Nigeria’s newly enacted tax law officially came into force on January 1, 2026, introducing wide-ranging reliefs and exemptions aimed at easing the burden on low-income earners, middle-income taxpayers, and small businesses. The reforms are designed to improve welfare, stimulate small-scale enterprises, and support overall economic growth.
Under the revised Personal Income Tax (PAYE) framework, individuals earning the national minimum wage or below are fully exempt from income tax. Annual gross income of up to ₦1.2 million—equivalent to about ₦800,000 in taxable income—is also exempt, while reduced PAYE rates apply to individuals earning up to ₦20 million annually. Gifts are no longer subject to tax.
The law also expands allowable deductions and reliefs for individuals, covering pension contributions, National Health Insurance Scheme payments, National Housing Fund contributions, interest on owner-occupied housing loans, life insurance or annuity premiums, and rent relief of up to 20 per cent of annual rent, capped at ₦500,000.
All pensions, gratuities, and retirement benefits granted in line with the Pension Reform Act are now tax-exempt, including pension assets and funds. Compensation for loss of employment of up to ₦50 million is equally exempt from tax.
Significant exemptions were introduced under Capital Gains Tax (CGT). These include gains from the sale of owner-occupied homes, personal effects worth up to ₦5 million, the sale of up to two private vehicles per year, and share gains below ₦150 million annually or gains of up to ₦10 million. Share gains above the exemption threshold may also be exempt if reinvested. Pension funds, charities, and non-commercial religious institutions are similarly exempt.
For businesses, the law grants sweeping reliefs under Companies Income Tax (CIT). Small companies with annual turnover not exceeding ₦100 million and fixed assets below ₦250 million now pay zero per cent tax. Eligible startups are fully exempt, while firms receive additional deductions for salary increases, wage awards, transport subsidies, and the hiring of new employees retained for at least three years. Agricultural businesses are granted a five-year tax holiday, and investments in labelled startups by venture capitalists and private equity firms enjoy tax-free gains.
Small companies are also exempt from the 4 per cent Development Levy, while Withholding Tax exemptions apply to small businesses, manufacturers, and agricultural enterprises, including deductions on payments to suppliers.
Under the updated Value Added Tax (VAT) regime, basic food items attract zero per cent VAT, while rent, education services, medical services, and pharmaceutical products are exempt. Small companies with turnover of ₦100 million or less are not required to charge VAT. VAT has also been suspended or removed on petrol, diesel, solar equipment, agricultural inputs, electric vehicles, transport services, baby products, sanitary items, humanitarian supplies, land, and buildings.
The law further exempts Stamp Duties on salary payments, electronic transfers below ₦10,000, intra-bank transfers, and transactions involving government securities or shares.
Reacting to early feedback, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, disclosed that Nigerian workers are already experiencing increased take-home pay due to reduced PAYE deductions. Speaking via his official X handle, Oyedele said employees who received their January 2026 salaries confirmed tangible relief from the new framework. He added that the reforms are aimed at simplifying tax administration, boosting disposable income, and improving nationwide compliance.
Meanwhile, the Nigerian Revenue Service (NRS) said the new tax laws also address double taxation, expand the tax net, and strengthen enforcement. According to the agency’s Frequently Asked Questions document, the law provides unilateral relief and recognises Nigeria’s double taxation agreements to prevent the same income from being taxed twice. Nigerian residents whose income has been taxed abroad may now claim relief within the limits allowed by law, a move expected to encourage cross-border investment.
The NRS also clarified that collective investment schemes are treated as companies for tax purposes, with income taxed at the scheme level, while distributions to unit holders are classified as dividends.
In related developments, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the NRS have agreed to deepen collaboration on oil and gas revenue collection following the implementation of the new tax regime. This was disclosed during a courtesy visit by NUPRC Chief Executive Officer, Mrs Oritsemeyiwa Eyesan, to NRS Chairman, Dr Zacch Adedeji, in Abuja.
