Nigeria’s New Tax Laws, Explained Like a Friend Would (2026 Guide)

Studying 215 pages of the Nigerian Tax Act law is not fun. Especially when it’s filled with technical terms. But you know what; with a degree in pure mathematics, I love numbers.

Since 1 January 2026, Nigeria has been running on a new set of tax laws, and they touch almost everything you do with money.

Two laws are now in charge. The Nigeria Tax Act 2025 decides what gets taxed and how much. Its companion, the Nigeria Tax Administration Act 2025, covers the paperwork side: registering, filing, paying, and what happens when you and the taxman disagree.

Between them, they replace the old Personal Income Tax Act, Companies Income Tax Act, Capital Gains Tax Act, Stamp Duties Act and VAT Act.

So if what you “know” about tax came from an uncle who used to work at the old FIRS, most of it has expired. For old things have passed away; all things have become Nigeria Revenue Service, NRS.

The great thing is that the basics are simpler than all that legal jargon makes them seem. This is what a usual paycheck looks like with the new tax rates. You don’t need to follow it yet; it’s just to show you what’s coming.

That’s the figure before factoring in things like rent relief and pension contributions, which we’ll take care of later. By the time you finish this guide, you’ll know how to slash a number like that legally.

This guide is for Nigerians who want answers without a law degree, whether you live in Lagos or Leeds. If you’re in the diaspora, you’ll find a good deal about foreign income because that’s where the confusion is usually thickest.

The sections follow a natural order, so each one builds on the last. We start with who counts as a Nigerian taxpayer because that decides everything else. Then, we move to how you earn, starting with a salary, then freelance income, then running a company.

After that comes what you own and sell (investments, crypto and property), what you borrow (loans and mortgages), and what you spend (VAT and fuel).

You can use the table below for a quick glance to see where you belong. Also, throughout the guide, I mentioned the sections/sources where I got the facts and figures from in the Nigeria Tax Act. Now, you know Oluboba didn’t fabricate numbers.

Before We Dive Deep into the Nigeria Tax Act

Three honest notes I need to bring to your attention before we begin.

First, this is a guide, not tax advice. I know I am a graduate of mathematics. Still, that doesn’t make an expert in the tax field. For big decisions and mega deals like selling a house or restructuring a business, please talk to a qualified tax professional.

Second, I couldn’t find everything. And not everything in the official scanned gazette is clear. Some details, like withholding tax rates, the pension contribution rate and state land-use charges, sit in separate regulations or other laws, and when that happens, I’ll say so instead of guessing.

Third, the laws don’t always agree with themselves. In a few places, the two Acts give different numbers for the same idea, or a line is missing from the printed copy. I’ll flag those as we meet them, so nothing catches you off guard.

If you understand this, let’s start with the question that comes before every other: are you a Nigerian taxpayer in the first place?

Nigeria Tax Act on Residency and the Diaspora

Before anyone can tell you what you owe, there’s one question that decides almost everything else: are you a Nigerian tax resident or a non-resident?

If you live here in Nigeria, you get taxed on income you earn no matter where it comes from: within the country or from abroad. But if you don’t live here in Nigeria, you only owe tax on what you earn from Nigeria.

Same person, same bank balance, but a totally different tax bill. Let’s just begin here.

Are you a Nigerian tax resident?

The Nigeria Tax Act is pretty straightforward about it. If you live here, Nigeria taxes your income and profits no matter where they come from, even if you never bring the cash into the country. If you’re not a resident, Nigeria only taxes the money you make from Nigeria.

The Act defines a non-resident individual as someone who ticks all six of these boxes below in a given year:

Since all six have to be true, messing up just one is a red flag. If someone’s away for 10 months but still keeps a flat in Lagos with their family, they’ve got issues with tests 2 and 4, no matter how short their trips back are.

The test is applied year by year, and the tax year is the calendar year, 1 January to 31 December. Companies have their own rules. A company is Nigerian if it’s registered here or if it’s managed or controlled from Nigeria.

Where you live also determines who collects your tax. State and FCT tax offices take care of residents, and the federal Nigerian Revenue Service looks after companies and non-residents. If you work in Nigeria, the state that receives your tax is where you live on January 1st of that year. If you’re on leave on that day, it’s where you lived last just before the leave began.

Living abroad: Nigerian income and foreign income

If you’re not a resident, only income from Nigeria gets taxed here. It includes rent from a house in Nigeria, dividends and interest from Nigerian companies, and earnings from selling assets like land in Nigeria. For salary, the rule is narrower: your pay is taxed in Nigeria if you did the work in Nigeria and that the country where you live does not tax you.

