Nigeria’s New Tax Law Is Forcing Remote Workers To Get Clever (Or Pay Dearly)

Consider Chidi, a Lagos-based backend engineer who landed a remote job with a San Francisco-based AI startup. He earns a competitive USD 6.5 K monthly, a sum that places him firmly in the top tax bracket under Nigeria’s new tax regime. For the last two years, Chidi operated in the informal economy, receiving payments through freelance platforms and enjoying the full weight of his earnings.

But under the Nigeria Tax Act 2025, which took effect this year, that era is over. As a tax resident, spending more than 180 days a year in Lagos, Chidi’s worldwide income is now fully taxable in Nigeria.

With annual earnings exceeding NGN 50 M, he falls into the 25% tax bracket. Without restructuring how he works, Chidi faces a potential annual tax liability of around NGN 26 M (USD 17.5 K). That is more than four months of his gross income, gone.

The frustration is compounded by what the tax man doesn’t see. Chidi pays for his own high-speed Starlink subscription, monthly electricity bills for his home office, and the latest M2 MacBook Pro he bought to handle the startup’s codebase.

None of these costs currently reduces his tax burden. He is paying for the tools of his trade with after-tax money, while his U.S.-based counterparts likely write off similar expenses before their taxable income is calculated.

Let's say Chidi then decides to take his chances and "fly under the radar" for one more year. The income keeps flowing, and for a while, nothing happens.

Then, his primary bank account flags an unusually large transaction: a USD 15 K performance bonus from the San Francisco startup, wired in a single transfer. Under the bank's new compliance protocols, the transaction is automatically reported.

Within months, Chidi receives a notice from the tax authority. Because he never registered, he is hit with an initial fine of NGN 50 K for failure to register, plus an additional NGN 25 K for every month he has remained noncompliant since the act took effect. The penalties stack quickly.

When the tax authority eventually opens a full review of his earnings, the situation worsens. Chidi attempts to explain that he spent thousands on equipment, software licenses, and home office infrastructure to earn that money. But without formal business records, invoices, or a registered entity, none of these expenses are recognised.

The tax assessment is calculated based on his total bank inflows—his revenue—not on what he actually kept after costs. What could have been taxed as profit after legitimate deductions is instead treated as pure income. Chidi ends up owing far more than necessary, simply because he operated informally and left no paper trail.