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Part of the guideDoing business with Africa: paying and getting paid in Nigeria
The short answer
The UK–Nigeria double taxation agreement, in force since 27 December 1987, decides which country may tax income that crosses between them and caps Nigerian tax on dividends, interest and royalties at 12.5% (15% for smaller dividend holdings). Because Nigeria's domestic withholding rate of 10% is already lower, the treaty's main value for UK firms is the permanent establishment rules and the right to credit Nigerian tax against UK tax.
A double tax treaty does not create tax. It divides taxing rights between two countries and promises relief where both tax the same income. The UK–Nigeria agreement (UK statutory instrument 1987/2057) is one of Nigeria's oldest, and it still governs how a UK company is taxed on Nigerian business. For the wider context of paying and getting paid across the border, see the parent guide on doing business with Nigeria and Africa.
Key dates and scope
- Signed
- 9 June 1987
- In force
- 27 December 1987
- Effective in the UK
- 1 April 1988 for corporation tax; 6 April 1988 for income tax and capital gains tax
- Effective in Nigeria
- 1 January 1988
- Taxes covered
- UK income tax, corporation tax and capital gains tax; Nigerian taxes on income and profits
The treaty has not been replaced, so its 1987 text still applies, read alongside Nigeria's 2025 tax Acts, which took effect on 1 January 2026.
Two other articles are worth knowing. Article 8 exempts profits from operating ships or aircraft in international traffic from tax in the other country, which matters to UK carriers and logistics firms. Article 25 lets HMRC and the Nigerian tax authority exchange information to apply the treaty and counter fraud, so treat anything you file in one country as visible to the other.
When a UK company becomes taxable in Nigeria
Under Article 7, a UK company's business profits are taxable only in the UK unless it carries on business in Nigeria through a permanent establishment (PE). Article 5 sets out what counts as a PE. The points most relevant to UK firms:
- A fixed place of business through which the business is carried on, such as an office, branch or workshop.
- Building, construction or assembly projects lasting more than three months, and supervisory activities on such sites after three months. This is shorter than in many modern treaties.
- Installation or supervision linked to machinery sales where the charges exceed 10% of the free-on-board price of the machinery.
- A dependent agent who habitually concludes contracts in Nigeria for the UK company.
- Not a PE: storage, display or purchasing-only facilities, and independent agents acting in the ordinary course of their business.
If you have a PE, Nigeria can tax the profits attributable to it, as if it were a separate business, and the Nigerian tax is credited in the UK.
Rate caps on investment income
| Income | Treaty cap on Nigerian tax | Nigerian domestic rate for non-residents (2026) | What applies in practice |
|---|---|---|---|
| Dividends to a company with at least 10% of voting power | 12.5% | 10% | 10% |
| Other dividends | 15% | 10% | 10% |
| Interest | 12.5% | 10% | 10% |
| Royalties (including use of industrial, commercial or scientific equipment) | 12.5% | 10% | 10% |
| Management and technical fees | No separate article | 10% | 10% (see below) |
A treaty can only reduce tax, never raise it, so the lower domestic rate wins. That is why PwC lists 10% for UK recipients across all four categories. Some of Nigeria's other treaties, such as those with Spain, Sweden and South Africa, cut dividends, interest and royalties to 7.5%; the UK agreement does not.
Service fees and the missing technical fees article
Some treaties with developing countries include a separate article that gives the source country the right to tax management and technical fees. The UK–Nigeria treaty does not. Fees for services that are not royalties fall to be considered under business profits (Article 7) or, for individuals, independent personal services (Article 14). In practice, Nigerian payers deduct the domestic 10% WHT on technical and professional fees to UK companies, and PwC's table reflects that. Whether that deduction can be challenged under Article 7 where the UK firm has no PE is a technical question that turns on Nigerian procedure; take advice before relying on it. Our explainer on Nigerian withholding tax for non-resident companies covers the deduction itself.
