Nigeria Taxes
Hello, I'm a an engineer from Canada working in Nigeria. I got this email address from the following site, http://centa.com/toc.htm I was wondering if you guys have experience dealing with this type of tax situation and if you have any recommendations concerning what approach I should take doing my taxes. Please let me know if you can offer assistance, if you need additional information, please advise. Regards, -----------------------------------------------------
david ingram replies:
Nigerian personal income tax rates range from 5% to 30% with the liklihood of your rate being 30% as a highly paid foreigner.
In general what happens with a worker in your position is that the company is paying the tax for you so that if your pay was $100,000 'after tax', the company is treating your wages as a $142,857.14, paying the Nigerian goverment 30% or $42,857.14 and giving you the $100,000 left over.
From that $100,000, they would likely deduct CPP and EI and about $10,000 in Canadian Income Tax.
If you have been working out of Canada for a 12 month period and your employer qualifies as a Canadian Employer and you are working for a Canadian branch (they have at least 12 office locations in Canada) and can sign a T626 (Overseas Employemtn Tax credit form) you are essentailly exempt on up to $80,000 (prorated by the number of months if 6 or more) and taxable on the excess.
You can see the form at http://www.cra-arc.gc.ca/E/pbg/tf/t626/t626-06e.pdf
When doing your return, you would fill in the T626 and a foreign tax credit (form 2209) for the tax paid on the (142,857 - 80,000) $62,857.
In a sample i threw together, as a single person living in BC with no RRSP or any other deductions, you would receive a $2,851.00 refund from Canada - remember the $10,000 of tax deducted.
Note that in this case, if you put $5,000 into an RRSP your refund actually goes "down" to $2,809.29.
If you paid $1,000 Union or professional fees, your refuind goes DOWN.
So be careful what you do in this situation. Conventional tax deductions can take away from the benefits of the foreign tax and overseas employment tax credits and most of the run of the muill Canadian accountants do not realize this.
Therefore, if you are on a monthly RRSP contribution plan or something similar, stop it and if you are paying Union or Engineering Dues, do NOT claim them on the return. If you have already made RRSP contributions, do NOT claim them, carry them over to a future year. If this is NOT your first year and you have already filed for last year, check it over.
You asked if we can do this, the answer is yes. That is 'what' we do.
Why did I answer the question as thoroughly? I used it as a training question for an international tax course. It was picked out of about 60 questiosn, 59 of which are not being answered. Your name has been added to an international Q & A list. If there are too many replies that you do not want, just send back one with "remove please" in the subject line and you will be removed.
david ingram replies:
Nigerian personal income tax rates range from 5% to 30% with the liklihood of your rate being 30% as a highly paid foreigner.
In general what happens with a worker in your position is that the company is paying the tax for you so that if your pay was $100,000 'after tax', the company is treating your wages as a $142,857.14, paying the Nigerian goverment 30% or $42,857.14 and giving you the $100,000 left over.
From that $100,000, they would likely deduct CPP and EI and about $10,000 in Canadian Income Tax.
If you have been working out of Canada for a 12 month period and your employer qualifies as a Canadian Employer and you are working for a Canadian branch (they have at least 12 office locations in Canada) and can sign a T626 (Overseas Employemtn Tax credit form) you are essentailly exempt on up to $80,000 (prorated by the number of months if 6 or more) and taxable on the excess.
You can see the form at http://www.cra-arc.gc.ca/E/pbg/tf/t626/t626-06e.pdf
When doing your return, you would fill in the T626 and a foreign tax credit (form 2209) for the tax paid on the (142,857 - 80,000) $62,857.
In a sample i threw together, as a single person living in BC with no RRSP or any other deductions, you would receive a $2,851.00 refund from Canada - remember the $10,000 of tax deducted.
Note that in this case, if you put $5,000 into an RRSP your refund actually goes "down" to $2,809.29.
If you paid $1,000 Union or professional fees, your refuind goes DOWN.
So be careful what you do in this situation. Conventional tax deductions can take away from the benefits of the foreign tax and overseas employment tax credits and most of the run of the muill Canadian accountants do not realize this.
Therefore, if you are on a monthly RRSP contribution plan or something similar, stop it and if you are paying Union or Engineering Dues, do NOT claim them on the return. If you have already made RRSP contributions, do NOT claim them, carry them over to a future year. If this is NOT your first year and you have already filed for last year, check it over.
You asked if we can do this, the answer is yes. That is 'what' we do.
Why did I answer the question as thoroughly? I used it as a training question for an international tax course. It was picked out of about 60 questiosn, 59 of which are not being answered. Your name has been added to an international Q & A list. If there are too many replies that you do not want, just send back one with "remove please" in the subject line and you will be removed.
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