US citizens in Nigeria face significant US tax complexity due to the absence of both a US-Nigeria income tax treaty and a social security totalization agreement. Relief from double taxation relies entirely on US domestic law, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit. Self-employed individuals remain fully liable for US self-employment taxes.
US filing basics every American abroad must know
US citizens and green-card holders are taxed on worldwide income wherever they live, and usually must file Form 1040 once gross income exceeds the IRS threshold ($15,750 for single filers, $31,500 for married filing jointly, and $23,625 for head of household for 2025), even when no tax is ultimately due. The tools that prevent double taxation are the Foreign Earned Income Exclusion (FEIE, up to $130,000 for 2025 under IRC §911) and the Foreign Tax Credit.
Two reporting rules catch most filers in Nigeria: the FBAR (FinCEN Form 114), required when foreign financial accounts exceed $10,000 in aggregate at any point in the year, and Form 8938 (FATCA) for specified foreign assets above the applicable threshold. Both can carry penalties even when no tax is owed. If you are behind, the Streamlined Filing Compliance Procedures are the usual penalty-free path back for non-willful taxpayers.
US tax treaty with Nigeria
There is no income tax treaty in force between the United States and Nigeria. US citizens and residents cannot claim any treaty benefits, such as reduced withholding rates, residency tie-breaker rules, or special treatment for certain income types. All double taxation issues must be resolved using US tax law, primarily the Foreign Tax Credit (FTC) and the Foreign Earned Income Exclusion (FEIE).
Nigerian Pensions and US Tax
Nigeria's mandatory retirement plan is the Contributory Pension Scheme (CPS), where contributions are held in a Retirement Savings Account (RSA) managed by a Pension Fund Administrator (PFA). While contributions, growth, and withdrawals are generally tax-exempt in Nigeria, the US tax treatment is radically different and more complex.
For a US person, an RSA is a foreign financial account that must be reported on the FBAR (FinCEN Form 114) and Form 8938 if thresholds are met. Furthermore, the IRS is likely to treat the RSA as a foreign trust, which requires annual reporting on Form 3520 and 3520-A. However, the RSA may be exempt from Form 3520 and 3520-A reporting if it meets the requirements of Rev. Proc. 2020-17. The investments within the RSA are almost certainly Passive Foreign Investment Companies (PFICs), triggering burdensome reporting on Form 8621 and potentially punitive tax outcomes. Employer contributions, employee contributions, and internal fund growth may all be currently taxable by the US.
Investments, property, and capital gains in Nigeria
The most common business entity in Nigeria is the Private Company Limited by Shares (Ltd). If a US person has significant ownership (typically over 10%), the entity may be classified as a Controlled Foreign Corporation (CFC). This triggers an annual, complex reporting requirement on Form 5471. Under the GILTI (Global Intangible Low-Taxed Income) rules, the US shareholder may owe US tax on their share of the company's profits, even if no dividends are distributed.
For 2025, capital gains in Nigeria are generally taxed at a flat rate of 10%. (Nigeria Capital Gains Tax Act (prior to 2026 effective date of NTA 2025)) Gains from digital and virtual assets are explicitly taxable in Nigeria. A US person must also report these worldwide gains to the IRS and can claim a foreign tax credit for taxes paid to Nigeria.
Self-employment and companies in Nigeria
There is no social security totalization agreement between the United States and Nigeria. This has a critical impact on self-employed US citizens. They are fully subject to US self-employment tax, which is 15.3% on net earnings up to the Social Security wage base, and 2.9% on earnings above it. (IRC Section 1401) The Foreign Earned Income Exclusion cannot be used to reduce this tax. A Certificate of Coverage, which would prove exemption, is not available for work in Nigeria, meaning a US person may be required to pay into both the US and Nigerian systems simultaneously.
Worked examples
Expat Engineer on Nigerian Payroll (2025)
Aisha is a US citizen working as an engineer in Lagos for a Nigerian company. Her salary is NGN 150,000,000, which is approximately USD 100,000. She can use the Foreign Earned Income Exclusion (FEIE) to exclude her entire salary from US income tax, likely resulting in zero US income tax liability. However, her mandatory contributions to her Retirement Savings Account (RSA) create significant reporting duties. She must report the RSA on her FBAR and Form 8938. She also likely needs to file Form 3520-A/3520 for the foreign trust aspect of the pension (unless exempt under Rev. Proc. 2020-17) and Form 8621 for the PFICs held within it.
Self-Employed Consultant (2025)
David is a self-employed American IT consultant living in Abuja. He has net self-employment earnings of $150,000. He uses the FEIE to exclude $130,000 (the approximate 2025 limit) of this income from US income tax, leaving $20,000 subject to income tax. Crucially, the FEIE does not affect his self-employment tax calculation. He owes US self-employment tax on his full earnings. The calculation is approximately $150,000 * 0.9235 * 0.153 = $21,194. He must pay this amount to the IRS regardless of any taxes or social contributions he pays in Nigeria.
