If your company turned over ₦100 million or less, owns fixed assets worth under ₦250 million and doesn’t provide professional services, it pays 0% company income tax under the Nigeria Tax Act 2025.
That rule has applied since 1 January 2026, and it’s the biggest change the new law made for small businesses. The 0% rate is not a pass to ignore tax, though. You still register, keep books and file.
And if your business is a sole proprietorship rather than a registered company, a different set of rules applies to you. Here’s how it all fits together, with what you still owe each year.
Who counts as a small company
The Act sets three tests, and a company has to pass all of them for the year:
| Test | To qualify |
|---|---|
| Gross turnover | ₦100,000,000 or less in the year |
| Total fixed assets | Less than ₦250,000,000 |
| Type of business | Not a professional services business |
Turnover means everything the business sold or earned before costs, not profit. A shop that sells ₦90 million of goods and keeps ₦9 million after expenses is judged on the ₦90 million.
Professional services firms, such as law, accounting and consultancy practices, are left out at any size. A two-person consultancy with ₦20 million turnover still pays the standard rate. If you’re not sure which side of the line your business falls on, ask a tax adviser or the Nigeria Revenue Service (NRS) before you file.
What a small company no longer pays
- Company income tax: 0% on its profits. Every other company pays 30%. How profit is worked out is covered under what company income tax is.
- Capital gains tax: small companies are exempt, so a gain on selling an asset isn’t taxed. For everyone else, see how capital gains tax works.
- The development levy: other companies pay 4% of assessable profit on top of income tax. Small companies pay none.
There’s VAT relief too. The Nigeria Tax Administration Act 2025 says small businesses don’t have to file monthly VAT returns, and they are exempt from registering for VAT and charging it on their sales. A small business can opt out of that exemption by writing to the NRS, which some do when their customers are large companies that want VAT invoices. If VAT is new to you, start with what VAT is and who pays it. The standard rate is still 7.5%.
What you still have to do
The Tax Administration Act says every company must file a self-assessment return at least once a year, whether or not it owes tax. Zero tax still means a return.
- Get a tax ID. Every company needs one to register and file. Here’s how to get a Tax Identification Number online.
- Keep books. Record sales, expenses and assets as they happen. Failing to keep proper books can attract a ₦50,000 penalty for a company.
- File on time. A company that has been in business for more than 18 months files within six months after the end of its accounting year. A new company has its own deadline; when a new company starts paying tax explains the first-year rules.
- Attach your accounts. Larger companies must send audited financial statements. A small company can send a statement of accounts attested to by the company instead, which saves an audit fee.
Late filing is costly. Under the Tax Administration Act, failing to file a return attracts ₦100,000 for the first month and ₦50,000 for every month after that. A small company that forgets for a year can owe more in penalties than it would ever have paid in tax. Put the deadline in your calendar and learn the steps for filing tax returns in Nigeria.
Sole traders and business names are taxed differently
The 0% rate is for companies. If you trade under your own name or a registered business name, the business isn’t a separate taxpayer. Its profit is your income, and you pay personal income tax on it to the revenue service of the state you live in.
Personal income tax uses these bands on taxable income: the first ₦800,000 at 0%, the next ₦2.2 million at 15%, the next ₦9 million at 18%, the next ₦13 million at 21%, the next ₦25 million at 23%, and anything above ₦50 million at 25%. Business expenses incurred wholly and exclusively to earn the income come off before you apply the bands.
Example only: a tailor running a business name makes ₦4,000,000 profit in the year after expenses, with no other deductions.
- First ₦800,000 at 0%: ₦0
- Next ₦2,200,000 at 15%: ₦330,000
- Last ₦1,000,000 at 18%: ₦180,000
- Total tax: ₦510,000 for the year
If the tailor pays rent on their home, 20% of the annual rent (up to ₦500,000) comes off first, which lowers the bill. You can try your own numbers on the personal income tax calculator.
Incorporating can bring the business profit to 0%, but it isn’t free money. Salary the company pays you is still taxed under PAYE, and a company has filing duties a business name doesn’t. Weigh it with an accountant before you register a company just for the tax rate.
When your company outgrows the exemption
Growth past ₦100 million turnover, or buying fixed assets worth ₦250 million or more, moves the company to the standard rules for that year.
Example only: a distribution company turns over ₦150 million and makes ₦20 million assessable profit, with no capital allowances or past losses.
- Company income tax at 30% of ₦20,000,000: ₦6,000,000
- Development levy at 4% of ₦20,000,000: ₦800,000
- Total: ₦6,800,000
That’s a big jump from zero, so plan for it once turnover gets near the line. The company income tax calculator runs the small company test and both taxes from your turnover, costs and assets.
When a business stops being small for VAT, it has to start filing monthly VAT returns. Selling off a capital asset, or selling the business itself, isn’t counted when testing if you’re still under the threshold.
Habits that keep a small business out of trouble
Separate the money. Run business income through a business account, not your personal one. When sales and family spending share one account, proving your turnover to a tax officer gets hard.
Record every income stream. Turnover includes all of it. If clients pay you in USDT and you sell the USDT for naira, keep the sale receipt from your History with the invoice it settled, so the naira figure is easy to prove. Simple money habits help too; start with building a strong financial foundation.
Check your status every year. The tests apply to each year on its own. A good year can push you over, and a slow year can bring you back under.
Keep your papers ready for contracts. Government jobs and many big clients ask for proof that you file. See how to get a tax clearance certificate.
Questions small business owners ask
Does a small company still need to file if it owes nothing?
Yes. Every company files a yearly return whether or not tax is payable, and missing it attracts late filing penalties.
Is the ₦100 million limit based on profit or sales?
Sales. The test uses gross turnover, meaning all income before you subtract costs.
I run a business name, not a company. Do I get the 0% rate?
No. A business name’s profit is taxed as your personal income at the personal income tax bands, though the first ₦800,000 of taxable income is taxed at 0%.
Who collects tax from my business now?
Company tax goes to the Nigeria Revenue Service (NRS), the body FIRS became. Personal income tax on a sole trader’s profit goes to your state’s internal revenue service. The Nigeria Tax Act explainer covers the wider changes.
Work out where your company stands in a minute with the company income tax calculator.
