Waheed Babatunde Written by Waheed Babatunde · 2 min read >


Secondment arrangements involve an employee being temporarily assigned by his employer to another part of their organization, to a different employer within the same group or to a different employer, often backed by agreements.

The arrangement could be internal or external, local or international. The employee is often described as a secondee. The employer assigning the secondee is described as the primary employer, while the employer receiving the services of the secondee is known as the economic employer or host employer.

We shall examine some potential challenges under external secondment agreements in the preceding paragraphs.

Matters Arising

Who bears the obligation of the secondee?

Under an international assignment, a secondee is first employed by his primary employer (home country employer) and required to work in another country with another employer or related company (the economic employer or host country employer) who requires and utilizes his services in return for a pre-agreed fee to the primary employer.

Who bears the payroll burden and associated costs of the secondee?

The home country employer retains the payroll responsibility, which may include the payment of salaries and other connected costs and bears the taxes for the services performed in Nigeria. In terms of taxation, the joint conditions of Section 10 of the Personal Income Tax Act will apply when the employee works under a temporary Work Permit (TWP). These include that:

  • The income is derived from Nigeria and the costs are recharged to the Nigerian Company.
  • The employee is in Nigeria for an aggregate period of 183 days: and
  • The remuneration of the secondee is not liable to tax in a country under a double tax treaty.  

Where the employee works in the host country with a Permanent Visa, he is liable to tax in Nigeria unconditionally.

In both scenarios, the secondee is seen to be taxed under the source rule as the secondment agreement is under a commercial arrangement. Under this arrangement, the third party (home country) reimburses the host country with a markup, which justifies that the transaction is done at arm’s length.

Are the salaries and associated costs recharged to the Nigerian Company tax deductible?

In arriving at a Company’s income tax, all reasonable expenses are allowed. However, section 27 of CITA was Amended by the Finance Act 2019. The amendment disallowed any expenses incurred within or outside Nigeria, involving related parties as defined under the Transfer Pricing Regulations, except to the extent that it is consistent with the Transfer Pricing Regulation.

Does the presence of a secondee create a tax presence to Nigeria?

A tax presence or Permanent Establishment (PE) can occur for the primary employer where the agreement is described as a “Service contract” instead of “Secondment agreement”. The primary employer is providing services to the principal employer through an employee who reports directly to the home country. In the secondment arrangement, the employees are under the direction, control and supervision of their economic employer. Care should be taken in wording the Agreement to ensure an appropriate classification as a “secondment contract”

Are social security and workplace insurance costs in the secondee home country tax-deductible?

Social Securities and Workplace Insurance costs for secondees borne in their home countries are not usually considered tax deductible costs in Nigeria.   

Are there transfer pricing issues created by the presence of secondment agreements in Nigeria?

Transfer Pricing (TP) issues may occur where the primary employer recharges its costs to the economic employer with a mark-up. More so, there will be a consideration regarding the salary earned by the secondee benched-marked against what an employee in Nigeria in that capacity would be remunerated.

 The way forward

  • Secondment arrangements can be very challenging in jurisdictions like Nigeria.
  • Leveraging the understanding of the legal and tax landscape would be of utmost importance for Companies about to contract their employees for external secondment assignments.
  • It is pertinent that Companies in this category seek professional advice before entering and concluding such arrangements.


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