07/10/2025
Christabel Amara explains the Tax Reforms taking effect as from next year.
" Q&A on the new Nigeria Tax Law (Specific focus on Individuals and Small businesses)
Q1: When does the new Nigeria Tax Act take effect?
A1: The new Nigeria Tax Act takes effect from 1 January 2026.
Q2: Which specific individuals does the Nigeria Tax Law apply to?
A2: It applies to all individuals that earn income in Nigeria (workers, content creators, remote workers, influencers, traders, etc.) and to Nigerians earning income abroad if they are tax residents in Nigeria
Q3: Will transfers and deposits into my bank account be taxed?
A3: No. Moving money around (via POS, transfers, deposits, or withdrawals) is not a taxable event. What is taxed is income earned.
Q4: Will the money I keep in my bank account be taxed from 2026?
A4: No. Just having money in your account is not taxable. Only the income you earn (like salary, business profits, or interest) is what can be taxed.
Q5: I’m a student with no job. Will I pay tax in 2026?
A5: No. If you have no taxable income, you won't pay tax.
Q6: Will tax authorities now monitor bank accounts of businesses more closely?
A6: Yes, it will be easier for authorities to track compliance. But again, your bank balances will not be taxed, profits and income are.
Q7: Will I pay tax on the loan I borrow from Fairmoney or any lender?
A7: No. Loans are not taxable given that they are not income. However, the interest income earned by Fairmoney will be taxed at their own hands.
Q8: I run a one man business. Do I pay personal income tax or company income tax?
A8: If registered as an enterprise (business name), you pay Personal Income Tax. If registered as a limited liability company then you pay Company Income Tax.
Q9: If I sell shares and make profit, will I pay tax in 2026?
A9: No, as long as the shares you sold are not more than ₦150 million in value, and the gain is not above ₦10 million. However, if it is higher than this threshold, the gain becomes taxable.
Q10: I am a pensioner. Will my pension income be taxed in 2026?
A: No. Approved pension and retirement benefits are exempt from tax.
Q11: Are military salaries taxable?
A11: No. The salaries of military officers are now tax exempt.
Q12: Do creatives (authors, musicians, sportsmen) still enjoy tax exemptions on foreign income?
A12: No. They must now pay Nigerian tax on their income earned within Nigeria and outside.
Q13: Are crypto gains taxable?
A13: Yes. Profits from crypto, NFTs, and other digital assets are now taxed.
Q14: Who is exempt from personal income tax?
A14: Individuals earning the national minimum wage or less, and those earning below ₦800,000 annually, are exempt.
Q15: What are the new progressive tax bands?
A15:
First ₦800,000 @ 0%
Next ₦2.2m @ 15%
Next ₦9m @ 18%
Next ₦13m @ 21%
Next ₦25m @ 23%
Above ₦50m @ 25%
Q16: If I get a big severance package when leaving my job, will I pay tax on it?
A16: You won't pay tax if it is ₦50 million or less but if it is more then the extra amount will be taxed using the progressive tax band in no 15 above.
Q17: If I earn dividends or rent from abroad, will Nigeria tax it?
A17: Dividends, interests, rent, royalties earned from outside Nigeria are exempt from tax provided they are brought into Nigeria through approved channels (banks).
Q18: If a soldier or anyone in the armed forces gets injured in service and starts receiving a disability pension, will it be taxed in Nigeria?
A18: No. The disability pensions earned by the soldier or anyone in the armed forces will completely be tax exempt.
Q19: My uncle wants to start an agricultural company next year. Will his company be taxed in Nigeria?
A19: No. Agricultural companies such as those in crop production, livestock, forestry, dairy, cocoa processing will enjoy a 5-year tax holiday from the date they begin operation
Q20: Is income from Federal or State Government bonds taxable?
A20: No, all government bonds are exempt from tax.
Q21: What does rent relief entail under the new tax law?
A21: Yes. From 2026, individuals can claim rent relief of 20% of the annual rent paid, but capped at ₦500,000.
For instance, if your yearly rent is ₦5 million, 20% would be ₦1 million, but the law caps it at ₦500,000. To enjoy this relief, you must declare your actual rent and provide the details to the relevant tax authority.
Q22: I earn 6m yearly, will i be better off under the new tax law?
*A22: Old law:*
CRA = 20% of ₦6m (₦1.2m) + ₦200k = ₦1.4m.
Taxable income = ₦6m − ₦1.4m = ₦4.6m.
Applying old tax bands gives total tax of ₦896,000.
*New law (NTA 2025):*
Rent relief = ₦500k (must declare actual rent).
Taxable income = ₦6m − ₦500k = ₦5.5m.
Applying new bands:
First ₦800k @0% = 0
Next ₦2.2m @15% = ₦330k
Remaining ₦2.5m @18% = ₦450k
Under the new law, tax reduces from ₦896k to ₦780k, saving ₦116k. This will increase your net pay (take home pay).
Q23: If my company's turnover is below ₦50 million, will I pay tax?
A23: No. Small companies under ₦50m turnover are exempt from taxes.
Q24: As a remote worker in Nigeria for an international organisation, will I pay tax?
A24: Yes, you will pay tax in Nigeria if the country where the international organisation is based exempts your salary under a treaty or diplomatic arrangement.
Q25: Will a foreigner earning salary in Nigeria be taxed?
A25: No, if their employer is a start-up, or operates in tech or creative arts, and their income is already taxed in their country of residence "
