This explainer provides clear answers to key questions about Nigeria’s new tax law, outlining its major provisions, implications, and how it affects individuals and businesses.
Via PUNCH:
The Nigeria Tax Act 2025, signed into law by President Bola Tinubu in June, will come into force on January 1, 2026. The new laws, embodied in several new acts, including the Nigeria Tax Act, the Nigeria Tax Administration Act, and the Nigeria Revenue Service Act, are designed to streamline the tax system, broaden the tax base, and promote economic growth and outlook of the nation.
Here are a few Questions & Answers compiled by several authors and online posts that relate to low-level workers and small and medium scale businesses.
Q: Which specific individual does the Nigerian Tax Law apply to?
A: Individuals who earn income in Nigeria (workers, content creators, remote workers, influencers, traders, etc.) and to Nigerians earning income abroad if they are residents in Nigeria.
Q: Will transfers and deposits into my bank account be taxed?
A: No. Moving money around (via POS, transfers, deposits, or withdrawals) is not taxable. What is taxed is income earned.
Q: Will tax authorities now monitor bank accounts of businesses more closely?
A: Yes. It will be easier for authorities to track compliance. However, your bank balances will not be taxed; profits and income are.
Q: I run a one-man business. Do I pay personal income tax or company income tax?
A: If registered as an enterprise (business name), you pay Personal Income Tax. If registered as a limited liability company, you pay Company Income Tax.
Q: Who is exempt from personal income tax?
A: Individuals, earning the national minimum wage or less, and those earning below N800,000 annually, are exempt.
Q: If I sell shares and make a profit, will I pay tax in 2026?
A: No. As long as the shares you sold are not more than N150 million in value, and the gain is not above N10 million. If it is higher than this threshold, however, the gain becomes taxable.
Q: I am a pensioner. Will my pension income be taxed in 2026?
A: No. Approved pension and retirement benefits are exempt from tax.
Q: Are military salaries taxable?
A: No. The salaries of military officers are now tax-exempt.
Q: Do creative (authors, musicians, actors, comedians, sportsmen) still enjoy tax exemptions on foreign income?
A: No. They must now pay Nigerian tax on their income earned within Nigeria and outside.
Q: Are crypto gains taxable?
A: Yes. Profits from crypto, NFTs, and other digital assets are now taxed.
Q: What are the new progressive tax bands?
A: First N800,000 – 0%
N2.2m – 15%
N9m – 18%
N13m – 21%
N25m – 23%
Above N50m – 25%
Q: If I get a big severance package when leaving my job, will I pay tax on it?
A: You won’t pay tax if it is N50 million or less, but if it is more than the amount, it will be taxed using the progressive tax band above.
Q: If I earn dividends on rent abroad. Will Nigeria tax it?
A: Dividends, interests, rent, royalties earned from outside Nigeria are exempt from tax provided they are brought into Nigeria through approved channels (banks).
Q: My uncle wants to start an agriculture company next year. Will his company be taxedin Nigeria?
A: No. Agriculture businesses such as those in crop production, livestock, forestry, dairy, and cocoa processing, will enjoy a five-year tax holiday from the date they begin operation.