Amanze Chinonye
Nigeria has unveiled a sweeping set of tax reforms aimed at easing the financial burden on low-income earners and small businesses while tightening compliance and expanding the country’s tax base.
The new laws, signed by President Tinubu in June 2025, are set to take effect on January 1, 2026. Under the reforms, individuals earning up to the national minimum wage will be exempted from personal income tax, while small companies with an annual turnover of less than ₦100 million will no longer be required to pay corporate income tax.
The legislation also grants value-added tax (VAT) exemptions on essential goods and services, including basic food items, pharmaceuticals, and farm inputs. In addition, taxpayers will be allowed deductions for pensions, rent, and job loss compensation of up to ₦50 million.
Join our WhatsApp ChannelWhile the measures aim to simplify the tax system and improve voluntary compliance, the government has also raised certain rates to balance its fiscal priorities. Notably, the capital gains tax for companies has been increased to 30 percent, while the existing 7.5 percent VAT rate remains applicable on items such as flight tickets and other non-essential goods.
Officials say the reforms are designed to stimulate economic growth, encourage investment, and promote fairness in the tax system by ensuring that wealthier individuals and larger corporations contribute a fairer share.
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Fifty Tax Exemptions and Reliefs to Benefit the Masses
From January 1, 2026, the Federal Government says 50 different tax exemptions and reliefs will come into effect under the new tax reform laws, targeting low-income earners, average taxpayers, and small businesses.
Personal Income Tax (PAYE)
1. Individuals earning the national minimum wage or less are exempt.
2. Annual gross income up to ₦1.2 million (about ₦800,000 taxable income) is exempt.
3. Reduced PAYE for individuals earning up to ₦20 million annually.
4. Gifts are exempt from taxation.
Allowable Deductions and Reliefs
5. Pension contributions to PFAs.
6. National Health Insurance Scheme contributions.
7. National Housing Fund contributions.
8. Interest on owner-occupied home loans.
9. Life insurance or annuity premiums.
10. Rent relief of up to 20% of annual rent (capped at ₦500,000).
Pensions and Gratuities
11. Pension funds and assets under the Pension Reform Act are tax-exempt.
12. Pension, gratuity, or retirement benefits granted under the PRA are exempt.
13. Compensation for loss of employment up to ₦50 million is exempt.
Capital Gains Tax (CGT)
14. Sale of owner-occupied homes.
15. Personal effects or chattels worth up to ₦5 million.
16. Sale of up to two private vehicles per year.
17. Gains on shares below ₦150 million per year or up to ₦10 million.
18. Reinvestment relief on gains above the exemption threshold.
19. Pension funds, charities, and religious institutions engaged in non-commercial activities.
Companies Income Tax (CIT)
20. Small companies (turnover ≤ ₦100 million, fixed assets ≤ ₦250 million) pay 0%.
21. Certified startups are exempt.
22. Compensation relief – 50% additional deduction for salary increases or subsidies for low-income workers.
23. Employment relief – 50% deduction for salaries of new hires retained for at least three years.
24. Five-year tax holiday for agricultural businesses.
25. Gains from investments in startups by venture capitalists, private equity funds, or accelerators.
Development Levy
26. Small companies are exempt from the 4% development levy.
Withholding Tax
27. Small companies, manufacturers, and agricultural businesses are exempt from withholding tax on income.
28. Small companies are also exempt from deductions on payments to suppliers.
Value Added Tax (VAT)
29. Basic food items – 0% VAT.
30. Rent – exempt.
31. Education services and materials – 0% VAT.
32. Health and medical services – exempt.
33. Pharmaceutical products – 0% VAT.
34. Small companies (≤ ₦100m turnover) are exempt from charging VAT.
35. Diesel, petrol, and solar power equipment – VAT suspended or exempt.
36. Refund of VAT on assets and overheads for producers of VATable goods.
37. Agricultural inputs such as fertilizers, seeds, and livestock – exempt.
38. Purchase or hire of agricultural equipment – exempt.
39. Disability aids including hearing aids, wheelchairs, and braille materials – exempt.
40. Shared road transport (non-charter) – exempt.
41. Electric vehicles and their parts – exempt.
42. Humanitarian supplies – exempt.
43. Baby products – exempt.
44. Sanitary towels, pads, and tampons – exempt.
45. Land and buildings – exempt.
Stamp Duties
46. Electronic money transfers below ₦10,000.
47. Salary payments.
48. Intra-bank transfers.
49. Transfers of government securities or shares.
50. All documents relating to the transfer of stocks and shares.
According to the Federal Inland Revenue Service (FIRS), the tax reform initiative is part of the administration’s plan to “make taxation work for the people” by aligning Nigeria’s fiscal policies with economic realities, reducing hardship, and supporting entrepreneurship.
In addition, the government has launched an “Influencing for Good” campaign encouraging Nigerians to nominate content creators who have been educating the public on the new tax laws.
Twenty creators with the highest nominations will receive special training to promote accurate and balanced tax education online.
Authorities say the initiative seeks to counter misinformation and ensure citizens understand how to access their new tax reliefs and exemptions.
“Accurate information empowers everyone and earns lasting trust,” the campaign statement said.
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Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
