Most of us have never filed a tax return. Until recently there wasn't much reason to think about it — no employer deducting anything, no letters arriving, nothing forcing the issue.
That changed on 1 January 2026, when the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 came into force. I've read both properly, and a lot of what's circulating online is still based on the earlier draft — with numbers that didn't survive into the
final version. So here's the plain version.
- Your foreign income is taxable here.
If you live in Nigeria, you're taxed on your worldwide income. It doesn't matter that the client is in Berlin, that Upwork is American, or that the money sat in a dollar wallet for six months. Working remotely from Lagos for a US client isn't "foreign income" in the way people hope — you did the work here. - The platforms do not pay your tax for you.
This is the assumption that costs people the most. Upwork, Fiverr, Payoneer — none of them remit anything to Nigeria on your behalf. Some withhold US tax in some situations; that's a different country's tax, and it doesn't settle yours. And paying VAT on things you buy doesn't cover it either. VAT is a tax on spending. This is a tax on earning. Two different things. - You're taxed on profit, not on everything that landed
Subtract what it cost you to earn it: internet and data, software you need for the work, the business share of your laptop, platform fees, payment charges, co-working space. The platform fee catches people out. If a client pays $1,000 and Upwork keeps $100, you earned $900 — not $1,000. Declaring the gross means paying tax on money you never received. Keep the receipts. Under the new law a deduction you can't document can be disallowed, which means it gets added back. - The rates
- First ₦800,000 — 0%
- Next ₦2,200,000 — 15%
- Next ₦9,000,000 — 18%
- Next ₦13,000,000 — 21%
- Next ₦25,000,000 — 23%
- Above ₦50,000,000 — 25%It's banded. Only the slice inside each band is taxed at that band's rate — so moving up a band never leaves you worse off overall. Plenty of part-time freelancers are under ₦800,000 taxable and owe nothing at all.
- The Consolidated Relief Allowance is gone
If you've read about CRA — the "higher of ₦200,000 or 1% of gross, plus 20% of gross" formula — it was abolished by the new Act. Any calculator or guide still applying it is working from the old law and will show you a number that's too low. That's the wrong direction to be wrong in.
What replaced it as the main personal relief is rent relief: 20% of your annual rent, capped at ₦500,000. You need proof of payment, and it doesn't apply if you own your home and pay no rent. Most people don't claim it because nobody tells them it exists. - Which exchange rate — the question everyone asks
Naira, at the official rate, on the day you were paid. Not the parallel rate. Not today's rate. And not one average for the whole year — convert each payment separately, using the rate for the date that payment landed. Twelve payments in a volatile year are twelve different conversions. Collapsing them into one number is a guess dressed up as a figure, and it won't match anything if you're ever asked to show your working.
Keep, for each payment: the date, the amount in the original currency, the rate you used, and where you got it. The Acts don't spell out a conversion method — so what protects you isn't citing a rule, it's being able to show how you got there. - Get a Tax ID — there's a direct cost to not having one
Registration is required of every taxable person. But the practical reason is money. When a Nigerian company pays you for professional or consultancy work, it has to withhold a slice and remit it. With a Tax ID that's 5%. Without one, the payer must deduct at double — 10%.
On a ₦500,000 invoice that's ₦25,000 versus ₦50,000. Withholding isn't a penalty in itself — it's an advance against tax you'd owe anyway, and you claim it back when you file. But it leaves your account at double the rate, and the only route to getting it back is filing a return, which needs the Tax ID you skipped.
Worth knowing too: the Act requires banks and other financial-services providers to make a Tax ID a condition for opening an account and for operating an existing one. How fast each bank actually enforces that is a separate question I can't answer — but the direction isn't ambiguous. - Where it goes, and when
Personal income tax is administered by your State Internal Revenue Service — based on where you live, not where your clients are. Not the federal body, unless you're running a registered company with its own obligations. Returns are annual, due 31 March for the year before. So income earned in 2026 is filed by 31 March 2027. - Even if you owe nothing, you file
The Act requires a return from every taxable person "whether or not liable to pay tax". If your answer is zero, you file a nil return saying so. it feels pointless the first time. It isn't — it puts your year on record. Without one there's no filed position for that year, just an absence, and an absence is what gets asked about later. - VAT — probably not your problem
A business under ₦50 million in annual turnover is exempt from charging and filing VAT. Watch that number. A lot of what's online still says ₦100 million — that figure came from an earlier draft, before the final version lowered it. If a source quotes ₦100 million, it's working from the bill rather than the law.
The honest summary
Omo. Great article. But sha, I am pretty sure very few freelancers actually know about this. It gets harder every day to keep more of our income.
I get jobs mostly on Upwork, and I can tell you: I am already pretty mad at all the Upwork charges + Tax. Because even Upwork also removes tax, apart from their platform charges. The tax Upwork is supposed to be because I am from Nigeria.
Now, we have to deal with yet another tax and deduction. That makes it even harder to be able to keep more of what we have earned.
We go dey alright last last.
@abdulrahman You're right — and I nearly told you otherwise before I went and checked.
Upwork does charge you a Nigerian tax. It's VAT at 7.5%, and it's there because your tax residence is Nigeria. Upwork collects it and remits it. Your instinct was correct.
But the bit that matters: it's 7.5% of Upwork's service fee, not of your earnings.
On a $1,000 contract with a $100 service fee, the VAT is $7.50 — not $75. Worth looking at your own statements, because that number is usually smaller on the invoice than it feels in your head.
What it doesn't do is cover your income tax. They're different taxes doing different jobs — VAT is on the service Upwork sold you; income tax is on your profit. Paying one doesn't settle the other. I know that's not the answer anyone wants.
The thing I'd actually check: your W-8BEN.
That's the form telling Upwork you're not a US person. With a valid one on file, they don't withhold US tax at all. Without one, they're required to withhold up to 30% of your earnings and send it to the IRS. That's a real number, separate from both the service fee and the VAT, and entirely avoidable. The form also expires, so it's worth confirming yours is current rather than assuming.
If you've ever seen a deduction you couldn't account for, that's the first place I'd look.
Two things that soften the Nigerian side:
- The Upwork fee, and the VAT you paid on it, are costs of earning that income — they come off before your taxable profit is worked out. You're not paying income tax on money Upwork kept.
- The first ₦800,000 of taxable income is at 0%.
And one not to bother with: getting a VAT number won't exempt you. Upwork's own documentation is explicit that providing it changes nothing — they'll just print it on your invoice.
@yuta Yes. Indeed, the tax that Upwork collects is 7.5% of Upwork's service fees. However, it is paid by us - freelancers. That means, for example, on a 1,000 USD contract. Upwork may take 10% as service fees. This leaves $900 for the freelancer. Then Upwork takes another 7.5% off the service fee, which is 7.5 USD.
At the end of the day, the freelancer will be left with $892.5 out of the original $1000. And that's even for a 10% service charge. For some freelancers in some niches, Upwork takes a whopping 15%!!!