QUESTIONS & ANSWERS ON THE NEW NIGERIA TAX LAW (SPECIFIC FOCUS ON INDIVIDUALS AND SMALL BUSINESSES)
QUESTIONS & ANSWERS ON THE NEW NIGERIA TAX LAW (SPECIFIC FOCUS ON INDIVIDUALS AND SMALL BUSINESSES)
*Q1*: When will 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?
*A10*: 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.
All Will Be Well