Getting relief in the UK: a worked example
Article 22 requires each country to give a credit for tax paid in the other, subject to its domestic law. For a UK company, that means foreign tax credit relief against UK corporation tax on the same income, capped at the UK tax on that income.
- A Bristol engineering consultancy invoices a Nigerian client £80,000 for design work done in the UK.
- The client deducts 10% WHT: £8,000. The consultancy receives £72,000 and a WHT receipt.
- Assume the profit on this contract is £40,000 and the UK corporation tax on that profit is £10,000 (an illustrative figure).
- The consultancy claims credit for the £8,000 Nigerian tax, reducing UK tax on this income to £2,000.
- If the Nigerian tax had exceeded the UK tax on that income, the excess would not be creditable. That is the main risk on low-margin contracts, where WHT on the gross fee can exceed UK tax on the net profit.
Keep the WHT receipt, invoice, contract and payment evidence; HMRC can ask for them. HMRC's Double Taxation Relief Manual (DT14400) holds the treaty's dates and links to the full text.
Staff working in Nigeria
Article 15 taxes employment income where the work is done, with an exception: a UK employee working in Nigeria is taxable only in the UK if they are present for no more than 183 days in the tax year, are paid by an employer that is not Nigerian resident, and their pay is not borne by a Nigerian PE. Fail any one test and Nigeria may tax the salary. Long site visits can also create a PE under Article 5, so track days for both reasons. If you take on local staff, the payroll guide for Nigeria, Ghana and Kenya explains Nigerian PAYE.
The treaty covers income taxes only. VAT on services is a separate Nigerian obligation, explained in VAT on digital services sold into Nigeria, and the Nigeria business payments guide compares Nigeria's treaties with Canada, the US and EU countries.
Where Pryme fits
For advice on treaty relief, use a tax adviser in each country; the sections above explain how relief works. The treaty depends on a paper trail: keep the gross fee, the withholding-tax deduction, the net receipt and the client's WHT receipt together for each invoice, so they line up when you claim UK relief. Invoicing is available on a Pryme business account, and a business multicurrency account holds GBP, NGN, USD and EUR in separate balances. Pryme Financial Ltd is a technology company, not a bank. In Nigeria, naira deposits are held by Solid Allianze Microfinance Bank Ltd, licensed by the CBN and insured by the NDIC up to the applicable limit; outside Nigeria, activities are carried out through regulated partners. A business account can be opened from any country; the documents required for your business are shown when you apply.
Questions people ask
Does the UK have a tax treaty with Nigeria?
Yes. The UK–Nigeria double taxation agreement was signed on 9 June 1987 and entered into force on 27 December 1987. It applies in the UK from April 1988 and in Nigeria from 1 January 1988.
What withholding tax applies to UK companies under the treaty?
The treaty caps Nigerian tax on interest and royalties at 12.5% and on dividends at 12.5% or 15%. Nigeria's domestic rate of 10% is lower, so 10% applies in practice.
Can I claim Nigerian withholding tax against UK corporation tax?
Generally yes, through foreign tax credit relief under Article 22, up to the UK tax charged on the same income. Keep the WHT receipt and matching invoice as evidence.
How long can UK staff work in Nigeria without Nigerian tax?
Under Article 15, up to 183 days in the tax year, provided the employer is not Nigerian resident and the pay is not borne by a Nigerian permanent establishment. All three conditions must be met.
Does the UK–Nigeria treaty cover technical fees?
There is no separate technical fees article. Fees for services are considered under business profits or independent services, but Nigerian payers usually deduct 10% WHT in practice. Take advice if the amounts are material.
Sources
- GOV.UK: 1987 UK–Nigeria double taxation agreement (in force) · accessed Oct 2026
- UK–Nigeria Double Taxation Agreement, full text (PDF) · accessed Oct 2026
- HMRC Double Taxation Relief Manual: DT14400 Nigeria · accessed Oct 2026
- HMRC International Manual: INTM153140 management and technical fees · accessed Oct 2026
- PwC Tax Summaries: Nigeria corporate withholding taxes · 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.