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The short answer
A UK company can pay a co-founder in Nigeria as an independent contractor (they invoice, you pay), as an employee (usually through a Nigerian entity or an employer of record, since Nigerian payroll needs a local employer), or as a shareholder (dividends from profits). Most early teams combine contractor fees with shares. Whichever you choose, the co-founder, as a Nigerian tax resident, is taxed in Nigeria on their worldwide income.
Three routes
| Route | How money moves | Main paperwork | Watch for |
|---|---|---|---|
| Contractor | Co-founder invoices the UK company; it pays the invoice | Written services agreement, invoices | A contract that describes employment in all but name |
| Employee | Salary through Nigerian payroll | Nigerian employer (subsidiary or employer of record), PAYE, pension | Cost and set-up time |
| Shareholder | Dividends from UK company profits | Share issue, shareholder agreement, dividend minutes | Dividends need distributable profits |
Paying as a contractor
This is the most common starting point. The co-founder signs a services agreement with the UK company, sends invoices, and is paid to a Nigerian account in naira or a domiciliary account in pounds or dollars. The UK company records the payments as a business cost.
On the Nigerian side, PwC's tax summary (reviewed 29 May 2026) says residents are taxed on worldwide income, so the co-founder declares the fees to their state tax authority. Under the Nigeria Tax Act bands PwC lists, the first ₦800,000 is taxed at 0%, the next ₦2.2 million at 15%, the next ₦9 million at 18%, rising to 25% above ₦50 million. Nigeria's withholding tax rules on fees are aimed at payers in Nigeria; if the UK company has an office, agent or subsidiary there, get advice on whether it must deduct.
Paying as an employee
Employing someone in Nigeria means Nigerian payroll: PAYE to the state, pension contributions and other employer obligations, handled by an employer in Nigeria. A UK company with no Nigerian entity usually has two choices:
- Set up a Nigerian subsidiary to employ local staff; see setting up a Nigerian subsidiary.
- Use an employer of record, a Nigerian company that employs the person on your behalf for a fee.
UK payroll is generally the wrong tool for someone who lives and works only in Nigeria, but the UK rules turn on residence and where the work is done; take advice before putting a Nigeria-based person on UK PAYE.
Paying as a shareholder
Giving the co-founder shares aligns them with the company's success, and dividends can follow once there are profits. PwC notes that foreign dividends brought into Nigeria through government-approved channels remain exempt for Nigerian residents, which makes the receiving route important: dividends paid into a Nigerian bank account through the banking system are easier to evidence than cash or informal transfers. Put vesting, leaver terms and decision rights in a written agreement; see shareholder agreement with a co-founder in Nigeria.
Worked example
Example only: a London fintech start-up has two founders: Ife in London and Chidi in Lagos. Each holds 50% of the UK company. Chidi is paid a monthly contractor fee of ₦1,500,000 (₦18,000,000 a year), invoiced in naira. On the Nigerian bands PwC lists, his tax on that income alone would be: ₦0 on the first ₦800,000; 15% of ₦2,200,000 = ₦330,000; 18% of ₦9,000,000 = ₦1,620,000; and 21% of the remaining ₦6,000,000 = ₦1,260,000. Total ₦3,210,000 before any reliefs. When the company later pays a dividend, Chidi receives his half through the banking system into his Lagos account.
Getting the money there
However you pay, use the banking system and keep the paper trail: invoice or payslip, the payment record from the UK side, and the credit on the Nigerian account. That record supports the co-founder's tax return, the UK company's accounts and any later due diligence by an investor. Agree in the contract whether fees are fixed in pounds or naira. A fee fixed in pounds moves the exchange rate risk to the co-founder; a fee fixed in naira moves it to the company. For international transfers, compare the transfer fee and the exchange rate margin against the mid-market rate, as both are part of the cost.
Mixing routes as the company grows
Early on, contractor fees plus founder shares are usually the simplest. Once the company raises money or hires a team in Nigeria, a Nigerian subsidiary that employs the co-founder and local staff often becomes more practical, with the UK company paying the subsidiary for services under an intercompany agreement. That move brings NIPC registration and transfer pricing questions, so plan it with advisers on both sides.
What to check first
- What does the co-founder actually do, and who controls how and when? That decides contractor or employee.
- Is there a written agreement for the services and a separate one for the shares?
- Which currency will invoices be in, and who bears the conversion cost?
- If the co-founder is also a director, how does that affect where the company is managed from? See tax residence risk.
Where Pryme fits
A UK company can pay a Lagos co-founder in naira or pounds from a Pryme Business Account, with bulk payouts for regular runs and invoicing on the other side. Conversions through Swap show the rate and the fee before you approve.
Questions people ask
Can a UK company pay someone in Nigeria as a contractor?
Yes. A written services agreement and invoices are the usual set-up. The contractor declares the income in Nigeria, where residents are taxed on worldwide income.
Can I put a Nigeria-based co-founder on UK payroll?
Generally UK payroll is not the right tool for someone living and working only in Nigeria. Nigerian employment usually runs through a Nigerian employer or employer of record.
Are dividends from a UK company taxed in Nigeria?
PwC's summary says foreign dividends brought into Nigeria through government-approved channels remain exempt for residents. Keep records of how the money arrived.
What is an employer of record in Nigeria?
A Nigerian company that legally employs staff on your behalf, running payroll, PAYE and pension, for a fee.
Sources
- PwC Worldwide Tax Summaries: Nigeria, individual taxes (reviewed 29 May 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, withholding taxes (reviewed 29 May 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.