New Tax Laws Take Effect in Nigeria: How They Affect Your Income, Salary, Investments, and Business

Nigeria’s tax system has undergone its most significant changes in decades, with new regulations coming into force on 1 January 2026. These reforms will affect individuals, investors, and businesses alike, making it essential to understand how they impact your finances.

Income Tax Updates

If you earn ₦800,000 or less per year (approximately ₦66,667 per month), you will pay zero tax on both income and capital gains. Income above this threshold is taxed progressively, with rates reaching 25% for earnings above ₦50 million.

For the first time, the law clearly defines tax residency. You are considered a tax resident if you:

• Are domiciled in Nigeria.
• Maintain a permanent home in Nigeria.
• Spend 183 days or more in Nigeria (including short trips abroad).
• Have substantial economic or family ties in Nigeria.
• Serve as a Nigerian diplomat or public servant abroad.

Residents are taxed on worldwide income, while non-residents are taxed only on Nigeria-sourced income. This is particularly important for individuals working remotely for foreign companies or splitting time between Nigeria and other countries.

Capital Gains Tax (CGT) Changes

The new law significantly changes capital gains taxation:

• Most retail investors will not pay CGT on stock sales if total disposal proceeds in 12 months are below ₦150 million and total gains do not exceed ₦10 million. Both conditions must be met.
• For individuals, CGT is now charged at your personal income tax rate (0%-25%), replacing the previous flat rate.
• Companies are subject to a flat 30% CGT, in line with corporate income tax.

Withholding Tax on Interest

A 10% withholding tax now applies to interest from Treasury Bills (T-Bills), Commercial Papers, Corporate Bonds, Promissory Notes, and similar short-term securities. Interest on Federal Government bonds and CBN OMO bills remains exempt.

Corporate Tax Updates

• Businesses with annual turnover under ₦100 million remain exempt from Company Income Tax (CIT).
• A 4% Development Levy replaces previous levies including Tertiary Education Tax, IT Levy, NASENI Levy, and Police Trust Fund Levy.
• Large companies (global revenue ≥ €750M or Nigerian turnover ≥ ₦50B) must maintain a minimum effective tax rate of 15%.

Value Added Tax (VAT)

The VAT rate remains 7.5%, with key updates:

• Businesses can now recover input VAT on all purchases linked to taxable supplies.
• Zero-rating applies to basic foods, educational materials, medical supplies, and electricity transmission.
• Mandatory e-invoicing is now required for VAT-registered businesses.
• Penalties for non-compliance have increased. Late returns cost ₦100,000 for the first month and ₦50,000 for each additional month. Awarding contracts to unregistered entities incurs a ₦5 million fine.

Stamp Duty on Electronic Transfers

A ₦50 charge now applies to electronic transfers of ₦10,000 and above, classified as Stamp Duty, payable by the sender. Transfers under ₦10,000, salary payments, and intra-bank transfers between your accounts remain exempt.

How to Comply

• Salary earners: Update PAYE deductions, document pension, NHF, NHIS, insurance, rent relief, and mortgage payments. Keep records of all deductible expenses.
• Investors: Track all purchases and sales, monitor the ₦150M disposal proceeds and ₦10M gain limits.
• Business owners: Determine whether exemptions or the 15% minimum tax applies. Prepare for e-invoicing, verify vendor registration, and review foreign subsidiaries under Controlled Foreign Company (CFC) rules.

Linking Your TIN

All taxpayers must ensure their Tax Identification Number (TIN) is registered and linked:

• Individuals: Your National Identity Number (NIN) serves as your TIN.
• Businesses: Your CAC Registration Number (RC Number) serves as your TIN.

You can verify and link your NIN or business TIN via mobile apps, USSD, online banking, or at any branch. Retrieve your TIN free via the Joint Tax Board portal or visit a Nigerian tax office.

Take Action Now

Nigeria’s tax landscape has changed, but your path to financial growth remains. Keep accurate records, automate savings, and ensure all deductions, vendor registrations, and filings are up to date. Plan your 2026 finances with the new brackets and exemptions in mind to maximize your take-home pay.