Business Guide

Small Business Tax in Nigeria

The ₦50M exemption, VAT thresholds, and what small business owners need to know under the 2025 reforms.

The Small Company Exemption

Under Section 202 of the Nigeria Tax Act 2025, companies with gross turnover of ₦50 million or less per year and fixed assets below ₦250 millionqualify as “small companies.” This classification unlocks a significant tax advantage.

Qualifying small companies pay:

  • •0% company income tax
  • •0% capital gains tax
  • •Exempt from the 4% development levy

Both conditions must be met simultaneously. A company that exceeds the fixed asset limit even while remaining under the turnover threshold does not qualify.

Who Does NOT Qualify

Professional service firms are explicitly excluded from the small company exemption under the Nigeria Tax Act 2025. This exclusion applies even if the firm's annual turnover is well under ₦50 million. The following professions are named in the Act:

  • •Lawyers
  • •Accountants
  • •Doctors
  • •Consultants
  • •Architects

These businesses remain subject to the standard 30% company income tax rate regardless of their size.

Small Business VAT Exemption

Separately from the income tax rules, the Nigeria Tax Administration Act 2025 (NTAA) exempts businesses with turnover of ₦100 million or less from mandatory VAT registration. This is a different threshold from the ₦50 million small company definition.

Understanding both thresholds is important. Here is how they interact:

TurnoverCIT Exempt?VAT Exempt?
₦70 millionYes (NTA)Yes (NTAA)
₦80 millionNoYes (NTAA)
₦120 millionNoNo

CIT exemption applies to non-professional service businesses only. Fixed asset limit of ₦250M also applies for CIT exemption.

The Development Levy

Companies that do not qualify for the small company exemption are subject to a 4% development levy on assessable profits. This levy replaces the old education tax and several other earmarked levies that previously existed alongside company income tax.

Small companies are fully exempt from the development levy. If your business qualifies under the ₦50M turnover and ₦250M fixed asset thresholds, you pay 0% on this levy as well as 0% CIT and 0% CGT.

Note: The development levy is calculated on assessable profits, not turnover. A company with high revenue but low profit will owe a smaller levy. However, minimum tax rules may apply for companies reporting consistent losses.

Minimum Effective Tax Rate

At the opposite end of the spectrum, large companies and multinationals with annual turnover of ₦20 billion or more are subject to a minimum effective tax rate of 15%. This provision is designed to prevent profit-shifting and excessive deductions from reducing the effective tax rate below a meaningful floor.

This rule has no bearing on small businesses. It is included here to give a complete picture of how the NTA 2025 treats companies at different scales.

Summary: Company tax tiers under NTA 2025

  • •Small companies (under ₦50M turnover): 0% CIT, 0% CGT, 0% development levy
  • •Medium and large companies: 30% CIT plus 4% development levy
  • •Multinationals (₦20B and above): 30% CIT subject to 15% minimum effective tax rate floor

What You Still Need to Do

Qualifying for the small company exemption means paying zero income tax. It does not mean zero obligations. All registered businesses in Nigeria must still meet the following requirements under the NTAA 2025.

  • 1

    Get a TIN

    A Tax Identification Number is mandatory for all businesses, including those fully exempt from company income tax. Register at the Nigeria Revenue Service (NRS) portal.

  • 2

    File annual returns

    Tax exemption does not waive the filing obligation. Returns must be submitted within 90 days after the end of your fiscal year. Late filing penalties apply regardless of exemption status.

  • 3

    Keep proper books and records

    All companies are required to maintain accounting records that support the figures in their returns. This requirement applies whether or not you owe tax.

Check if your business qualifies →

This guide is for educational purposes only and does not constitute professional tax advice. While we strive for accuracy based on the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025, tax law is complex and subject to interpretation. For official guidance, consult the Nigeria Revenue Service (NRS) or a qualified tax professional.

Sources: Nigeria Tax Act 2025 (Section 202); Nigeria Tax Administration Act 2025; EY Tax Alert (June 2025); PwC Nigeria Tax Summaries; KPMG Nigeria GMS Flash Alert.