Nigeria Tax Act 2025: Complete Business Tax Guide
Everything you need to know about Nigeria's new tax law for business owners: the tax brackets, who's exempt, deductions, and how it affects your business.
Key Highlights
Small Companies: Tax-free
LLCs with turnover ≤ ₦100 million pay 0% CIT.
Business Names: ₦800k tax-free
First ₦800,000 of income is completely tax-free.
VAT threshold: ₦100 million
Must charge VAT only if turnover ≥ ₦100M.
Development Levy: 4%
Replaces 2% TET for large companies only.
The Nigeria Tax Act 2025 (NTA 2025) represents the most significant overhaul of Nigeria's tax system in decades. Signed into law by President Bola Ahmed Tinubu on June 26, 2025, and effective from January 1, 2026, this new law consolidates multiple tax legislations into a single, unified statute.
If you're wondering how your business will be affected, we've built a free tax calculator that shows you exactly how much you'll keep and how much goes to tax.
Business Name vs LLC: Which is Better for Tax?
Taxed under Personal Income Tax (PIT)
- Progressive rates (0% - 25%)
- ₦800,000 tax-free threshold
- CRA deduction (₦200K + 20% of income)
- Top marginal rate: 25%
Taxed under Companies Income Tax (CIT)
- Small company (≤₦100M): 0% CIT
- Large company: 30% CIT
- + 4% Development Levy
- Total: 34% for large companies
Tax Comparison at Different Profit Levels
| Profit | Business Name (PIT) | LLC (CIT + DL) | Savings with Business Name |
|---|---|---|---|
| ₦10,000,000 | ~₦1,590,000 (15.9%) | ₦3,400,000 (34%) | ₦1,810,000 |
| ₦50,000,000 | ~₦10,430,000 (20.9%) | ₦17,000,000 (34%) | ₦6,570,000 |
The gap never closes. There is no profit level where the LLC suddenly becomes cheaper on tax alone.
Personal Income Tax (PIT) - For Business Names
Business Names (sole proprietors) are taxed under Personal Income Tax with progressive rates. This applies to you if you registered a Business Name with CAC but are not a Limited Company.
| Tax Band (Annual) | PIT Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Consolidated Relief Allowance (CRA)
Before applying the tax bands, you deduct a CRA of:
₦200,000 + (20% × Gross Income)
This significantly reduces your taxable income, keeping effective tax rates low.
Companies Income Tax (CIT) - For LLCs
Limited Liability Companies (LLCs) and Public Limited Companies (PLCs) are taxed under Companies Income Tax. The rate depends on your annual turnover.
| Company Size | Annual Turnover | CIT Rate | Dev Levy | Total |
|---|---|---|---|---|
| Small Company | ≤ ₦100 million | 0% | 0% | 0% |
| Large Company | > ₦100 million | 30% | 4% | 34% |
VAT (Value Added Tax) - Who Must Charge It
VAT is a consumption tax paid by the final consumer, not the business. You collect VAT and remit it to FIRS. Here's who must charge VAT:
You MUST charge VAT (7.5%) if ALL are true:
- Annual turnover is ₦100 million or more
- You sell VAT-able goods or services
- You operate or supply customers in Nigeria
| Item | Old Regime | New Regime (2026) |
|---|---|---|
| VAT rate | 7.5% | 7.5% |
| Who pays VAT | Final consumer | Final consumer |
| VAT threshold | ₦25M | ₦25M |
| Small business protection | Yes | Yes |
| Enforcement | Weaker | Stronger |
| Digital services clarity | Limited | Clearer |
Allowable Deductions (Section 20)
Reduce your taxable income by claiming these business expenses:
Deductible (Section 20)
- • Salaries & employee benefits
- • Rent for business premises
- • Interest on business loans
- • Bad debts (proven)
- • Pension contributions
- • R&D expenses
- • Repairs & maintenance
- • Utilities
- • Professional fees
- • Insurance premiums
Non-Deductible (Section 21)
- • Capital expenditure
- • Personal/domestic expenses
- • Depreciation (use capital allowances)
- • Fines and penalties
- • Taxes paid
- • Entertainment expenses (limited)
- • Political donations
Capital Allowances (LLCs Only)
Instead of depreciation, LLCs can claim capital allowances on business assets at these annual rates:
| Asset Type | Annual Rate |
|---|---|
| Buildings (offices, warehouses) | 10% |
| Plant & Machinery | 20% |
| Furniture & Fittings | 20% |
| Motor Vehicles | 25% |
| Software | 25% |
Official Sources
Authoritative links to official PDFs and repositories for compliance and legal reference:
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