The person (or company) paying you dividends, interest, rent, royalties, or directors’ fees has to withhold tax before paying you, and for non-residents, that’s the final tax.

If you bring foreign dividends, interest, rent, or royalties into Nigeria through approved channels, they’re exempt.

If you’ve already paid tax abroad on the same income, you may not pay twice. Nigeria gives you a credit for foreign tax, but only if three conditions are met:

• You were a Nigerian resident that year.
• The tax was paid to a country Nigeria has a double taxation agreement with.
• You claim it within two years after the tax year.

You get credit for the lower number between the foreign tax you paid and the share of your Nigerian tax linked to that foreign income (foreign income divided by total income, multiplied by your Nigerian tax).

So, if you’ve got ₦6,000,000 salary from Nigeria and ₦4,000,000 freelancing from a treaty country, here’s the deal before any tax breaks.

In the second column, you ended up paying more overseas than what Nigeria would’ve charged, so you lost the extra ₦164,000. You can’t just take foreign tax off your income under the Act.

So where you live decides what gets taxed, and then the next thing is how they tax it. Next up is the most typical example: your monthly salary.

Nigeria Tax Act on Monthly Salary Earners

You collect your pay. Your employer deducts some tax, and you go on with your life. That’s the part most people see. There’s a set of rules underneath that determines the deductions and how you can lower them.

I will break it down with a ₦500,000 monthly salary to show you.

How the authorities tax your salary.

What counts as income? Income from work covers more than just your base salary. This covers your salary, fees, bonuses, allowances, and benefits from your boss.

The tax bands. In Nigeria, tax comes in different forms. You only pay each rate on the slice of money that fits in that band, not your entire earnings. That’s why only part of your salary goes up with a raise, not the whole thing. Just the extra naira gets taxed at the higher rate.

The bands count on your taxable income; that’s your income after the deductions. I’ll explain in a moment. This is what the tax looks like on different salaries, before deductions kick in.

A special case. If your gross pay (before any deductions) from a job is at or below the national minimum wage, that income is exempt from tax entirely.

Things you can subtract to pay less tax. You can subtract these payments from your income first, before calculating tax.

The top priority for tenants is rent relief. If your rent is over ₦2.5 million a year, you won’t get any extra relief since 20% of ₦2.5 million already maxes out the limit. You need to report your actual rent right, and keep proof since they can turn down a claim with no evidence.

Here’s what those deductions do to our ₦500,000-a-month earner, whose salary is ₦6,000,000 a year. I assume the ₦480,000 pension figure in the last column for illustration only.

The third column shows the cap at work. Paying ₦3 million in rent gets you no more relief than paying ₦2.5 million.

Perks, PAYE and what you must file

If you get a benefit from your boss, the tax authority could consider part of it as taxable income. But if your employer hands you a benefit using their own property, such as a company car, you count as earning 5% of the price they paid for it each year. If your employer gives you housing, they count it as you earning the place’s yearly rent, but only up to 20% of your gross pay (excluding the rent itself).

They leave out certain perks like canteen meals and meal vouchers, uniforms and work tools, and relocation costs. Here’s how the two main perks affect our ₦6,000,000 earner:

PAYE – Pay As You Earn

Your boss has to take tax out of your salary and make sure it all adds up right by the end of the year. By January 31 every year, the employer sends in a report for the past year showing each worker’s total pay (including bonuses and perks), deductions, take-home pay, and tax taken out.

Your very own return. Here’s the one most people miss. It doesn’t end with PAYE. No matter what, file your annual return showing all your income, even if there’s no tax due.

What happens when you leave a job?

If you get paid because you lost your job, you don’t have to pay tax on up to ₦50,000,000. But if over 50 million, the one paying the compensation must subtract and forward any taxes required by law. Lump sum payouts for redundancy and other big cash compensations don’t count. Same goes for pensions, gratuities, retirement benefits under the Pension Reform Act, and death gratuities.

A paycheck is just one way to bring in cash. Now, let’s talk about freelancers and side gigs, where no one’s taking taxes out for you.

Nigeria Tax Act on Freelancers and Side Income

If you are receiving a monthly salary, your employer does most of the tax paperwork for you. If you’re freelancing, consulting, or running a side gig, you’re on your own. You’re handling all your taxes solo.

The good thing is the Act taxes what you keep, not what you get, so how you manage your costs really counts.

