Nigeria’s new tax reform laws, scheduled to take effect from 1 January 2026, introduce wide-ranging reliefs and exemptions aimed at easing the financial burden on low-income earners, average taxpayers and small businesses.
The reforms outline 50 key exemptions and incentives covering personal income tax, company income tax, value added tax, capital gains tax, stamp duties and other statutory charges.
Under the revised Personal Income Tax and Pay-As-You-Earn regime, individuals earning the national minimum wage or less will be fully exempt from tax. In addition, annual gross income of up to ₦1.2 million, which translates to about ₦800,000 in taxable income, will no longer attract personal income tax. Taxpayers earning annual gross income of up to ₦20 million will benefit from reduced PAYE rates, while gifts received by individuals are also exempt from taxation.
The reforms further expand allowable deductions and reliefs available to individuals. Contributions to pension fund administrators, payments under the National Health Insurance Scheme and National Housing Fund contributions are all deductible. Interest paid on loans used for owner-occupied residential housing will attract relief, alongside premiums paid for life insurance or annuity policies. Rent relief has also been introduced, allowing taxpayers to claim 20 per cent of annual rent paid, subject to a maximum of ₦500,000.
In the area of pensions and retirement benefits, the new laws grant full tax exemption to pension funds and assets managed under the Pension Reform Act. Pension, gratuity and other retirement benefits granted in line with the Act are also exempt. Compensation for loss of employment enjoys tax relief up to ₦50 million.
Significant exemptions have also been provided under Capital Gains Tax. The sale of an owner-occupied house will not attract CGT, while personal effects or chattels valued at up to ₦5 million are exempt. Individuals may sell up to two private vehicles per year without incurring capital gains tax. Gains on shares are exempt where they are below ₦150 million per year or where gains do not exceed ₦10 million. Gains above the exemption threshold will also be exempt if the proceeds are reinvested. Pension funds, charities and non-commercial religious institutions are similarly exempt from CGT.
For businesses, the reforms introduce sweeping reliefs under Companies Income Tax. Small companies with turnover not exceeding ₦100 million and total fixed assets not more than ₦250 million will pay zero per cent company income tax. Eligible and labelled startups will also enjoy full exemption. Employers will benefit from a compensation relief that allows an additional 50 per cent deduction for salary increases, wage awards or transport subsidies granted to low-income workers. An employment relief permits a 50 per cent deduction for salaries paid to new employees hired and retained for at least three years. Agricultural businesses engaged in crop production, livestock, dairy and related activities will enjoy a five-year tax holiday. In addition, gains arising from investment in labelled startups by venture capitalists, private equity funds, accelerators or incubators are exempt.
The development levy has also been reviewed, with small companies exempted from the four per cent development levy.
Under the withholding tax framework, small companies, manufacturers and agricultural businesses will be exempt from withholding tax deductions on their income. Small companies are also exempt from withholding tax deductions on payments made to their suppliers.
Value Added Tax provisions under the new laws provide extensive reliefs. Basic food items will attract zero per cent VAT, while rent is fully exempt. Education services and materials, health and medical services, and pharmaceutical products will either attract zero per cent VAT or be exempt. Small companies with turnover of ₦100 million or less are exempt from charging VAT. VAT on diesel, petrol and solar power equipment is suspended or exempted. Businesses will be entitled to refunds of VAT paid on assets and overheads used to produce VATable or zero-rated goods and services. Agricultural inputs such as fertilisers, seeds, seedlings, animal feeds and live animals are exempt, as well as the purchase, lease or hire of equipment for agricultural purposes. Disability aids, including hearing aids, wheelchairs and braille materials, are VAT-exempt. Shared passenger road transport services that are non-charter, electric vehicles and their parts, humanitarian supplies, baby products, sanitary towels, pads or tampons, as well as land and buildings, are also exempt from VAT.
The reforms further extend exemptions under stamp duties. Electronic money transfers below ₦10,000 will not attract stamp duty. Salary payments, intra-bank transfers, transfers of government securities or shares, and all documents relating to the transfer of stocks and shares are also exempt.
Collectively, the 2026 tax reforms represent one of the most comprehensive attempts to reduce the tax burden on ordinary Nigerians, stimulate small business growth, encourage investment and support critical sectors such as agriculture, health, education and renewable energy.
