Introduction

Healthcare delivery in Nigeria does not operate in isolation. It is closely linked to the country’s tax system, which funds public health services while also placing statutory obligations on healthcare professionals and facilities. Understanding how taxation affects both individuals and institutions in the healthcare sector is essential for compliance, sustainability, and long-term growth.

This article explains the relationship between healthcare and taxation in Nigeria, focusing on how it affects healthcare professionals and healthcare facilities.

The Role of Tax in Nigeria’s Healthcare System

Taxes collected by federal and state governments form a major source of funding for Nigeria’s healthcare system. These funds support:

• Public hospitals and teaching hospitals
• Primary Health Care Centres (PHCs)
• Salaries of healthcare workers in government facilities
• Public health initiatives such as immunization, maternal health, and disease control programs

Without tax revenue, the government’s ability to provide accessible and affordable healthcare would be severely limited.

Tax Obligations of Healthcare Professionals

Personal Income Tax (PIT / PAYE)Healthcare professionals such as doctors, nurses, pharmacists, laboratory scientists, and allied health workers are subject to Personal Income Tax. Employed professionals pay tax through PAYE (Pay As You Earn), deducted monthly by their employer.Self-employed professionals and consultants file annual returns under the Personal Income Tax Act (PITA). Proper PAYE remittance is not optional it is a legal requirement.

Withholding Tax (WHT) for Consultants and Locum Staff.

Many healthcare professionals work as:

• Locum doctors
• Visiting consultants
• Independent contractors

In such cases:

• Healthcare facilities are required to deduct Withholding Tax (usually 5–10%) at source.
• The deducted amount is remitted to the relevant tax authority and serves as advance tax credit for the professional.

Failure to deduct or remit WHT exposes facilities to penalties and audits.

Professional Allowances and Tax

Certain allowances (call duty, hazard allowance, shift allowance) are generally taxable unless specifically exempted by law. Professionals should understand that allowances are not automatically tax-free.

Tax Responsibilities of Healthcare Facilities

Company Income Tax (CIT)

Private hospitals, clinics, laboratories, diagnostic centres, and pharmacies are liable to Company Income Tax.

• Small companies (₦25 million turnover or less): 0%
• Medium companies (₦25–₦100 million): 20%
• Large companies (Above ₦100 million): 30%

Facilities must file annual tax returns with the Federal Inland Revenue Service (FIRS).

Value Added Tax (VAT) in Healthcare

VAT is one of the most misunderstood taxes in the healthcare sector.

VAT-Exempt Services

• Medical consultations
• Diagnostic services directly related to patient care
• Treatment and clinical procedures

VATable Services

Sale of drugs and medical consumables (subject to interpretation and structure)

Non-medical items (cosmetics, supplements not prescribed)

Training programs and non-clinical services

Facilities offering both exempt and taxable services must maintain clear financial separation to avoid compliance issues.

PAYE Obligations for Healthcare Facilities

Hospitals and clinics must:

• Deduct PAYE from staff salaries
• Remit deductions monthly to the State Internal Revenue Service
• File annual PAYE returns

Non-compliance can lead to penalties, interest, and public enforcement actions.

Pension and Health Insurance Contributions

• Employer pension contributions are tax-deductible expenses.
• Health insurance contributions under the National Health Insurance Authority (NHIA) scheme are also allowable deductions.
• Proper documentation is essential to enjoy these tax benefits.

Faith-Based and Non-Profit Healthcare Facilities

Many mission hospitals and NGOs operate on a non-profit basis.

• They may qualify for tax exemptions, but exemption is not automatic.
• Registration with FIRS and approval for exemption is required.
• PAYE, WHT, and VAT obligations may still apply depending on operations.

Why Tax Compliance Matters in Healthcare

For professionals:

• Proof of tax compliance is often required for visas, loans, and professional engagements.
• It protects against future tax liabilities and penalties.

For facilities:

• Builds credibility with regulators and partners
• Prevents sudden tax assessments and audits
• Improves eligibility for government programs, grants, and institutional partnerships

Conclusion

Taxation and healthcare in Nigeria are deeply interconnected. While taxes fund public healthcare, healthcare professionals and facilities also carry legal tax responsibilities that cannot be ignored. Understanding these obligations helps professionals protect their income and enables facilities to operate sustainably, transparently, and in compliance with the law.

Healthcare providers who treat tax compliance as part of good governance position themselves for long-term success in Nigeria’s evolving healthcare landscape.