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 reduce double taxation are the Foreign Earned Income Exclusion (FEIE, up to $130,000 for 2025 under IRC §911) and the Foreign Tax Credit. Neither is automatic. The FEIE requires a tax home in a foreign country plus either the bona fide residence test or 330 full days abroad in a 12-month period, and it reaches earned income only. The Foreign Tax Credit is figured separately for each income category under IRC §904 and is capped at the US tax on the foreign income in that category, so it reduces double taxation without guaranteeing that none remains.
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 path back for non-willful taxpayers. They run on two tracks: the foreign track carries no offshore penalty but requires meeting the program's non-residency test, and the domestic track carries a 5% offshore penalty but works through amended returns, so it does not fit someone who never filed at all. Tax and interest on the catch-up years are owed whichever route applies.
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). The entity is a Controlled Foreign Corporation (CFC) when US shareholders who each own at least 10% together own more than 50% of it by vote or by value. A single 10% stake does not meet that test on its own, and only shareholders at or above 10% are counted toward it. Where the test is met, each 10% US shareholder faces an annual, complex reporting requirement on Form 5471, and under the GILTI (Global Intangible Low-Taxed Income) rules may owe US tax on their share of the company's profits even if no dividends are distributed.
The Nigeria Tax Act 2025 repealed the Capital Gains Tax Act and took effect on 1 January 2026, ending the separate flat 10% capital gains rate. An individual's chargeable gains now form part of assessable income and are taxed under the personal income tax bands in the Act's Fourth Schedule, which run from 0% on the first N800,000 up to 25% above N50,000,000. Digital and virtual assets are named as chargeable assets, and gains on shares in a Nigerian company are outside the charge where disposal proceeds total less than N150,000,000 and the gain does not exceed N10,000,000 in any 12 consecutive months. A US person must report these gains to the IRS as worldwide income whichever Nigerian rate applies, and can claim a foreign tax credit for Nigerian tax paid, within the separate limitation Form 1116 applies to each income category.
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 under IRC Section 1401: 15.3% on 92.35% of net earnings from self-employment, with the 12.4% Social Security portion applying only up to the wage base ($176,100 for 2025) and the 2.9% Medicare portion uncapped, plus a further 0.9% Additional Medicare Tax on combined Medicare-taxed wages and self-employment income above $200,000 for a single, head-of-household or qualifying-surviving-spouse filer, $250,000 for a joint return, and $125,000 for married filing separately. It is owed once net earnings from self-employment reach $400 or more. Neither the Foreign Earned Income Exclusion nor the Foreign Tax Credit reduces 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. If her tax home is in Nigeria and she meets either the bona fide residence test or the 330-day physical presence test, the Foreign Earned Income Exclusion (FEIE) covers her whole salary, since it sits under the 2025 limit of $130,000, which would leave no US income tax on those wages. 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. Assuming his tax home is in Nigeria and he meets the bona fide residence or 330-day test, the FEIE excludes $130,000 (the 2025 limit) of this income from US income tax, leaving $20,000 exposed. That $20,000 is not taxed from the bottom of the brackets: under IRC Section 911(f) it is taxed at the rates that would have applied had the excluded amount been included. Crucially, the FEIE does not affect his self-employment tax. The calculation is $150,000 * 0.9235 = $138,525 of net earnings, which is below the 2025 Social Security wage base of $176,100, so the full 15.3% applies: about $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. Michael owns at least 10% and so counts as a US shareholder, and his 100% stake puts US shareholders above 50% by both vote and value, so the 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 Nigerian 'Ltd' that is a CFC, or assuming a stake below the control threshold rules the filing out.
- 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, US self-employment tax runs at 15.3% on 92.35% of your net earnings, with the 12.4% Social Security portion stopping at the wage base ($176,100 for 2025) and the 2.9% Medicare portion uncapped. 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?
The company is a Controlled Foreign Corporation (CFC) when US shareholders who each own at least 10% together own more than half of it by vote or by value. Your own stake alone does not settle it. Where the test is met, a 10% US shareholder files the very complex Form 5471 each year and may owe current US tax on the company's profits under the GILTI regime, even without receiving dividends. Form 5471 can also be due in other situations, such as the year you acquire or dispose of a qualifying interest, so the filing question is worth checking separately from CFC status.
How do I avoid being taxed twice on my salary?
Two tools do most of the work, and they cannot both cover the same dollar. The Foreign Earned Income Exclusion excludes foreign wages up to $130,000 for 2025, but only if your tax home is in Nigeria and you meet either the bona fide residence test or the 330-day physical presence test. The Foreign Tax Credit gives credit for Nigerian income tax on income the US also taxes, subject to a separate limitation for each Form 1116 income category, so a credit sitting in one category cannot soak up US tax in another. Neither one reduces US self-employment tax.
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)
Reviewed by Ilya Fayerman, Esq. (NY Bar) on
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.