From January 1, 2026, Nigeria’s new tax laws take effect. Signed into law on June 26, 2025, these reforms reshape your take-home pay, investment taxes, and business obligations. Here’s your practical guide.
Who This Affects Most
| Group | Key Changes |
| Salary earners under ₦800k/year | No tax; keep 100% of income and gains. |
| Middle-income earners (₦1m–₦10m) | Lower effective tax vs. old regime; ensure deductions are documented. |
| Stock investors | No CGT if annual disposal proceeds < ₦150m and total gains ≤ ₦10m. |
| Freelancers/SMEs | Development Levy applies only if turnover > ₦100m; full relief below ₦100m and fixed assets ≤ ₦250m. |
| Multinationals/large Nigerian firms | 15% minimum effective tax; tighter disclosures; potential top-up tax. |
| Free Zone companies selling locally | Domestic-market sales become taxable from Jan 1, 2026 – plan restructuring. |
Am I Even Taxable in Nigeria? New Residency Rules
For the first time, the new tax law clearly defines who counts as a resident individual, removing decades of ambiguity.
You’re considered a tax resident in Nigeria if any of the following apply in a tax year:
- You’re domiciled in Nigeria.
- You maintain a permanent home for domestic use in Nigeria.
- You spend 183 days or more in Nigeria (including short leaves or temporary absences).
- You have substantial economic or immediate family ties in Nigeria.
- You serve as a Nigerian diplomat or public servant abroad.
Why this matters:
- Residents are taxed on worldwide income (including foreign investments), though double-tax treaties may apply.
- Non-residents are taxed only on Nigeria-sourced income (such as local salaries, rent, or dividends).
Your Salary & Personal Income Tax
New thresholds: ₦800,000 annual income is now tax-free
The first ₦800,000 of your yearly income is fully tax-free.
This change is particularly significant: individuals earning ₦800,000 or less per year (around ₦66,667 monthly) are now completely exempt from tax on both income and gains.
Progressive tax brackets up to 25%
Income above ₦800,000 is taxed in ascending bands up to 25% for earnings above ₦50 million. Middle-income earners between ₦1m and ₦10m should see slightly lower effective tax rates.
Make sure your PAYE tables, deductions (pension, NHF/NHIS, rent relief, insurance, mortgage), and documentation are updated before January 2026.
Increased exemption on job loss/injury from ₦10m to ₦50m
Compensation for redundancy, job loss, or injury is now tax-exempt up to ₦50 million, up from ₦10 million previously, a welcome cushion during difficult times.
Your Investments & Capital Gains Tax
CGT restructured for individuals and companies
- Companies: Pay 30% on capital gains (same as the corporate income tax rate).
- Individuals: Pay CGT at your personal income tax rate (0%–25%), depending on your income band, not a flat rate.
Small investor exemption: Most retail investors are safe
You won’t pay CGT on Nigerian stock sales if:
- Your total disposal proceeds in 12 months are below ₦150 million, and
- Your total gains in that period don’t exceed ₦10 million.
Example: If you bought shares for ₦50M and sold them for ₦140M, your disposal proceeds are ₦140M (under the ₦150M threshold), but your gain is ₦90M (over the ₦10M threshold), so you’d pay CGT on the full ₦90M at your personal income tax rate. The ₦10M exemption only applies if your total gains for the year don’t exceed that amount.
What this means for Cowrywise users
- Mutual Funds: Fund managers handle taxes internally; your distributions are taxed according to your personal tax bracket.
- Stocks: When you sell at a profit, your CGT depends on your personal income tax rate. Keep your cost basis, contract notes, and broker statements intact for accurate computation.
Long-term investing still wins
Even with higher corporate CGT, long-term investing remains the smarter play. Inflation still erodes idle cash faster than tax can touch compounding investment returns.
Your Business (If You’re Self-Employed)
₦100m turnover threshold for CIT exemption
Businesses with turnover below ₦100 million remain exempt from Company Income Tax (CIT).
What the Development Levy means
A 4% Development Levy applies to companies’ assessable profits.
Small business relief: Companies with turnover ≤ ₦100M and fixed assets ≤ ₦250M are exempt from both CIT and the Development Levy.
The Development Levy also replaces multiple old taxes: the Tertiary Education Tax, IT Levy, NASENI Levy, and Police Trust Fund Levy, making it a consolidation, not an additional burden for most companies.
For multinational companies: the 15% Minimum Rule
Large companies, those part of multinational groups with global revenue ≥ €750M or Nigerian turnover ≥ ₦50B, must maintain a minimum effective tax rate of 15%.
If tax reliefs or incentives drop your payable tax below 15%, you must pay a top-up tax to meet that minimum.
Export Processing & Free Trade Zones: sunset approaching
Currently, companies in Free Zones enjoy full tax exemptions on exports.
From January 1, 2028, profits will be taxable if such companies sell into Nigeria’s customs territory. Free-zone operators should start restructuring now to stay compliant.
VAT: What Changed (and What Didn’t)
Rate: Remains 7.5%.
But three big shifts matter:
Input VAT Recovery
Businesses can now recover input VAT on all purchases (goods, services, and fixed assets) tied to taxable supplies previously unclear in law.
Zero-Rated Essentials
Basic foods, educational materials, medical supplies, and electricity transmission are zero-rated, meaning sellers can recover input VAT but charge 0% VAT to customers.
E-invoicing/Fiscalisation
VAT-registered businesses must adopt NRS-mandated e-invoicing systems (Nigeria Revenue Service, formerly FIRS).
While the exact timeline is still being finalised, expect phased implementation from early 2026. Build or buy compliant invoicing systems now, train finance staff, and test integration with accounting software.
Controlled Foreign Company (CFC) Rules
If a Nigerian company owns foreign subsidiaries, it must now pay tax on undistributed profits if the foreign company could have paid dividends without harming its operations.
This closes loopholes used to shift profits offshore. Review your international structure and ensure substance and compliance.
Compliance Urgency: What to Do Before January 2026
- Assess whether minimum effective tax rules apply to your group or business.
- Update payroll systems for new PAYE brackets and the ₦800K zero-tax band.
- Review tax planning arrangements; you must disclose any that offer “tax advantages.”
- Prepare for mandatory e-invoicing if VAT-registered (build systems, train staff).
- If you own foreign subsidiaries, review whether CFC rules apply to undistributed profits.
Penalties Have Increased Sharply
- Late return filing: ₦100,000 for the first month, plus ₦50,000 for each additional month.
- Awarding contracts to unregistered entities: ₦5 million fine.
Compliance isn’t optional. Update your filings, records, and vendor lists now.
These Changes Don’t Have to Be Stressful
Yes, the tax landscape has shifted, but the fundamentals of wealth building haven’t.
Most salary earners earning below ₦10M will see similar or lower effective tax rates thanks to the ₦800K exemption. Small investors are protected by the ₦150M disposal threshold, and small businesses remain CIT- and levy-exempt under ₦100M turnover.
These reforms also close loopholes and standardize rules that previously were confusing. The key: stay informed, keep good records, and automate what you can control.
What Smart Nigerians Should Do Now
- Review your financial goals for 2026: Calculate your new take-home pay using the updated PAYE brackets. If you earned ₦5M last year, you may take home ₦50K–₦100K more annually under the new regime. Factor this into your savings and investment targets.
- Automate your savings: consistency protects you against income variability.
- Diversify your portfolio with Cowrywise mutual funds, stocks, and fixed-income plans.
- Keep airtight records to ensure accurate tax computation and avoid penalties.
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