Nigerian Tax Laws & 2026 Reforms
Comprehensive statutory overview of the Nigeria Tax Act 2025 (NTA) and Nigeria Tax Administration Act 2025 (NTAA), effective 1 January 2026.
Nigerian Tax Laws & 2026 Reforms
Tax Nigeria implements calculations grounded in the Nigeria Tax Act 2025 (NTA) and the Nigeria Tax Administration Act 2025 (NTAA), which take effect on 1 January 2026. This statutory framework modernizes Nigerian revenue administration, replacing outdated provisions under the former Personal Income Tax Act (PITA), Companies Income Tax Act (CITA), and disparate Finance Acts.
Governing Legislation and Tax Authorities
- Primary Legislation:
- Nigeria Tax Act 2025 (NTA): Codifies substantive direct and indirect tax rules, income tax brackets, relief provisions, corporate tax thresholds, and withholding rates.
- Nigeria Tax Administration Act 2025 (NTAA): Standardizes tax procedures, filing timelines, dispute resolution mechanisms, interest rates, and enforcement penalties.
- Competent Revenue Authorities:
- Nigeria Revenue Service (NRS): Administers federal taxes, including Companies Income Tax (CIT), Value Added Tax (VAT), the unified Development Levy, and corporate Withholding Tax (WHT), succeeding the Federal Inland Revenue Service (FIRS).
- State Internal Revenue Services (State IRS): Administer Personal Income Tax (PAYE) and Withholding Tax on individuals, sole proprietorships, and unincorporated bodies within their respective states.
1. Personal Income Tax (PAYE)
Under the Nigeria Tax Act 2025 (NTA), the personal taxation structure has been completely redesigned with a focus on progressive equity, the elimination of regressive minimum tax floors, and relief targeting.
Consolidated Relief Allowance (CRA) Abolished
[!IMPORTANT] The former Consolidated Relief Allowance (CRA) (previously calculated as the higher of ₦200,000 or 1% of gross income, plus 20% of gross income) is abolished under NTA 2025.
Rent Relief
In place of blanket percentage deductions, NTA 2025 introduces targeted Rent Relief:
- Relief Rate: The lower of 20% of annual rent paid or ₦500,000.
- Eligibility: Only applies where actual rent paid is declared and substantiated with receipts and documentation.
Allowable Statutory Deductions
Before applying tax brackets, the following allowable statutory deductions are subtracted from gross earned income:
- Pension: 8% of pensionable pay (basic salary + housing allowance + transport allowance) pursuant to the Pension Reform Act.
- National Housing Fund (NHF): 2.5% of monthly basic salary (deductible where enrolled; opt-in for private sector employees).
- National Health Insurance Scheme (NHIS): Statutory employee contributions deductible where the employer has enrolled the employee.
- Life Assurance: Verified premiums paid on the employee's life or spouse's life as recognized under allowable deduction provisions.
Progressive PIT Bands (NTA 2025)
The previous 7% to 24% tax schedule is replaced with higher entry thresholds and a generous tax-free initial bracket. The first ₦800,000 of annual taxable income is taxed at 0%:
| Taxable Income Band | Band Width | Statutory Rate | Cumulative Threshold | Cumulative Tax |
|---|---|---|---|---|
| First ₦800,000 | ₦800,000 | 0% (Tax-Free) | ₦800,000 | ₦0 |
| Next ₦2,200,000 | ₦2,200,000 | 15% | ₦3,000,000 | ₦330,000 |
| Next ₦9,000,000 | ₦9,000,000 | 18% | ₦12,000,000 | ₦1,950,000 |
| Next ₦13,000,000 | ₦13,000,000 | 21% | ₦25,000,000 | ₦4,680,000 |
| Next ₦25,000,000 | ₦25,000,000 | 23% | ₦50,000,000 | ₦10,430,000 |
| Above ₦50,000,000 | Remainder | 25% | Remainder | Progressive |
Minimum Tax Abolished for Individuals
[!NOTE] Under NTA 2025, there is no minimum tax on individuals. The previous 1% gross income minimum tax floor no longer applies. Individuals earning within the ₦800,000 threshold incur zero personal income tax liability.
2. Companies Income Tax (CIT) & Corporate Levies
The corporate tax architecture under the Nigeria Tax Act 2025 streamlines classifications, raises small business thresholds, and unifies legacy education and development levies.