Investor and Business Owner (2025)
Michael, a US citizen, owns 100% of a Nigerian Private Company Limited by Shares ('Ltd') that provides marketing services. The company is profitable but has not distributed any dividends. Because Michael is a US person who controls a foreign corporation, his company is a Controlled Foreign Corporation (CFC). He must file the highly complex Form 5471 with his US tax return each year. Furthermore, under the GILTI rules, he may need to include a portion of the company's current profits in his personal US income and pay US tax on it, even though he received no cash from the company.
Common mistakes for Americans in Nigeria
- Assuming a US-Nigeria tax treaty or social security agreement exists.
- Believing the Foreign Earned Income Exclusion reduces or eliminates US self-employment tax.
- Failing to report a Nigerian Retirement Savings Account (RSA) on the FBAR and Form 8938.
- Ignoring the US tax classification of a Nigerian pension as a foreign trust (Form 3520, unless exempt under Rev. Proc. 2020-17) holding PFICs (Form 8621).
- Not filing Form 5471 for a controlled Nigerian 'Ltd' company.
- Thinking that the tax-free status of a Nigerian pension within Nigeria applies to a US tax return.
- Attempting to claim a Certificate of Coverage to get an exemption from US self-employment tax.
- Forgetting that the US taxes worldwide capital gains, requiring the reporting of Nigerian property or asset sales.
Nigeria tax FAQ
Is there a US-Nigeria tax treaty?
No. There is no comprehensive income tax treaty between the United States and Nigeria. Double tax relief is managed through US domestic law like the Foreign Tax Credit and Foreign Earned Income Exclusion.
Do I owe US self-employment tax while working in Nigeria?
Yes. If you are self-employed, you are fully liable for US self-employment taxes (15.3% for Social Security and Medicare) on your net earnings. There is no totalization agreement to provide an exemption, so you may have to pay into both the US and Nigerian systems.
Is my Nigerian pension (RSA) taxable in the US?
Yes. Unlike in Nigeria, your Retirement Savings Account (RSA) is not given special tax-deferred status by the US. Employer contributions, your contributions, and internal investment growth may all be subject to current US taxation. The account is also subject to extensive reporting.
What US reporting is required for my Nigerian pension?
You must include the value of your RSA on your annual FBAR (FinCEN 114) and Form 8938 if you meet the filing thresholds. Additionally, because the IRS likely views it as a foreign trust holding PFICs, you may also need to file Forms 3520, 3520-A (unless exempt under Rev. Proc. 2020-17), and 8621.
I own a Nigerian 'Ltd' company. What do I need to do?
If you are a US person with a significant stake in a Nigerian company, it is likely a Controlled Foreign Corporation (CFC). This requires you to file the very complex Form 5471 each year and you may owe current US tax on the company's profits under the GILTI regime, even without receiving dividends.
How do I avoid being taxed twice on my salary?
You can use either the Foreign Earned Income Exclusion (FEIE) to exclude your wages from US income tax up to a certain limit, or you can take a Foreign Tax Credit (FTC) for income taxes paid to Nigeria to offset your US tax bill on the same income.
Are my capital gains from selling Nigerian assets taxed by the US?
Yes. The US taxes its citizens on their worldwide income, including capital gains. A sale of Nigerian real estate, stocks, or digital assets must be reported on your US return. You can, however, claim a foreign tax credit for any capital gains tax you paid to Nigeria on that sale.
What is a PFIC and is my Nigerian investment one?
A PFIC is a Passive Foreign Investment Company. Most foreign-domiciled investment funds, including those held within a Nigerian pension (RSA), fall under this category. Owning PFICs requires filing Form 8621 and involves very complex and often unfavorable tax rules.
Sources and last reviewed
- IRS, Tax Guide for U.S. Citizens Abroad (Publication 54) (verified 2026-06-07)
- National Pension Commission (PenCom) of Nigeria (verified 2026-06-07)
- SSA, International Agreements Overview (verified 2026-06-07)
Last reviewed .
Common services needed by expats in Nigeria
Most Americans abroad in Nigeria need help with at least one of the following core compliance areas, which frequently interact:
- US expat tax returns, Form 1040 with FEIE, FTC, treaty positions, and any required state returns.
- FBAR reporting, FinCEN Form 114 for foreign financial accounts exceeding $10,000 aggregate at any time during the year.
- Form 8938 (FATCA), IRS disclosure of specified foreign financial assets when thresholds are met.
- Streamlined catch-up filing, For eligible non-willful taxpayers with prior unfiled years.