Taxing what you keep

Don’t worry about turnover, think profit instead. Your taxable business income is what you earn after you take away the costs you had to pay just to make that money. This is how the Act breaks down common costs:

There are two more things you should know. If you spend in a foreign currency, like on a dollar software subscription, you can only deduct it using the Central Bank of Nigeria’s official exchange rate for that day or timeframe. A business loss isn’t thrown away; you can carry it forward and use it against future earnings.

Imagine a person making ₦700,000 every month freelancing, totaling ₦8,400,000 annually. This is how the same income shows up based on what they can prove:

The calculation of tax uses the same bands as for salaries.

When your side gig adds to your paycheck. The bands add up, so your extra cash gets taxed on top of your paycheck instead of from scratch. Here’s someone earning ₦500,000 monthly on the job and raking in ₦7,000,000 yearly from freelance work.

That side hustle means an extra ₦1,290,000 tax on ₦7,000,000 profit, about 18.4% more. Your employer’s PAYE only takes care of your salary. You must file a return covering all your income.

How’s VAT handled then?

If your small business makes ₦100m or less and has fixed assets under ₦250m, you don’t have to register for VAT, charge it, or file returns unless you want to. But this small business covering doesn’t include any business offering “professional services,” like consulting, planning, or support that needs special skills. Aside artisans or trade jobs.

So, a freelance digital marketing consultant might not qualify for small-business relief, even with low turnover.

Next, we move from individuals to companies, where the rates, the small-company threshold and the new levy all come into play.

Nigeria Tax Act on Companies

Going from your own cash to the company’s changes the game in three key ways. Instead of having different bands, the tax rate’s a single flat percentage. Small businesses don’t have to pay a thing. Let’s take them in order.

Rates, small companies and capital allowances

A company pays tax on its total profits, which includes assessable profits from everywhere, gains from selling assets, minus any losses carried forward and capital allowances. This is called Company Income Tax.

How much you pay depends on the size.

If a company’s sales are ₦50 million or under, fixed assets don’t exceed ₦250 million, and it’s not in professional services, it’s considered small. If you miss one of those numbers or deal in professional services, you land in the 30% tax bracket.

Keep in mind, the Tax Administration Act uses the term “small business” for a ₦100 million turnover. That applies when it comes to Value Added Tax (VAT) not Company Income Tax (CIT). Since the two Acts don’t line up, I handle them separately.

This is what a ₦10 million profit looks like either way, with the levy added (I’ll get to that in a bit).

Here’s how it scales across sizes, assuming no capital allowances:

You get tax relief through capital allowances when you buy equipment. When a company buys an asset, it can’t write off the whole price as an expense since that’s capital spending. Rather, it goes for a yearly capital allowance based on the kind of asset.

You only get the allowance if you actually own the asset and use it for business by the end of the accounting period. Make sure you go and claim it. If you don’t use your allowance, it doesn’t disappear, it just rolls over, but don’t count on the tax persons to remind you.

Here’s the first-year effect for the larger company above (₦200m profit), after buying a ₦20m machine, a ₦10m vehicle and a ₦15m building:

That’s ₦2.4 million less than the ₦68 million without allowances.

Submitting and paying up.

Every business has to submit a self-assessment return yearly, no matter if there’s tax to pay or not. Make sure to add audited financial statements, tax and capital allowances calculations, proof you paid, and a principal officer’s signed attestation.

If you’re a small company, you can provide a statement of accounts you confirm, rather than audited accounts.

This is the schedule:

Pay the tax by the filing deadline, either all in one go or in parts, just don’t miss the last part due then. Each company needs to appoint someone to sort out tax issues, and if they hire an agent, that person has to be an accredited tax agent.

The Development Levy, minimum tax and dividends

Apart from company tax, a 4% fee hits the assessable profits of all companies, except small companies and those not living in the country. The money is split among seven bodies:

• 50% to the Tertiary Education Trust Fund,
• 15% to the Nigerian Education Loan fund,
• 10% to the Defence and Security Infrastructure Fund,
• 8% each to the National Information Technology Development Fund and the National Agency for Science and Engineering Infrastructure,
• 5% to the National Cybersecurity Fund and
• 4% to the National Board for Technological Incubation.

A minimum tax of 15%

Some businesses just can’t use deductions to slash their bill that low. When a company’s effective tax rate (covering company tax, petroleum taxes, levy, and priority-sector credits as a percentage of net income) dips below 15%, it needs to top up to make 15%.

