By Chioma Obinagwam
Nigeria has rewritten its tax rules. Millions of business owners are either overpaying, underpaying, or filing nothing at all. Here is what the law actually says, in plain language.
Small companies earning below N50 million pay zero income tax
Under the Nigeria Tax Act (NTA) 2025, any company with an annual turnover of N50 million or less and fixed assets below N250 million pays 0% Companies Income Tax (CIT). This is not a reduction. It is a full exemption. The government wants small businesses to grow without the burden of income tax slowing them down.
Practical note: Your total fixed assets must also stay below N250 million. Both conditions must be met, not just the turnover figure.
The N100 million figure applies to VAT, not income tax
Many people confuse these two thresholds. The N100 million figure applies to VAT administration under the Nigeria Tax Administration Act (NTAA) 2025. It means businesses earning below N100 million per year do not need to register for or file VAT returns. The income tax exemption threshold is a different and lower figure: N50 million.
Practical note: A business can qualify for the VAT exemption (below N100m) without qualifying for the income tax exemption (below N50m). They are governed by different laws.
Professional services firms are excluded from tax exemptions
No matter how small your revenue is, if your company provides professional services, you do not qualify for the small company exemption. Professional services include law, accounting, auditing, medical practice, consulting, public relations, editing, engineering consultancy, architecture, and technology-driven advisory services. These firms are taxed at the full 30% CIT rate.
Practical note: The law uses a broad phrase, ‘professional services,’ without listing every profession. If your business requires specialist knowledge or credentials to deliver, assume it qualifies as a professional service and seek legal advice.
Mixing professional services with product sales puts your entire exemption at risk
If your company sells digital products like e-books but also offers editing or PR services under the same registration, the professional services component can disqualify the whole company from the tax exemption. The Nigerian Revenue Service (NRS) looks at what your company does as a whole, not just the revenue from products alone.
Practical note: The safest structure is to run two separate companies: one for digital products and publishing, and another for professional services.
Nigerians working remotely for foreign organisations must still pay taxes in Nigeria
If you live in Nigeria and earn income from foreign clients or organisations, that income is fully taxable in Nigeria. This applies to freelancers, remote workers, content creators, and research fellows. Nigeria now taxes its residents on worldwide income, not just income earned locally. Where you live determines your tax obligation, not where your client is based.
Practical note: If your foreign employer or client already deducted tax in their country, you can claim that as a credit against what you owe in Nigeria. This prevents double taxation.
Fellowship stipends and grants are now taxable income
The NTA 2025 broadens the definition of taxable income to include prizes, honoraria, grants, and stipends. Research fellowship payments are captured under this expanded definition, especially if the fellowship comes with deliverables, reports, or any work obligation. Receiving a stipend into a company account instead of a personal account does not exempt it from tax. It may actually increase your tax exposure.
Practical note: If the naira equivalent of your annual fellowship stipend is N800,000 or less, you are fully exempt under the personal income tax threshold. Above that figure, progressive tax rates apply from 15% upward.
Every individual earning income in Nigeria now has a tax-free threshold of N800,000
The NTA 2025 introduces a personal income tax-free threshold of N800,000 per year. This means the first N800,000 of your annual income attracts zero tax. Income above that figure is taxed on a progressive scale, starting at 15% and reaching a maximum of 25%. This is a significant relief for lower-income earners and freelancers.
Practical note: For foreign income, calculate the naira equivalent using the official Central Bank of Nigeria (CBN) exchange rate at the time of each payment.
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