Company Classification & CIT Rates
| Company Classification | Statutory Criteria | CIT Statutory Rate | Development Levy |
|---|---|---|---|
| Small Company | Annual turnover ₦100,000,000 or less AND fixed assets ₦250,000,000 or less | 0% (Exempt) | Exempt |
| Large / Non-Small Company | Annual turnover above ₦100,000,000 OR fixed assets above ₦250,000,000 | 30% | 4% of Assessable Profit |
[!IMPORTANT] Small Business Exemption & Mandatory Filing: Small companies benefit from 0% CIT, 0% Capital Gains Tax (CGT), and full exemption from the Development Levy. However, they must still file annual returns with the Nigeria Revenue Service (NRS) with their financial statements to claim the 0% exemption rate.
There is no separate 20% intermediate tier under the NTA 2025 framework; non-small companies are assessed at the standard 30% rate.
Unified 4% Development Levy
The 2026 reforms consolidate multiple fragmented taxes into a single 4% Development Levy calculated on assessable profits:
- Levies Replaced: Tertiary Education Tax (TET, previously 3%), National Information Technology Development Agency (NITDA) levy (1%), NASENI levy, and Police Trust Fund levy.
- Exemptions: Small companies and non-resident companies are exempt from the Development Levy.
Minimum Effective Tax Rate (METR - 15%)
To prevent base erosion and ensure alignment with global tax standards (OECD Pillar Two):
- A 15% Minimum Effective Tax Rate (METR) applies to large companies with annual group turnover of ₦50 Billion or more, as well as multinational groups with consolidated annual global revenue of EUR 750 Million or more.
3. Withholding Tax (WHT) Regulations
Withholding Tax is deducted at source from qualifying transactions under modernized regulations designed to avoid working capital strain on enterprise operations:
| Transaction / Payment Type | Resident Rate | Non-Resident Rate | Key Scope & Exceptions |
|---|---|---|---|
| Dividends, Interest & Rent | 10% | 10% | Passive investment income and equipment / property lease |
| Royalties | 5% (Individuals) / 10% (Companies) | 10% | Intellectual property exploitation and licensing |
| Professional, Consultancy & Management Fees | 5% | 10% | Legal, accounting, architectural, advisory, and corporate management |
| Technical & Agency Fees | 5% | 10% | Technical services, engineering support, brokerages, and agency |
| Construction (Roads, Bridges, Buildings, Power Plants) | 2% | 5% | Major civil infrastructure and public utility development |
| Other Construction & Works | 5% | 10% | General building contracts and ancillary structural works |
| General Supplies & Merchandise | 2% | 2% | Exempt on direct supplies by the original manufacturer or producer |
| Directors' Fees | 15% | 20% | Remuneration and sitting allowances paid to board directors |
Critical WHT Exemption & Non-TIN Rules
- Small Business Exemption: Transactions and invoices below ₦2,000,000 issued to or paid by eligible small companies are exempt from withholding tax deduction.
- Non-TIN Penalty Rate: Where a vendor or payee fails to provide a valid Taxpayer Identification Number (TIN), withholding is deducted at double the standard rate, subject to a maximum cap of 20%.
4. Statutory Deadlines & Compliance Calendar
The Nigeria Tax Administration Act 2025 (NTAA) establishes standard filing and remittance schedules:
- PAYE Remittance: Due by the 10th day of the month following deduction, payable to the relevant State Internal Revenue Service (State IRS).
- WHT Remittance: Due by the 21st day of the month following deduction (paid to NRS for corporate vendors, State IRS for individuals).
- VAT Remittance: Due by the 21st day of the following month, remitted to the Nigeria Revenue Service (NRS).
- CIT Annual Return: Due within 6 months after the close of the company's financial accounting year (e.g., 30 June for companies with a 31 December fiscal year-end). Newly incorporated entities are allowed up to 18 months from incorporation or 6 months after their first financial year-end, whichever is later.
5. Statutory Penalties for Default (NTAA 2025)
The NTAA 2025 updates statutory default fees and aligns interest calculations with the Central Bank of Nigeria monetary rate:
- Late CIT Filing (NTAA Section 101):
- ₦100,000 for the first month of default.
- ₦50,000 for each subsequent month during which default continues.
