Impact of the NRTB 2024 on Non-Resident Individuals

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So, let’s say the National Reform Tax Bill (NRTB) 2024 makes it through the gauntlet of debates, objections, and controversies, and finally becomes law. If you’re a non-resident individual—whether you’re a foreigner or a Nigerian living abroad—here’s the deal: any income you earn from Nigeria might just land you on the Nigerian tax radar. Yes, it’s that serious. But how does it all work, and more importantly, how will it affect you?  

 

Who is a Non-Resident Individual?

First, who exactly is a “non-resident individual”? In simple terms, it’s someone who doesn’t live in Nigeria but somehow has a financial or business relationship with the country. They are individuals who don’t reside in Nigeria but earns income from the country. For example, if you’re a Nigerian software developer living in the U.K. but earning money from clients in Nigeria, or an American consultant offering services to Nigerian firms, you’re a non-resident individual in the eyes of Nigerian tax authorities. The NTRB 2024 aims to clarify and expand how such individuals are taxed for their activities in Nigeria.

The Concepts of Permanent Establishment & Significant Economic Prescence

To determine who a non-resident individual who is chargeable is, the NTRB 2024 says they must have either a permanent establishment or significant economic presence in Nigeria. What is a permanent establishment and what is a significant economic presence?

To have a permanent establishment (PE) is like having a mini-business hub in Nigeria, even if you’re not physically present. If you have a physical presence in Nigeria—a branch, office, or even a workshop—that counts as a PE.  Doing business through someone based in Nigeria? Like an agent or a local distributor? Yea, that’s a PE too.  PE also entails storing goods in Nigeria to deliver to your customers.

Imagine you’re a European contractor working on a $2 million oilfield project in Nigeria. Once your boots hit Nigerian soil (or your machines start digging), you’re officially in PE territory, and the income attributable to you from that project will be taxed in Nigeria. 

On the other hand, a Significant Economic Presence (SEP) covers digital interactions—say you run an e-commerce site or provide online services that Nigerians use. SEP is aimed squarely at the digital economy—e-commerce giants, online service providers, cloud computing platforms, you name it.  If your business involves transmitting data, offering online services, or selling digital products to Nigerians, you’re in SEP territory.  For Examples? Running an app store, serving online ads, offering cloud services, or hosting gaming platforms—all these activities fall under SEP. 

Let’s say you’re running a U.S.-based streaming platform that generates ₦50 million annually from Nigerian subscribers. Under the new law, that income becomes taxable in Nigeria, even though you’ve never set foot in the country. 

On thing you should know is that under the NRTB 2024, you’re not exempted even if you’re a solo entrepreneur running an online tutoring service and earning ₦5 million annually from Nigerian students, this bill if it becomes law will catch you. 

The Taxation Framework

Under the proposed framework, any income derived from Nigeria by non-resident individuals—through permanent establishments or significant economic presence—will be taxable. These income sources include:

  • Business Profits: Income generated from business activities carried out in Nigeria, whether through a permanent establishment or a significant economic presence.
  • Investment Income: Returns from investments in Nigerian companies or assets.
  • Professional Fees: Income earned from providing professional services to Nigerian clients.
  • Royalties and Licensing Fees: Payments received for the use of intellectual property rights in Nigeria.
  • Revenue from Digital Activities: Non-residents earning from online activities like e-commerce, digital advertising, or streaming services will be taxed based on their economic engagement with Nigerian users.

 

Why Does Nigeria Want to Tax Non-Residents? 

It’s no secret: Nigeria’s economy needs all the revenue it can get. Oil is no longer the cash cow it once was, and diversifying revenue streams is critical. Taxing non-residents fits perfectly into this strategy. 

If this bill passes, Nigeria could rake in billions annually. For instance, in 2023 alone, digital revenues in Nigeria were estimated at ₦2 trillion. Even taxing a fraction of that could add a significant boost to public coffers. 

Conclusion: Navigating Nigeria’s New Tax Terrain 

The National Reform Tax Bill 2024, if passed, represents a bold step into the future of taxation. For non-resident individuals, it’s a wake-up call: if you’re making money from Nigeria, the taxman will come knocking. 

But it’s not all doom and gloom. With proper planning, you can navigate these changes without breaking the bank—or the law. After all, being taxed is just part of doing business in a globally connected world. 

So, whether you’re an entrepreneur with a digital storefront or a multinational corporation, it’s time to pay attention. Nigeria is rewriting the tax playbook, and you’ll want to stay ahead of the curve.

 

 

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