-1.70%
+1.67%
+2.26%
-0.64%
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+3.11%
Starting January 1, 2026, Nigeria will implement sweeping tax reforms with 50 exemptions and reliefs targeting low-income earners, small businesses, and essential goods. President Bola Tinubu signed four tax reform bills into law on June 26, 2025.
Nigeria’s 2026 Tax Reform: 50 Exemptions Explained
1. Gifts Are Tax-Exempt ✅
Gifts you receive are not taxed under the new Personal Income Tax (PAYE) category.
2. Churches, Mosques, and NGOs Are Exempt
Pension funds, charities, and religious institutions (for non-commercial activities) remain tax-exempt under Capital Gains Tax provisions. Under the new law, workers earning up to ₦20 million annually get reduced PAYE rates.
3. Sale of Primary Residence Is Exempt
Profits from the sale of an owner-occupied house are exempt from Capital Gains Tax—whether it’s ₦10 million, ₦20 million, or ₦100 million.
4. Student Upkeep/Allowances Are Exempt
Money sent by parents to students for upkeep is treated as a gift and remains untaxed.
What Was Missed: The Full 50 Exemptions
Here’s the complete breakdown:
Personal Income Tax (PAYE) – Who Pays Nothing
| Category | Exemption Details |
|---|---|
| Minimum wage earners | Completely exempt |
| Income up to ₦1.2M/year | Exempt (≈₦800k taxable income) |
| Income up to ₦20M/year | Reduced PAYE rates |
| Gifts received | Tax-free |
Tax-Deductible Contributions
- Pension contributions to PFAs (Pension Fund Administrators)
- National Health Insurance Scheme (NHIS) contributions
- Life insurance premiums up to ₦500,000 or 20% of annual rent
- National Housing Fund contributions
- Gratuity fund contributions
Pension & Retirement Benefits (All Exempt)
- All pension funds and assets under the Pension Reform Act (PRA)
- Pensions, gratuities, and retirement benefits granted under PRA
- Compensation for loss of employment up to ₦50 million
Capital Gains Tax – What’s Exempt
According to Vanguard Nigeria:
| Item | Exemption Limit |
|---|---|
| Owner-occupied house sale | Unlimited (fully exempt) |
| Personal effects/chattels | Up to ₦5 million |
| Private vehicle sales | Up to 2 vehicles per year |
| Share gains | Below ₦150M/year or ₦10M per transaction |
| Reinvested share proceeds | Exempt if above threshold but reinvested |
| Religious institutions | Non-commercial activities only |
Companies Income Tax (CIT) – Small Business Relief
This is huge for entrepreneurs. According to EY’s statutory alert:
Small Companies Pay 0% Tax
Definition: Annual turnover ≤ ₦100 million AND total fixed assets ≤ ₦250 million
Benefits:
- 0% Companies Income Tax
- Exempt from 4% development levy
- Exempt from Capital Gains Tax
- No withholding tax on income
- No withholding tax on payments to suppliers
Additional Corporate Reliefs
- Startups classified as “eligible”: Tax-exempt
- Salary increases for low-income workers: 50% additional deduction
- New employee hiring: 50% deduction for salaries (if retained 3+ years)
- Agricultural businesses: 5-year tax holiday (crop production, livestock, dairy)
- Manufacturers: Withholding tax exemptions
Value Added Tax (VAT) – 0% or Exempt
These attract 0% VAT or are fully exempt:
Essential Goods & Services
| Category | Items |
|---|---|
| Basic food items | Rice, beans, bread, flour, etc. |
| Education | Materials, tuition, educational services |
| Healthcare | Services, pharmaceuticals, medical supplies |
| Rent | Residential accommodation |
| Fuel | Diesel, petrol (VAT suspended) |
| Clean energy | Solar equipment, LPG, CNG, renewables |
Agriculture & Social Goods
- Agricultural inputs (fertilizers, seeds, seedlings, animal feeds, live animals)
- Disability aids
- Baby products
- Sanitary towels
- Electric vehicles and parts
- Humanitarian supplies
Small Business VAT Exemption
Businesses earning less than ₦100 million annually will not charge VAT.
Stamp Duties – What’s Exempt
Electronic transfers in the following categories are exempt:
- Transfers below ₦10,000
- Salary payments
- Intra-bank transfers
- Transfers involving government securities or shares
Who Really Pays Tax?
The video got this right: “For only salary earners, those are the people that will now start to consider if they fall within the band.”
According to Mercans’ statutory alert, here’s the new progressive tax structure for those who DO pay:
| Annual Taxable Income (₦) | Tax Rate |
|---|---|
| Up to 800,000 | 0% |
| 800,001 – 3,200,000 | 15% |
| 3,200,001 – 8,000,000 | 19% |
| 8,000,001 – 20,000,000 | 21% |
| 20,000,001 – 50,000,000 | 23% |
| Above 50,000,000 | 25% |
Key Changes:
- Minimum tax has been abolished
- Consolidated Relief Allowance (CRA) replaced with specific deductions
- Middle-income earners pay less than before
- High earners (₦50M+) pay more
- Income exemptions: Minimum wage earners, low-income workers (up to ₦1.2M), gifts
- Business exemptions: Small companies (₦100M turnover), startups, agricultural businesses
- Consumption exemptions: Basic food, education, healthcare, clean energy
- Capital gains exemptions: Primary residence, personal effects, vehicles, shares (with limits)
- Social exemptions: Pensions, charities, religious institutions (non-commercial)
As Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, stated:
“This is one of the most people-focused tax reforms in Nigeria’s recent history, emphasizing fairness, simplicity, and inclusiveness within the nation’s fiscal system.”
The reforms take effect January 1, 2026. Businesses and individuals should review their operations now to understand how these exemptions apply.
What Did We Miss? (Community Input)
The video creator asked: “Let me know the ones I’ve missed because there are more. Let me hear your contribution in the comment section.”
Based on the official, here are additional nuances:
- VAT refunds: Businesses can now claim refunds on VAT paid for assets and overheads used in producing VATable or 0%-rated goods
- Free zone reforms: Tax exemptions retained for exports, but with conditions after 2028
- Minimum ETR: Large multinationals must meet 15% minimum effective tax rate (ETR)
- Fossil fuel surcharge: 5% levy to promote clean energy (kerosene, LPG, CNG exempt)