- Late WHT and PAYE Remittance (NTAA Section 107):
- The full outstanding tax principal owed, PLUS
- A statutory penalty of 10% per annum on the unremitted balance, PLUS
- Commercial interest at the prevailing Central Bank of Nigeria (CBN) Monetary Policy Rate (MPR). (The former "+5%" statutory spread is eliminated under NTAA Section 107).
Quick Reference: Transition from Pre-2026 to 2026 Rules
| Topic | Inaccurate / Outdated Framework | Accurate / Current 2026 Law (NTA & NTAA) |
|---|---|---|
| Governing Law | PITA, CITA, and previous Finance Acts | Nigeria Tax Act 2025 (NTA) and Nigeria Tax Administration Act 2025 (NTAA), effective 1 January 2026 |
| Tax Authority | FIRS | NRS for federal taxes; State IRS for PAYE and individuals' WHT |
| Pension Deduction | 8% of basic, housing, and transport | 8% of pensionable pay (basic + housing + transport) |
| NHF Deduction | 2.5% of monthly basic salary | 2.5% of basic salary (deductible; opt-in for private sector staff) |
| NHIS Deduction | Statutory employee contributions | Deductible where the employer has enrolled the employee |
| Life Assurance | Verified premiums deductible | Deductible where applicable under allowable deductions section |
| Relief on Income | CRA: higher of ₦200,000 or 1% of gross, plus 20% of gross | CRA abolished. Rent relief is the lower of 20% of annual rent or ₦500,000 (applies if rent is declared) |
| Tax-Free Income | First ₦300,000 taxed at 7% | First ₦800,000 taxed at 0% |
| PIT Bands | 7%, 11%, 15%, 19%, 21%, 24% | 0% up to ₦800k; 15% to ₦3m; 18% to ₦12m; 21% to ₦25m; 23% to ₦50m; 25% above ₦50m |
| Minimum Tax (Individuals) | 1% of gross income | None under NTA 2025. The 1% floor no longer applies |
| Small Company Threshold | Turnover under ₦50m | Turnover ₦100m or less AND fixed assets ₦250m or less (0% CIT, CGT, and Development Levy) |
| Medium Company Tier | ₦50m to ₦100m at 20% | No separate 20% tier. Non-small companies pay 30% |
| Large Company | Over ₦100m at 30% | 30% CIT. Turnover above ₦100m or fixed assets above ₦250m |
| Education Levy | Tertiary Education Tax (TET) at 3% | 4% Development Levy on assessable profits (replaces TET, IT levy, NASENI levy, Police Trust Fund levy). Small and non-resident companies are exempt |
| Minimum Effective Tax Rate | Not applicable | 15% for companies with turnover of ₦50bn or more, and multinationals with group turnover of EUR 750m or more |
| Small Business Filing | Must file returns | Must still file annual returns to claim the 0% exemption rate |
| WHT: Dividends, Interest, Rent | 10% | 10% |
| WHT: Royalties | 10% | 10% for companies, 5% for individuals |
| WHT: No-TIN Rate | Double the standard rate | Double the standard rate (capped at 20%) |
| WHT: Professional / Advisory Fees | 5% individuals, 10% corporate | 5% for residents, 10% for non-residents |
| WHT: Technical & Agency Fees | 5% | 5% for residents, 10% for non-residents |
| WHT: Construction | 2.5% | 2% for roads, bridges, buildings, and power plants (5% non-resident); 5% for other construction (10% non-resident) |
| WHT: Supplies & Merchandise | 2% | 2% (Exempt on direct supplies by the manufacturer or producer) |
| WHT: Directors' Fees | Missing | 15% for residents, 20% for non-residents |
| WHT: Small Business Exemption | Missing | Payments below ₦2,000,000 from small companies are exempt |
| WHT Remittance | 21st of following month | 21st of following month (NRS for companies, State IRS for individuals) |
| PAYE Remittance | 10th of following month | 10th of following month, to State IRS |
| VAT Remittance | 21st of following month | 21st of following month, to NRS |
| CIT Annual Return | 6 months after year-end | 6 months after year-end (30 June for December year-end). New companies: 18 months from incorporation or 6 months after first year-end, whichever is later |
| Late CIT Filing Penalty | ₦50,000 first month, ₦25,000 per month after | ₦100,000 first month, ₦50,000 per month after (NTAA s.101) |
| Late WHT / PAYE Remittance | 10% p.a. plus CBN MPR + 5% | The tax owed, plus 10% p.a., plus interest at the prevailing CBN MPR (no "+5%") (NTAA s.107) |