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The short answer
PAYE for Nigerian staff is deducted by the employer each month under the Nigeria Tax Act 2025 bands (0% on the first ₦800,000 a year, rising to 25% above ₦50m) and remitted to the internal revenue service of the state where the employee lives, on or before the 10th of the following month. A US business needs a registered Nigerian employer, its own subsidiary or an employer of record, to hold the PAYE registration.
If you employ people in Nigeria, their income tax is collected through you. Nigeria's PAYE system makes the employer deduct tax from each salary and pay it to the tax authority. This guide explains how it works for a US business, with a worked example under the 2026 bands. It is information, not tax advice.
Who collects PAYE
Personal income tax on employees is administered by the states, not the federal Nigeria Revenue Service (NRS, which replaced FIRS). BusinessDay's explainer on the Nigeria Tax Act 2025 describes individuals dealing with the internal revenue service of their state of residence, and the Act's residence test for individuals is 183 days in a 12-month period. In practice, a Lagos-based employee's PAYE goes to the Lagos State Internal Revenue Service, an Abuja employee's to the FCT IRS, and so on. If your team is spread across states, you remit to each one.
Registering as an employer
PAYE registration sits with a Nigerian employer that has a tax identification number. A US LLC or corporation with no Nigerian presence usually cannot register on its own, so the choices are:
- A Nigerian subsidiary registered with the CAC, which then registers with each relevant state IRS and gets an employer tax record;
- An employer of record, whose Nigerian entity is already registered and remits for you; see employer of record in Nigeria.
Ask the state IRS for its current registration steps and documents; they differ by state and most now run online portals.
How the tax is worked out
According to PwC's summary of the 2026 rules (reviewed 29 May 2026), the annual bands are:
| 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% |
Before applying the bands, deduct the employee's pension contribution and other allowable reliefs. PaySpace's summary of the reform lists rent relief of 20% of annual rent paid, capped at ₦500,000. Minimum wage earners are exempt, according to PwC.
Worked example
Example only. An Abuja-based developer earns ₦500,000 a month (₦6,000,000 a year), all of it pensionable emoluments for simplicity, and pays ₦1,200,000 a year in rent.
- Employee pension at 8%: ₦480,000.
- Rent relief at 20% of ₦1,200,000: ₦240,000 (below the ₦500,000 cap).
- Taxable income: ₦6,000,000 − ₦480,000 − ₦240,000 = ₦5,280,000.
- Tax: 0% on ₦800,000 = ₦0; 15% on ₦2,200,000 = ₦330,000; 18% on the remaining ₦2,280,000 = ₦410,400.
- Annual PAYE ₦740,400, or ₦61,700 a month.
The employee's net pay before any other deductions is ₦500,000 − ₦40,000 pension − ₦61,700 PAYE = ₦398,300 a month. Your actual figures depend on how pay is split between basic, housing and transport, and on the reliefs each employee can document.
Monthly remittance and the annual return
- Remit each month's PAYE on or before the 10th of the following month (PwC).
- File the annual return of all emoluments paid to employees by 31 January (PwC).
- Keep payroll records. The Nigeria Tax Administration Act 2025 requires records sufficient to work out tax to be kept for at least six years after the year of assessment.
Give each employee a payslip showing the PAYE deducted and, after year end, a statement of tax paid they can use for visas, loans or a tax clearance certificate; see payslips and tax cards. For the dates in one place, see a statutory deductions calendar, and for the bands in more depth the Ledger's Nigeria PAYE tax bands for 2026.
Common mistakes
- Remitting to the wrong state. An employee who moves from Lagos to Ibadan changes the state that is owed PAYE. Ask staff to tell you when they move.
- Ignoring reliefs. Rent relief and pension deductions reduce taxable income; ask staff for rent evidence once a year and keep it on file.
- Computing tax on the wrong pay. Bonuses, allowances and benefits in kind are generally part of taxable pay. Run them through payroll in the month they are paid.
- Late remittance. The 10th comes quickly after a month-end payday. Fund the tax with the salaries, not afterwards.
- No receipts. Keep the state IRS payment receipt for every remittance; employees need the record for tax clearance.
Check the bands and reliefs each January. The 2025 reform changed both, and payroll software configured for the old rules will keep applying them until someone updates it.
What if staff live in Nigeria but you treat them as contractors?
Contractors pay their own tax under self-assessment with their state IRS, so no PAYE applies. That only holds if the relationship really is a contract for services. If it looks like employment, the state IRS can treat it as such.
Where Pryme fits
Pryme's payroll on a Business Account pays net naira salaries in a batch, and the Compliance agent can prepare a reminder list of remittance dates for a person to approve. Pryme does not file PAYE or act as your employer.
Questions people ask
Which state do I pay PAYE to for a remote Nigerian employee?
Generally the internal revenue service of the state where the employee lives. Staff in different states mean remittances to each.
What are the Nigerian PAYE tax bands for 2026?
0% on the first ₦800,000, then 15%, 18%, 21% and 23% on further bands, and 25% above ₦50m a year, per PwC's summary of the Nigeria Tax Act 2025.
When must PAYE be remitted?
On or before the 10th of the month after the salary month, with an annual return of emoluments by 31 January, according to PwC.
Can my US LLC register for PAYE in Lagos?
It usually needs a Nigerian entity with a tax ID. Most US businesses use a subsidiary or an employer of record. Ask LIRS for its current requirements.
Sources
- PwC Worldwide Tax Summaries: Nigeria, taxes on personal income (reviewed 29 May 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, individual tax administration (reviewed 29 May 2026) · accessed Oct 2026
- PaySpace: Nigeria Tax Reform 2026 (19 Nov 2025) · accessed Oct 2026
- BusinessDay: Nigeria Tax Act 2025 explainer (12 Jan 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.