Small Business Tax in Nigeria 2026: What You Owe and How to Pay

If you run a small business in Nigeria, the tax system can feel like a maze. There is CIT, VAT, WHT, PAYE if you have employees, and state levies. But there is also good news: the Nigeria Tax Act 2026 introduced a zero rate for small businesses that could save you millions.

The NGN 50 Million Rule

The biggest change for small businesses in 2026 is the zero-rate CIT threshold:

• •Annual turnover of NGN 50 million or less: 0% Company Income Tax
• •NGN 50 million to NGN 100 million: 20% CIT
• •Above NGN 100 million: 30% CIT (standard rate)

This means if your business earns NGN 50 million or less per year, you pay ZERO company income tax. This is a massive incentive for small businesses and startups.

What Counts as Turnover?

Turnover is your total revenue before any expenses. If you sell goods or services and your total annual revenue is NGN 48 million, you qualify for the zero rate.

Does This Apply to All Business Types?

• •Limited liability companies: Yes
• •Business names (sole proprietorships): Taxed under personal income tax, not CIT
• •Partnerships: Taxed under personal income tax
• •NGOs: Different rules apply

Taxes Small Businesses Actually Pay

Even with the CIT zero rate, small businesses still have other tax obligations:

1. VAT (if turnover exceeds NGN 25 million)

• •Rate: 7.5% on taxable goods and services
• •Filing: Monthly, by the 21st of the following month
• •Exemptions: Basic food items, medical products, educational materials

2. Withholding Tax (WHT)

• •Deducted at source on payments for services
• •Rates: 5% for companies, 10% for individuals
• •Common on: rent, professional fees, contracts, commissions
• •You collect it from the payer and remit to the tax authority

3. PAYE (if you have employees)

• •Deduct monthly from employee salaries
• •Remit to state internal revenue service
• •Rates: 7% to 24% depending on income level

4. Education Tax

• •2% of assessable profit for companies
• •Applies even to companies with zero CIT

5. Technology Levy

• •1% of assessable profit for companies with turnover above NGN 100 million

6. State Levies

• •Business premises registration
• •Development levies
• •Vary by state

Registering Your Business for Tax

Step 1: Get a TIN

Register for a Tax Identification Number through:

• •NRS portal (for federal taxes)
• •Your state's internal revenue service (for state taxes)

Step 2: Register for Applicable Taxes

• •CIT: All companies
• •VAT: If turnover exceeds NGN 25 million
• •PAYE: If you have employees
• •WHT: If you make payments subject to WHT

Step 3: Open Tax Accounts

• •Link your TIN to your bank account
• •Set up payment channels on the NRS portal

Record Keeping Requirements

The NRS requires businesses to keep records for at least 6 years:

• •Sales and purchase invoices
• •Bank statements
• •Payroll records
• •Asset registers
• •VAT records
• •WHT receipts

Poor records are the number one reason businesses get into trouble during audits.

Common Small Business Tax Mistakes

Mistake 1: Not Filing Because You Owe Zero Tax

Even if your CIT is zero, you still must file annual returns. Failure to file attracts penalties regardless of whether you owe tax.

Mistake 2: Mixing Personal and Business Finances

Use a separate bank account for your business. Mixing funds makes tax compliance impossible and raises red flags in audits.

Mistake 3: Ignoring VAT Until You Get Caught

If your turnover exceeds NGN 25 million, VAT registration is mandatory. The NRS is increasingly using bank data to identify non-compliant businesses.

Mistake 4: Not Claiming WHT Credits

If you provide services and clients deduct WHT, you should claim this as a credit against your tax liability. Many businesses leave this money on the table.

Mistake 5: Assuming You Do Not Need a Tax Professional

Tax rules change frequently. What worked last year may not work this year. At minimum, have a professional review your annual filing.

Tax Incentives for Small Businesses

Beyond the zero CIT rate, there are other incentives:

• •Pioneer Status: Tax holidays for businesses in certain sectors (up to 5 years)
• •Agricultural incentives: Additional tax relief for agribusinesses
• •Export incentives: Tax relief on export income
• •Capital allowances: Accelerated depreciation on qualifying assets
• •Investment tax credit: Credit for qualifying capital expenditure

Making It Simple

Taxee helps you understand exactly what your business owes across all tax types. Whether you are a one-person operation or a growing team, the numbers matter.

Calculate your business tax →