AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
A Nigerian employer must deduct PAYE each month under the Nigeria Tax Act bands in force since 1 January 2026 and remit it to the state internal revenue service by the 10th of the following month, and, with three or more staff, pay at least 10% of pay into each employee's pension account on top of the employee's 8%. There are also NSITF and, above set thresholds, ITF contributions. A Canadian company normally meets these through a Nigerian subsidiary or an employer of record.
Who the employer has to be
Nigerian payroll obligations sit with an employer that is registered in Nigeria: it holds the tax and pension registrations, deducts from pay and files returns. A Canadian company with no Nigerian presence has no such registrations, so in practice it either sets up a Nigerian subsidiary or uses an employer of record (EOR) that employs the staff on its behalf. Hiring someone as an independent contractor is a different relationship with different rules; see what an employer of record does for the EOR route.
Employing people in Nigeria can also raise the question of whether your Canadian company has a taxable presence there. PwC's summary (reviewed May 2026) says employing Nigerian residents does not on its own create a permanent establishment if they do not mainly serve Nigerian customers. Read whether a Lagos employee creates a Nigerian tax presence before you decide on structure.
PAYE: the 2026 bands and the deadlines
Under the Nigeria Tax Act 2025, the personal income tax bands from 1 January 2026 are, as summarised by PaySpace (19 November 2025):
| Annual taxable income | Rate |
|---|---|
| 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% |
PaySpace also lists rent relief of 20% of annual rent, capped at ₦500,000. DLA Piper's payroll FAQ (28 August 2026) notes that the employee's pension contribution is deducted from taxable income and that rent relief needs a receipt, lease or employer-approved declaration. For a fuller explanation, see Nigeria PAYE tax bands for 2026.
PwC's tax administration summary (last reviewed 29 May 2026) gives the deadlines: PAYE remitted on or before the 10th day of the month after salaries are paid, and an annual return of all employees' emoluments by 31 January. Individuals' income tax is collected by the relevant state internal revenue service; for staff living in Lagos, see registering with LIRS.
Pay set in Canadian or US dollars
If you set pay in a foreign currency, DLA Piper says the employer converts it to naira at the CBN rate at the time of payment and uses that figure for PAYE and other statutory deductions. Bonuses and a 13th-month payment are added to the PAYE base.
Pension and the other contributions
- Pension: PenCom's FAQ (2023) says the contributory scheme covers private employers with three or more staff. The minimum is 18%: 10% from the employer and 8% from the employee, or the employer can pay the whole amount. Contributions go to each employee's retirement savings account (RSA) with a pension fund administrator, within seven working days of paying salary. See pension contribution rates for detail.
- Group life insurance: PenCom's FAQ says employers must maintain group life cover of at least three times each employee's annual total emoluments.
- NSITF: the Nigeria Social Insurance Trust Fund's services page sets the Employees' Compensation Scheme contribution at 1% of total monthly payroll for every registered employer.
- ITF: under the ITF (Amendment) Act 2011, as summarised on Mondaq (2020), employers with five or more staff, or fewer with turnover of ₦50m or more a year, pay 1% of annual payroll to the Industrial Training Fund.
- NHF: DLA Piper reports that private-sector employers should stop National Housing Fund deductions unless the employee explicitly consents.
A worked example
Example only, simplified. A Toronto software firm, through its Lagos subsidiary, employs one developer on ₦500,000 a month (₦6,000,000 a year). For simplicity, assume pension is calculated on the whole salary and no rent relief is claimed.
- Employee pension (8%): ₦480,000 a year, deducted before tax
- Taxable income: ₦6,000,000 - ₦480,000 = ₦5,520,000
- Tax: 0% on ₦800,000 = ₦0; 15% on ₦2,200,000 = ₦330,000; 18% on the remaining ₦2,520,000 = ₦453,600
- Annual PAYE: ₦783,600, or ₦65,300 a month
- Employer pension (10%): ₦600,000 a year (₦50,000 a month), on top of salary
- NSITF (1% of payroll): ₦60,000 a year (₦5,000 a month)
Check: ₦330,000 + ₦453,600 = ₦783,600; ₦783,600 / 12 = ₦65,300. Group life premiums and any ITF contribution would be extra.
Steps to set up
- Decide the employer: your own Nigerian subsidiary or an employer of record.
- Register the employer with the state internal revenue service where your staff live, and get an employer code from a pension fund administrator.
- Ask each employee for their RSA PIN and tax ID. PenCom's FAQ lets an employer open a nominal RSA for someone who has not opened one after six months.
- Register with NSITF and, if you meet the thresholds, the ITF.
- Arrange group life cover before the first payday.
- Diarise the 10th for PAYE, seven working days after payday for pension, and 31 January for the annual return.
Getting it wrong
DLA Piper lists the main penalties: failing to deduct tax, 40% of the amount; failing to remit, 10% plus interest at the CBN rate; late filing, ₦100,000 for the first month. These fall on the Nigerian employer, which is another reason to be clear who that is.
Where Pryme fits
A Pryme Business Account can be opened from Canada and holds NGN, USD, GBP and EUR. Payroll and bulk payouts pay staff in naira, and the Compliance agent can prepare a calendar of PAYE and pension dates for a person to approve. The app shows the rate and the fee before you approve any conversion.
Questions people ask
Do I need a Nigerian company to employ staff in Nigeria?
You need a Nigerian employer to hold the PAYE and pension registrations: either your own subsidiary or an employer of record.
When is PAYE due in Nigeria?
On or before the 10th of the month after salaries are paid, with an annual return of emoluments by 31 January (PwC, May 2026).
What pension does an employer pay in Nigeria?
PenCom's FAQ sets a minimum of 10% from the employer and 8% from the employee for employers with three or more staff.
Is NHF still compulsory for private employers?
DLA Piper (August 2026) says private-sector employers should stop NHF deductions unless the employee explicitly consents.
Sources
- PwC Worldwide Tax Summaries: Nigeria, individual tax administration (last reviewed 29 May 2026) · accessed Oct 2026
- PaySpace: Nigeria Tax Reform 2026 (19 Nov 2025) · accessed Oct 2026
- PenCom: Frequently asked questions (2023 edition) · accessed Oct 2026
- NSITF: Services (Employees' Compensation Scheme) · accessed Oct 2026
- Mondaq (TNP): The ITF levy, to pay or not to pay (17 Feb 2020) · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability in Nigeria (28 Aug 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.