For many Nigerian business owners, the word “tax” sounds like a headache. With the 2025 Nigeria Tax Act for small businesses, things have finally changed. From 1 January 2026, new tax laws now offer massive reliefs and exemptions designed to help small businesses grow, not struggle.
The government has introduced massive reliefs and exemptions specifically to help small businesses grow. This guide breaks down exactly what you need to know in simple English, without the confusing “legal-speak.”
1. Are You a “Small Business” Under the 2025 Nigeria Tax Act?
Under the new law, your business is classified as “Small” if you meet two criteria:
- Your annual turnover (total sales) is ₦100 million or less.
- Your total fixed assets are worth not more than ₦250 million.
If this describes your business, congratulations—you have just unlocked the biggest tax breaks in Nigerian history.
2. 0% Companies Income Tax (CIT) for Small Businesses in Nigeria
In the past, every registered company had to pay a percentage of its profit to the government. That has changed.
- Small companies now pay 0% Company Income Tax.
- You are also exempt from the 4% Development Levy.
Essentially, if you make ₦100 million or less, the profit you make belongs entirely to your business to reinvest and grow.
Do small businesses pay tax in Nigeria in 2026?
Small businesses with an annual turnover of ₦100 million or less pay 0% Companies Income Tax under the Nigeria Tax Act for small businesses. However, they are still required to file annual tax returns.
3. VAT Exemptions Small Businesses Should Know
Value Added Tax (VAT) is the 7.5% added to goods and services. For a small business, calculating and remitting this can be stressful.
- Small companies are now exempt from charging VAT to their customers.
- VAT is now 0% or Exempt on essential items your business uses daily, such as:
- Diesel and Petrol (VAT suspended or exempt).
- Solar power equipment.
- Basic food items like raw food, milk, and bread.
- Educational materials and health services.
This means your “cost of doing business” just went down because you aren’t paying VAT on your fuel or your raw food supplies.
4. PAYE and Personal Income Tax Changes for Nigerian Workers
The new law doesn’t just help the business; it helps the people behind it.
- Low Earners: Anyone earning the National Minimum Wage or less is completely exempt from paying income tax.
- The ₦1.2M Rule: If an individual’s annual gross income is up to ₦1.2 million, they are tax-exempt.
- Staff Incentives: If you increase your staff’s salary or provide transport subsidies to help them with the cost of living, the government allows you a 50% additional deduction on those costs when filing.
5. Withholding Tax Exemption for Small Businesses
Cash flow is the lifeblood of any small business. Previously, when a big company paid you, they would deduct “Withholding Tax” (WHT) upfront.
- Small companies are now exempt from Withholding Tax deductions on their income.
- You are also exempt from deducting WHT when you pay your small-scale suppliers.
This means you get your full payment immediately, rather than waiting for tax credits.
6. Other Tax Exemptions in the 2025 Nigeria Tax Act
The 2026 reforms have removed taxes from areas that used to be “grey zones”:
- Bank Transfers: Electronic money transfers below ₦10,000 are exempt from stamp duties.
- Capital Gains: If you sell a private vehicle (up to two per year) or your own personal items worth up to ₦5 million, you don’t pay tax on the profit from that sale.
- Agricultural Wins: If you are into crop production or livestock, you can enjoy a tax holiday for the first 5 years.
7. How Small Businesses Can File Taxes in Nigeria (Step by Step)
Even if your tax rate is 0%, you are still required by law to “file” your taxes. Think of it like a “Business Health Check.” Here is the simple process:
Step 1: Get your TIN
The Taxpayer Identification Number (TIN) is your business’s ID card. You cannot do anything tax-related without it. Most businesses get this automatically when registering with the CAC, but you can verify yours on the tax authority’s portal.
Step 2: Keep Accurate Records
You cannot tell the government your turnover is under ₦100 million if you don’t have records. You must track:
- Every sale (Invoices).
- Every expense (Receipts).
- Staff payroll.
Step 3: Register on the Tax Portal
Nigeria has moved to digital platforms (like TaxPro-Max). You create an account for your business using your TIN.
Step 4: Prepare and File Returns
Even if you owe ₦0, you must fill out the forms once a year (for CIT) and sometimes monthly (for other taxes). You input your total sales and total expenses. If the system sees you are a “Small Company,” it will calculate your tax as zero.
Step 5: Get your Tax Clearance Certificate (TCC)
Once you have filed your returns, you can apply for a TCC. This document is vital—you need it to open certain bank accounts, apply for government contracts, or get business loans.
8. Simplify Your Life with Leaftally
Managing all these rules, tracking turnover to ensure you stay under the ₦100M threshold, and keeping receipts can be a full-time job.
Leaftally is designed specifically for the Nigerian small business owner who isn’t an accountant.
- Built-in Tax Rules: You don’t need to memorize the 2026 Tax Act. Leaftally already knows which items are VAT-exempt and which staff members shouldn’t pay PAYE.
- Automated Records: Instead of a messy box of receipts, just snap a photo. Leaftally organizes everything.
- Business at a Glance: See your profit, your loss, and your tax status in one simple dashboard.
- Smooth & Easy: It’s accounting made simple so you can focus on selling, not chasing paper.
Best of all? Leaftally is absolutely FREE. You don’t need a massive budget to have professional-grade bookkeeping. Start your journey to stress-free business management today at leaftally.com.
