Introduction to Tax Reforms in Nigeria
Nigeria has taken a significant step towards reforming its tax system with the introduction of 50 new tax exemptions and relief measures. These reforms, set to take effect from 1 January 2026, aim to make the tax system fairer, simpler, and more beneficial for ordinary Nigerians. The federal government has unveiled these changes as part of broader tax reform laws designed to reduce the burden on low-income earners, average taxpayers, and small businesses.
The Chairperson of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, shared this information through a post on X, highlighting the importance of these reforms. He emphasized that the goal is to create a more equitable and efficient tax system that supports economic growth while protecting the interests of citizens.
Key Components of the Tax Reform Laws
On 26 June, President Bola Tinubu signed four major tax reform laws: the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service (Establishment) Act (NRSEA), and Joint Revenue Board (Establishment) Act (JRBEA). These laws are intended to overhaul Nigeria’s fiscal system by consolidating them into a single document for greater efficiency.
The reforms aim to boost economic growth and strengthen tax administration, making it easier for individuals and businesses to comply with tax regulations.
Personal Tax Reliefs
Under the new law, individuals earning the national minimum wage or less will be exempt from personal income tax. Additionally, those whose annual gross income does not exceed N1.2 million, which translates to about N800,000 taxable income, will also be fully exempt.
There will be reduced PAYE rates for people earning up to N20 million annually, while gifts received by individuals will no longer be taxed. Other allowable deductions include pension contributions, National Health Insurance Scheme (NHIS) payments, National Housing Fund contributions, life insurance or annuity premiums, and interest on loans for owner-occupied housing. Rent relief of 20 per cent of annual rent, up to N500,000, is also provided.
Retirement and Compensation Benefits
All pension funds and assets regulated under the Pension Reform Act (PRA) will remain tax-exempt. Pensions, gratuities, and other retirement benefits granted in line with the PRA will not attract tax. In addition, compensation for loss of employment up to N50 million will be exempted from tax.
The new law exempts from Capital Gains Tax (CGT) the sale of an owner-occupied house, personal effects or chattels worth up to N5 million, and the sale of up to two private vehicles per year. Gains on shares below N150 million per year or up to N10 million will also be exempt. Investors who reinvest proceeds from share sales above the exemption threshold will continue to enjoy reliefs.
Pension funds, charities, and religious institutions engaged in non-commercial activities will also be exempt from CGT.
Corporate Incentives
Small companies with annual turnover not exceeding N100 million and total fixed assets below N250 million will continue to pay 0 per cent company income tax. Eligible startups will also enjoy exemptions, while firms that increase salaries, grant wage awards, or provide transport subsidies to low-income workers will qualify for a 50 per cent additional deduction known as the compensation relief.
Businesses that hire and retain new employees for at least three years will also be entitled to a 50 per cent employment relief deduction. Agricultural companies involved in crop production, livestock, or dairy farming will enjoy a five-year tax holiday, while investors in labelled startups through venture capital funds, accelerators or incubators will be exempt from tax on their investment gains.
Additional Exemptions
Small companies will not pay the 4 per cent development levy and are also exempt from withholding tax deductions, both on their income and payments made to suppliers. For Value Added Tax (VAT), several goods and services will either attract 0 per cent VAT or be fully exempt. These include basic food items, rent, education materials and services, health and medical services, pharmaceutical products, agricultural inputs, and diesel.
Small firms with N100 million or less in turnover will not be required to charge VAT. The exemption list also covers solar power equipment, baby products, sanitary towels, disability aids, and electric vehicles. Shared road transport, non-chartered passenger services, and humanitarian supplies are also exempt, as are land and building transactions.
In addition, electronic money transfers below N10,000, salary payments, intra-bank transfers, and transfers of government securities or shares will not attract stamp duties.
Outreach and Public Awareness
To support better public understanding of the new policies, the committee has launched an outreach initiative to engage social media influencers, journalists, and business groups. Mr. Oyedele emphasized the importance of accurate information, stating that misinformation spreads quickly but that verified updates can empower everyone and earn lasting trust.
Full List of Tax Exemptions and Relief Measures
- Individuals earning the national minimum wage or less (exempt)
- Annual gross income up to ₦1,200,000 (translating to about ₦800,000 taxable income) is exempt
- Reduced PAYE tax for those earning annual gross income up to ₦20 million
- Gifts (exempt)
- Pension contribution to PFA
- National Health Insurance Scheme
- National Housing Fund contributions
- Interest on loans for owner-occupied residential housing
- Life insurance or annuity premiums
- Rent relief - 20% of annual rent (up to ₦500,000)
- Pension funds and assets under the Pension Reform Act (PRA) are tax-exempt.
- Pension, gratuity or any retirement benefits granted in line with the PRA
- Compensation for loss of employment up to ₦50 million
- Sale of an owner-occupied house
- Personal effects or chattels worth up to ₦5 million
- Sale of up to two private vehicles per year
- Gains on shares below ₦150 million per year or gains up to ₦10 million
- Gains on shares above exemption threshold if the proceed is reinvested
- Pension funds, charities, and religious institutions (non-commercial)
- Small companies (turnover not more than ₦100 million and total fixed assets not more than ₦250 million) pay 0% tax
- Eligible (labelled) startups are exempt
- Compensation relief - 50% additional deduction for salary increases, wage awards, or transport subsidies for low-income workers
- Employment relief - 50% deduction for salaries of new employees hired and retained for at least three years
- Tax holiday for the first 5-years for agricultural businesses (crop production, livestock, dairy etc)
- Gains from investment in a labeled startup by venture capitalist, private equity fund, accelerators or incubators
- Small companies are exempt from 4% development levy
- Small companies, manufacturers and agric businesses are exempt from withholding tax deduction on their income
- Small companies are exempt from deduction on their payments to suppliers
- Basic food items - 0% VAT
- Rent - Exempt
- Education services and materials - 0% VAT
- Health and medical services
- Pharmaceutical products - 0% VAT
- Small companies (≤ ₦100m turnover) are exempt from charging VAT
- Diesel, petrol, and solar power equipment - VAT suspended or exempt
- Refund of VAT on assets and overheads to produce VATable or 0% VAT goods and services
- Agricultural inputs - fertilizers, seeds, seedlings, feeds, and live animals
- Purchase, lease or hire of equipment for agric purposes
- Disability aids - hearing aids, wheelchairs, braille materials
- Transport - shared passenger road transport (non-charter)
- Electric vehicles and parts - exempt
- Humanitarian supplies - exempt
- Baby products
- Sanitary towels, pads or tampons
- Land and building
- Electronic money transfers below ₦10,000
- Salary payments
- Intra-bank transfers
- Transfers of government securities or shares
- All documents for transfer of stocks and shares