It covers multinational group companies with €750 million turnover or more, plus any other company earning ₦50 billion+, but the tax authority can increase that limit.

Just to keep it simple, if a company makes ₦10 billion in net income and has already paid ₦1 billion in covered taxes (that’s 10%), they’d still need to pay another ₦500 million to hit ₦1.5 billion. Smaller companies aren’t really affected.

Founders, watch out for dividends.

If a company pays dividends, it deducts tax upfront at a fixed rate, preventing the shareholder from being taxed twice. But if a business hands out a dividend from untaxed profits, since it had no or less profit than the dividend, it ends up paying company tax as if that dividend was its actual profit.

If it hands out a ₦5 million dividend, it’ll end up costing ₦1.5 million. Dividends from already taxed earnings, exempt profits, franked income, and certain real estate investment company payments are the exceptions.

Next up, we’ll dive into selling your assets ‘cause gains on shares, property, and crypto each have their own set of rules.

Capital Gains and Digital Assets

Another way the tax authority steps in is when you sell something for more than what you paid. They add the gain to your income and tax it at the same rates as your salary. For businesses, it’s part of their total profits and taxed 30%.

Selling shares, property and belongings

The way to calculate a gain. You only make a gain when you get rid of an asset, like selling, leasing, transferring, assigning, or if it’s taken off you by force. The gain’s what you get after taking away what the asset cost and any selling fees like agent or legal charges.

Pretty much anything you own is an asset, no matter where it is: land, stocks, rights, debts, digital stuff, and even foreign cash. When you’re paid in instalments over more than 12 months, the tax on the gain gets spread out depending on how much you receive yearly.

So here’s a property that sold at ₦60 million, which you got for ₦25 million plus ₦3 million in selling costs, and you’re making ₦6 million salary a year.

The Act doesn’t factor in inflation, so any gain that’s built up over years gets taxed completely. When it’s a full sale, it just shows the buying price and selling fees, so don’t just assume you can write off renovation expenses without double-checking.

When you use the asset in a business and claim capital allowances, you only write off the remaining balance, not the full purchase price.

What’s exempt. Many everyday sales aren’t taxed at all:

Here’s how the share rules play out:

The reinvestment row is my plain reading of “proportionately”. Check it against your own numbers.

Gifts and inheritance.

These shift the tax rather than erase it. If you inherit something, your cost is its market value when you inherit it. If someone gives you an asset, your cost is deemed to be the price at which it was last sold in an arm’s-length deal, which is usually what the giver paid. So the later gain is measured from that old price.

Gifting away an asset you yourself received as a gift isn’t chargeable. The Act doesn’t clearly say whether gifting away an asset you bought triggers a gain, so ask a professional before giving away property.

Dollars count too.

Holding foreign currency isn’t tax-free. A currency other than naira is a chargeable asset. With assumed rates, if you bought $5,000 at ₦1,500 and sold at ₦1,700, the ₦1,000,000 gain adds ₦180,000 of tax. The Act doesn’t explain how everyday bank dollar trades are reported.

If you’re in the diaspora, gains on assets in Nigeria, such as land, are taxable even if you’re a non-resident. So is selling shares in a foreign company that gets more than half its value from Nigerian property.

Crypto and other digital assets

Crypto gets its own rules because it’s treated as a chargeable asset, defined to include crypto assets, utility and security tokens, NFTs and derivatives of them. Here’s what’s taxable:

If a client pays your freelance fee in stablecoins, the value on the day you get it counts as income. The values are based on prices from a recognised exchange that the tax authority has approved.

Only one rule really matters here. You can only offset crypto losses with crypto gains. They can’t reduce your salary or business income.

Here’s an example.

For diaspora holders, the law counts digital assets as Nigerian if the person in charge lives here or has a Nigerian permanent setup. If you follow the non-resident rules, a non-resident’s crypto won’t count as Nigerian property unless it’s held through a Nigerian business presence.

The platforms you use for trading have responsibilities as well. Exchanges and custodians have to sign up as Virtual Asset Service Providers, keep customer info for at least seven years, and flag any big or shady transactions.

They need to keep the tax authority posted on customers’ trades regularly . Get ready for the tax authorities to see your trades.

Next, we apply all this to the biggest asset most people own: property. We’ll cover buying, selling and renting, including stamp duty.

Nigeria Tax Act on Property

Since property’s the biggest purchase for most Nigerians, it’s worth figuring out which taxes hit you, when, and who’s responsible. There’s not one “property tax” mentioned in the Acts.

