance, a foreigner who comes into Nigeria firstly
on 1st May, 2017 and leaves Nigeria for a temporary break or annual leave on
31st August, 2017 but returns again on 20th December, 2017 and leaves finally
on 30th December, 2017 would be deemed to have triggered tax under section 10
of PITA provision having exceeded 183 days in Nigeria because his period of
absence in the months of September, October, November and some part of December
would be counted in determining whether he has stayed up to 183 days in
Nigeria.
On the other hand, such a person would have
been held to have spent only 143 days in Nigeria during 2017 year of assessment
under Article 15(2) of the DTA since the DTA focuses on the actual number of
days the foreigner was physically present in Nigeria.  
Tax
Implications Of Nigerian Visas And Permits
Relating these ground rules discussed above
to the topic at hand, the tax implications of Nigerian visas and permits are as
follows:
1.    
Transit Visa and
Visiting Visa: Holders of these forms of visas are not entitled to work in
Nigeria and therefore have no tax liability in Nigeria. However, where a holder
breaches his visa condition by working and deriving income from Nigeria, tax
may apply. Immigration offence is further disclosed and the individual may be
prosecuted by authorities as such.
2.    
Business Visa: This
visa before now, covered restrictively, entry into Nigeria for purposes of
business meetings, seminars, conferences, workshops and their likes. Holders of
the visa were therefore not expected to work/derive income from Nigeria and as
such generally had no tax exposure in Nigeria.
However, the scope of this visa has
recently been extended by the Nigeria Immigration Service (“NIS”) to
include entry for the purposes of contract negotiation, marketing, sales,
purchase and distribution of Nigerian goods, training of Nigerians etc.
These additional scopes may be construed as
work related and may thus give rise to tax exposure though the NIS will
typically require a foreign applicant that wishes to come in on this visa for
any of these purposes above and with the intention of staying in-country for
longer duration (e.g. 60 days) or who comes in on repetitive basis through this
visa to apply and obtain a Temporary Work Permit (“TWP”).
In any case, the tax implication of coming
in on this visa under any of the additional scopes above would amongst others
be dependent on the nature of the foreigner coming in on the visa (e.g. foreign
employee, independent contractor, sole proprietor/self-employed person,
entertainer etc. – this will be discussed further below) and whether he/she did
derive income from Nigeria in the course of such visits:  
i)                 
Foreign
Employees: The tax implication of business visa on a foreign employee
would be dependent on whether the individual is a resident of a DTA or non DTA
country. Please see comments above on section 10 of PITA and Article 15(1) and
(2) of the DTAs applications to foreign employees.
ii)              
Independent
Contractors, Sole Proprietors/Self-Employed
Persons/Investors/Entertainers/Sportsmen: Where such a person is
considered a Nigerian resident, he would automatically become taxable in
Nigeria without further ado on his worldwide income. But where he is deemed a
non-resident, he should be liable to tax on his Nigerian sourced income only if
any of the conditions in section 6 of PITA enumerated above is satisfied.
However, it has been argued on the contrary that such persons are caught up by
the omnibus provision of section 3(1)(a) of PITA and are therefore generally
liable to tax on their Nigerian sourced income, irrespective of section 6
qualification. 
In practice though, the default position of
the Nigerian counter parties in contract with these non-resident individuals is
to deduct tax at source unless the foreigner can provide an exemption
certificate issued by the relevant tax authority exempting such income to
Nigerian tax before the local party will agree not to make withholding tax
deductions.
3.    
Visa on Arrival: This
visa may be termed a hybrid of transit visa, business visa and TWP as it
is in some cases issued to persons who are unable to procure any of these other
types of visas. See therefore my comments on transit visa, business visa and TWP
for the tax implication of this visa.
4.    
TWP: This
permit connotes that its holders would work in Nigeria though on a short
term basis (usually for a period not exceeding 90 days in the first instance).
Therefore the tax implication of this permit is essentially dependent on the
character of the holder of the permit (i.e. whether a foreign employee,
independent contractor etc.). See comments above on taxation of foreign
employees, independent contractors etc. 
5.    
Diplomatic Visa: By
the provisions of paragraph 11 of the Third Schedule to PITA, Article 27
of the DTAs and the Diplomatic Immunities and Privileges Act,diplomatic
or consular officials are not taxable (on their salaries) in Nigeria while
exercising their official functions for their home countries in Nigeria as they
are treated as residents of the sending countries paying their remunerations in
Nigeria in line with theVienna
Convention on Diplomatic Relations and the Vienna Convention on Consular Relations. However, it
is expected that where a diplomat engages in a private trade, business,
profession or vocation in Nigerian, the income from such a personal endeavour
should become liable to Nigerian personal income tax where any of the
conditions discussed above are satisfied.
6.    
 STR Visa and CERPAC: Holders of STR
Visa and/or CERPAC are Nigerian residents and as such are liable to tax in
Nigeria on their incomes.
Managing
The Tax Exposure
Persons inviting and assuming the
immigration responsibilities of foreigners coming into Nigeria are advised to
monitor and keep proper documentation on the movements of the foreigners in and
out of Nigeria (e.g. copies of the endorsed visa pages of their passports
showing their dates of arrival and exit from the country, records of their
locations in Nigeria etc.). They should also take the filing of their
Emigration Monthly Returns to the NIS seriously because these are documents tax
authorities usually look out for in determining whether a foreigner has
triggered tax in Nigeria and which of the tax authority has the jurisdiction to
collect the foreigner’s personal income tax. Failure to provide these documents
upon request by a tax authority may lead to an adverse tax assessment against
such persons or the tax payer.

Anthony Ezeamama is a corporate commercial
lawyer and a tax specialist.

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