Nigeria's 2026 tax reform framework has carved out a distinct set of provisions aimed at small and mid-sized enterprises, signalling a deliberate policy shift towards easing fiscal pressure on the segment that accounts for the bulk of employment and output in the country.
The reforms, which consolidate several existing tax laws into a unified code, raise the corporate income tax exemption threshold for small companies. Businesses with annual turnover below N25 million are fully exempt from corporate income tax and are also shielded from the burden of filing complex returns. For mid-sized firms — those with turnover between N25 million and N100 million — a reduced corporate tax rate applies, significantly lower than the standard headline rate for large companies.
Beyond rate cuts, the reforms introduce simplified compliance pathways. Smaller firms can now file returns through streamlined digital platforms, with reduced documentation requirements and extended filing timelines. The intention, according to architects of the policy, is to lower the cost of compliance and to draw more enterprises out of the informal economy and into the tax net voluntarily.
A key incentive embedded in the new framework is the investment allowance for capital expenditure. Qualifying SMEs that invest in plant, machinery, or digital infrastructure can deduct a portion of those costs from taxable profits, effectively reducing their effective tax rate. This is designed to spur productivity-enhancing investments without the administrative friction that characterised earlier incentive regimes.
Employment-linked reliefs also feature prominently. Companies that expand their payroll by hiring full-time employees within defined bands may qualify for additional deductions, making it cheaper for growing businesses to formalise their workforce. For sectors identified as priority — including agriculture, manufacturing, and technology — the benefits are further enhanced through accelerated capital allowances and extended loss carry-forward periods.
The reforms also address indirect taxes. The revised VAT framework raises the registration threshold, meaning many micro and small businesses fall below the mandatory registration line. Those that do register benefit from simplified input-credit recovery mechanisms, reducing the cash-flow strain that VAT compliance traditionally imposes on smaller operators.