With property, you’re dealing with loads of rules at once. From stamp duty when buying, capital gains when selling, income tax if you rent it, VAT (usually not an issue), and a clearance certificate for the paperwork.

Let’s start with buying and selling.

Buying and selling

1) Stamp duty: the cost the buyer has to cover.

When ownership changes, the transfer document has a 1.5% stamp duty fee, and the buyer’s the one who pays up. What you need to know is that the exemption applies only to property valued at ₦10 million or less. Above that, the 1.5% appears to apply to the whole value, not just the excess.

You need to stamp the document within 30 days of signing. If you don’t, you’ll have to pay 10% of the unpaid duty plus interest at the Central Bank’s rate. For that ₦30 million property, it’s ₦45,000 plus interest.

It becomes riskier since failing to stamp the document means courts or arbitration won’t recognise it (except in criminal cases), and that is exactly when you need your title documents to be legitimate.

The tax clearance certificate.

It’s a real eye-opener for many buyers and builders. If you’re applying for a certificate of occupancy or building plan approval, the government agency or bank working with you has to ask for a tax clearance certificate for the past three years.

Once you ask, the tax authority has two weeks to either send it or explain why they won’t. It lays out your income, tax due, tax paid, and any balances left.

Renting and leasing

In case you’re renting. Rent relief lets you deduct 20% of your yearly rent, up to ₦500,000, from your taxable income. If you pay ₦1.5 million a year in rent, you get ₦300,000 back as relief.

If you are a landlord. Money from rent counts as taxable income. They add it to your total income and tax it using the same brackets. You’re allowed to deduct repair costs for the rental and legal fees to protect your title, along with loan interest tied to earning income.

If you don’t live here and rent out property, the tax taken from your rent is the final amount due.

Looking to dig in more? iPropty breaks down how the Nigeria Tax Act changes things for real estate.

Nigeria Tax Act on Loans and Interest

Borrowing triggers a few small taxes and one big relief. There are different rules for lending, saving, and even when someone lets a debt go. Here’s what applies and when.

Borrowing and mortgages

Stamp duty charges on loans.

The Act says “loan capital” means debt taken on by a company or group set up in Nigeria, so this charge is for business loans, not personal ones. If a company takes out a ₦20 million loan for three years, it pays ₦25,000. The lender (the mortgagee) gets charged the mortgage rate, though the Act doesn’t say how they work out the amount.

Mortgage interest relief.

If you’re paying interest on a loan for building your own home, you can deduct it before the tax rates kick in. If you’re making ₦6 million a year and paying ₦900,000 in interest:

The wording says “developing,” so it’s not clear if interest on a loan for a finished house counts.

Business loans.

You can deduct interest on money borrowed to make business income, but there’s one catch. If a company borrows from someone connected, like a spouse, relative, a company you run, or a related business, any interest over 30% of its earnings before interest, tax, depreciation, and amortisation isn’t allowed.

You can carry the extra for as long as five years. The cap doesn’t apply to Nigerian subsidiaries of overseas banks and insurers.

Imagine a company making ₦100 million and handing ₦40 million in interest to its parent.

Lending, saving and forgiven debt

Since the withholding rates are in the regulations, not the Acts, I won’t be quoting them. Keep in mind, the exemption specifically applies to bonds. Since it doesn’t mention other instruments, don’t go thinking everything from the government’s exempt.

When a debt is forgiven. Forgiveness can create a tax bill. The rule works in two parts:

When a company charging a ₦5 million consulting fee but then waives it, they owe tax on the ₦5 million income, so that’s ₦1.5 million at 30%.

If they wipe out an ₦8 million equipment loan, that ₦8 million counts as a gain, so you’d owe ₦2.4 million at 30%.

This rule applies due to a prior deduction allowance, making it primarily a business issue. The Acts do not specify how a personal loan forgiven by a friend should be handled.

How to File Your Tax in 2026

Here’s the whole process, from “I’ve never filed before” to “Now, I am done filing”.

Step by step

A worked example of step 4. An employee on ₦500,000 a month pays ₦1.2 million in annual rent:

If your employer already deducted PAYE, subtract what was deducted. You still file the return.

Who files what, and when

The Acts base a year’s assessment on the preceding accounting period, and it isn’t clear how that applies to the first year under the new law. Keep your 2025 and 2026 records, and ask your tax authority which period your first return should cover.

What happens when you fail to comply