FIRS Tax Update: Small Businesses Must File Returns from 2026 Despite Zero Tax

The Federal Inland Revenue Service (FIRS) has clarified that small businesses in Nigeria will be required to file annual tax returns starting in 2026, even though they will not be obligated to pay tax.

Speaking during a webinar, FIRS Deputy Director Kehinde Kajesomo explained that small businesses will undergo the full tax computation process. This includes calculating assessable profits, deducting capital allowances and losses, and determining total profits before applying the zero tax rate.

“This means small businesses will compute their taxable profits and submit returns to the tax authority, but the actual tax payable will be zero,” Kajesomo stated.

For larger companies, the corporate income tax (CIT) remains at a standard 30 percent, although the President may reduce it to 25 percent upon recommendation from the National Economic Council (NEC), with any changes formally published in the official gazette.

The definition of a small company has also been updated. Companies with an annual turnover up to ₦50 million and fixed assets not exceeding ₦250 million will qualify as small businesses. These companies will enjoy a zero percent tax rate, including on capital gains, which were previously taxed at 10 percent.

Kajesomo emphasized that the capital gains tax rate itself has not increased from 10 percent to 30 percent. Tax treatment now depends on company size: small businesses effectively pay zero tax on capital gains, while larger companies are subject to the standard CIT rate. He noted that companies with losses may offset gains across business activities, further reducing taxable amounts.

Under the revised tax provisions, higher tax rates apply only to income exceeding specific bands. For instance, individuals with taxable income above the top threshold will pay 25 percent only on the excess, not on their entire earnings. Exemptions remain for individuals earning the national minimum wage, military personnel, diplomats, and those covered by international tax agreements.

The federal government maintained the 30 percent CIT rate for all companies, excluding small businesses, under the new Nigerian Tax Act (NTA), which takes effect in January 2026.

This reform aims to simplify tax compliance for small enterprises, encourage entrepreneurship, and ensure that larger companies contribute fairly to federal revenue.