Tax Reform: Nigeria Government Unveils 50 Exemptions and Reliefs Aimed at Easing Burden on the Masses

From January 1, 2026, Nigeria’s new tax law will come into effect. This law will provide many reliefs and exemptions for low-income earners, average taxpayers, and small businesses.

The following are the reliefs that will boost the welfare of these classes of people and promote the growth of small scale businesses.

Personal Income Tax or PAYE

1. Exempts individuals earning the national minimum wage or less
2. Annual gross income up to N1,200,000 (translating to about N800,000 taxable income) is exempt
3. Reduced PAYE tax for those earning annual gross income up to N20 million
4. Gifts (exempt)

Allowable Deductions & Reliefs for Individuals

5. Pension contribution to PFA
6. National Health Insurance Scheme
7. National Housing Fund contributions
8. Interest on loans for owner-occupied residential housing
9. Life insurance or annuity premiums
10. Rent relief – 20% of annual rent (up to N500,000)

Pentions & Gratuities – Exempt

11Pension funds and assets under the Pension Reform Act (PRA) are tax-exempt.

12. Pension, gratuity or any retirement benefits granted in line with the PRA
13. Compensation for loss of employment up to N50 million

Capital Gains Tax (CGT) – Exempt

14. Sale of an owner-occupied house
15. Personal effects or chattels worth up to N5 million
16. Sale of up to two private vehicles per year
17. Gains on shares below N150 million per year or gains up to N10 million
18. Gains on shares above exemption threshold if the proceed is reinvested
19. Pension funds, charities, and religious institutions (non-commercial)

Companies Income Tax (CIT) – Exempt

20. Small companies (turnover not more than N100 million and total fixed assets not more than N250 million) pay 0% tax
21. Eligible (labelled) startups are exempt
22. Compensation relief – 50% additional deduction for salary increases, wage awards, or transport subsidies for low-income workers
23. Employment relief – 50% deduction for salaries of new employees hired and retained for at least three years
24. Tax holiday for the first 5-years for agricultural businesses (crop production, livestock, dairy etc)
25. Gains from investment in a labeled startup by venture capitalist, private equity fund, accelerators or incubators

Development Levy – Exempt

26. Small companies are exempt from 4% Development Levy

Withholding Tax – Exempt

27. Small companies, manufacturers and agric businesses are exempt from withholding tax deduction on their income
28. Small companies are exempt from deductions on their payments to suppliers

Value Added Tax (VAT) -0% or Exempt

29. Basic food items – 0% VAT
30. Rent – Exempt
31. Education services and materials – 0% VAT
32. Health and medical services
33. Pharmaceutical products – 0% VAT
34. Small companies (≤ N100m turnover) are exempt from charging VAT
35. Diesel, petrol, and solar power equipment – VAT suspended or exempt
36. Refund of VAT on assets and overheads to produce VATable or 0% VAT goods and services
37. Agricultural inputs – fertilizers, seeds, seedlings, feeds, and live animals
38. Purchase, lease or hire of equipment for agric purposes
39. Disability aids – hearing aids, wheelchairs, braille materials
40. Transport – shared passenger road transport (non-charter)
41. Electric vehicles and parts – exempt
42. Humanitarian supplies – exempt
43. Baby products
44. Sanitary towels, pads or tampons
45. Land and building

Stamp Duties – Exempt

46. Electronic money transfers below N10,000
47. Salary payments
48. Intra-bank transfers
49. Transfers of government securities or shares
50. All documents for transfer of stocks and shares