FG Announces 50 Tax Exemptions and Reliefs to Ease Impact of New Fiscal Reforms

The Federal Government has unveiled a comprehensive package of 50 new tax exemptions and reliefs as part of ongoing fiscal reforms aimed at boosting economic growth, easing the burden on low-income earners, and enhancing Nigeria’s business competitiveness.

Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, announced that the new tax provisions will take effect from January 1, 2026. The initiative is designed to support micro, small, and medium-scale enterprises (MSMEs), startups, and critical sectors such as agriculture, manufacturing, and technology.

According to Oyedele, the reforms are structured to promote inclusive economic growth, reduce income inequality, and create more jobs across the country.

Personal Income Tax Exemptions

Under the new framework, individuals earning the national minimum wage or below will be completely exempted from paying Personal Income Tax (PAYE). Similarly, those with annual gross incomes of up to ₦1.2 million (equivalent to a taxable income of around ₦800,000) will also pay no tax.

The new law introduces a progressive PAYE structure that reduces tax obligations for individuals earning up to ₦20 million per year. Certain allowances, including gifts, pension contributions, life insurance premiums, and rent relief of up to 20% of annual rent (capped at ₦500,000), will also be tax-free.

Retirees will continue to enjoy tax exemptions on pensions, gratuities, and benefits provided under the Pension Reform Act (PRA). In addition, compensation for loss of employment of up to ₦50 million will not be taxed, offering relief to displaced workers.

Capital Gains and Investment Reliefs

To encourage savings and investment, gains from the sale of owner-occupied homes, personal effects valued up to ₦5 million, or sales of up to two private vehicles per year will be exempt from Capital Gains Tax (CGT).

Investors will also benefit from exemptions on share transactions below ₦150 million annually or gains up to ₦10 million. Furthermore, proceeds reinvested in shares will qualify for tax relief, while pension funds, charities, and non-commercial religious bodies will retain their tax-free investment status.

Corporate Tax Incentives for Businesses and Startups

Small companies with annual turnover not exceeding ₦100 million and total fixed assets below ₦250 million will pay zero percent Companies Income Tax (CIT). Startups that meet eligibility requirements will also enjoy full exemptions.

To encourage employee welfare, companies that increase staff salaries, provide wage awards, or offer transport allowances to low-income workers will qualify for an additional 50% tax deduction under the compensation relief plan.

Businesses that hire and retain new employees for at least three years will receive a 50% employment deduction to further promote job creation.

Agricultural enterprises, including crop production, livestock, and dairy operations, will enjoy a five-year tax holiday. Investors funding certified startups through venture capital, private equity, or accelerator programs will also qualify for special tax reliefs.

VAT Exemptions and Adjustments

The Value Added Tax (VAT) system will undergo major restructuring under the new reforms. Essential goods and services such as basic food items, house rent, school materials, healthcare services, pharmaceuticals, and agricultural inputs will either attract 0% VAT or be fully exempted.

To reduce production and transportation costs, VAT on diesel, petrol, and solar power equipment will be suspended. Small companies with turnover below ₦100 million per year will also be exempted from charging VAT on their products or services.

Other VAT-free categories include disability aids, baby care and sanitary products, shared passenger transport, electric vehicles and parts, as well as humanitarian supplies.

Withholding Tax and Stamp Duty Reliefs

Small businesses, manufacturers, and agricultural firms will be exempted from withholding tax deductions on their income and payments to suppliers.

Under the revised Stamp Duties Act, electronic transfers below ₦10,000, salary payments, intra-bank transfers, and transactions involving government securities or shares will no longer attract duty charges.

Boosting Nigeria’s Economic Competitiveness

Experts have described the reforms as one of the boldest fiscal restructuring efforts in recent years. The initiative seeks to simplify Nigeria’s complex tax system, make it more equitable, and enhance voluntary compliance among individuals and businesses.

By focusing on low- and middle-income earners, MSMEs, and high-growth sectors like agriculture and technology, the government aims to stimulate domestic investment, consumption, and job creation while ensuring fiscal stability.

The reforms are also expected to enhance Nigeria’s attractiveness to both local and foreign investors by improving ease of doing business and promoting a fairer distribution of the tax burden.

Economic analysts have noted that the move aligns with the administration’s long-term goal of driving productivity-led growth and reducing dependency on oil revenues. The reforms, when fully implemented in 2026, could play a major role in revitalizing Nigeria’s economy and expanding its non-oil revenue base.