Taxes play a key role in financing government investments in human capital, infrastructure, and the provision of services for the benefit of the populace. In Nigeria, different taxes are administered by the Federal, State, and Local Governments. In this article, we’ll focus on the types of taxes that are imposed, charged, and collected from individuals and companies by the governments of the 36 states in Nigeria. Continue reading to find out how state governments internally generate revenue to make their respective states viable and on the path to sustainable growth.
The types of State Government taxes in Nigeria would be discussed below:
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Personal Income Tax
Personal Income Tax (PIT) is guided by the Personal Income Tax Act Cap P8 LFN (as amended) and is administered by the States Internal Revenue Service (IRS) in respect of their residents. This tax is imposed on the income of individuals, a corporate body of individuals, executors of any settlement, and communities. Every 31st of March is the due date for filing returns of Personal Income Tax. And the failure of an individual or employer to file a return when due attracts a penalty on conviction. Depending on the amount of chargeable income, the rate of PIT ranges from 7 percent to 24 percent.
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Withholding Tax (WHT)
Withholding Tax is used to collect income tax from individuals and companies in advance. WHT is guided by both the Company Income Tax Act and Personal Income Tax Act and is subjected to transactions that are ordinarily liable to tax in Nigeria. The rate of WHT varies from 5 percent to 10 percent depending on the transaction. Examples of transactions covered by WHT include commissions, management services, consultancy and professional services, royalty, all types of building, construction, and related services, as well as contract and agency arrangements other than outright purchase and sale of goods and property in the normal course of business.
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Capital Gains Tax (CGT)
In Nigeria, across the 36 states and the FCT, Capital Gains Tax is regulated by the Capital Gains Tax Act C1 LFN (as amended) and is imposed on all chargeable assets disposed of for a gain. The rate of CGT on disposed assets is 10 percent of the chargeable gains. These assets may or not be situated in Nigeria. However, some assets are exempted from CGT such as compensation for wrong or injury, shares and stocks, Nigerian Government Securities, the main residence of an individual, and decorations for valour and gallant acts. Filing and payment of CGT ought to be done on the same day as filing the company’s Income Tax.
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Stamp Duties on Instrument Executed by Individuals
In Nigeria, the Federal Government has the sole authority to impose, charge and collect stamp duties for instruments executed by companies. State governments on the other hand collect stamp duties executed between persons within their state. Unstamped duties are not admissible as evidence in a court of law.
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Road Taxes
Constant maintenance of road infrastructure is cost-extensive and would be a huge strain on any state budget. To help further large-scale safety on public roads and maintain existing infrastructure, state governments in Nigeria impose road taxes on wheeled vehicles for using public roads within their state. These road taxes come in several forms such as motor vehicle registration, renewal of number plates and driver license fees, road permits, and road worthiness assessment fees. Each of the State Board Internal Revenue Service of the 36 states works with the Federal Road Safety Commission (FRSC) and other road enforcement authorities to administer road taxes within their states.
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Market Taxes and Levies
In Nigeria, State governments impose, charge and collect market taxes and levies from persons who do business in public market spaces within their states. With the taxes and levies generated from markets, state governments can provide and improve the conditions of markets within their jurisdiction.
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Land Use Charge
Land Use Charge is one of the taxes that is administered by state governments in Nigeria to all properties within their jurisdiction. The types of taxable properties include industrial premises of manufacturing concerns, owner-occupied residential property, open spaces, agricultural land, commercial properties used for business, private schools, and residential properties without the owner in residence. For Land Use Charge to be determined, it has to first be assessed by relevant state authorities, after which the owner is expected to make payments to appropriate quarters per the guidelines of the state where the property is situated. From proceeds from payments of Land Use Charge, State governments can provide social amenities and economic infrastructure to the populace within their jurisdiction.
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Signage and Mobile Advertisement
Signage and mobile advertisement are one of the ways state governments in Nigeria generate internal revenue. Specific authorities are mandated by state governments to be in charge of collecting all sorts of outdoor advertisements and signage such as 2nd party and 3rd party advertisements.
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Gaming, Lotteries, Pools Betting, and Casino Taxes
Gaming, lotteries, casinos, and betting shops have become increasingly popular across Nigeria. The Federal Government and states across Nigeria enforce the collection of value-added tax (VAT) on lottery and gambling activities within the jurisdiction they operate. At the federal level, the National Lottery Act 2005 (NLA) and the National Lottery Regulation (NLR) govern the industry of gambling in the country. So far, only Lagos State has enacted the Lagos State Lotteries Law 2008 (LLL) to enforce the collection of VAT on gaming activities within Lagos State.
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Mining, Milling, and Quarrying Tax
There are lots of mineral resources that are spread across Nigeria such as precious stones and metallic ores. To be able to search for or exploit these mineral resources, both the Federal and State governments issue mining rights to successful bidders. These come in the form of quarry leases, mining leases, exploration licenses, and reconnaissance permits. This presents a viable avenue for revenue generation for the Federal and State governments.
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Produce Sales Tax
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Animal Trade Tax
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Ecological (Environmental) Levy
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Naming of the Street Registration Fees in the State Capital
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Economic Development Levy
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Entertainment Tax
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Fire Service Charge
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Property Tax
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Social Services Contribution Levy
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Infrastructure Maintenance Charge
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Hotel, Restaurant, or Event Centre Consumption Tax
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Right of Occupancy Fees
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Development Levy
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Slaughter or Abattoir Fees
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Business Premises Registration Fees