New Nigerian Tax Law (Effective January 1, 2026)
This video provides an in-depth overview of the upcoming Nigerian tax law set to take effect from January 1, 2026. The content is particularly relevant for investors, individuals working, and earning income in Nigeria, emphasizing the importance of understanding the law to remain compliant and avoid penalties. The speaker, an experienced investor (over 20 years in Nigerian investments), clarifies key aspects of the law, focusing mainly on tax exemptions, deductions, and obligations for individuals and small businesses.
Key Insights and Highlights
- The tax law is extensive, spanning over 400 pages, requiring careful study and ongoing updates.
- The speaker stresses that knowledge and compliance are critical, regardless of political opinions about the government.
- The law applies broadly to anyone earning income or investing in Nigeria.
Core Concepts and Structure of Taxation
1. Taxable Income vs. Gross Income
- Tax is not levied on gross income but on taxable income, which is gross income minus allowable deductions.
- Example: A monthly salary of 100,000 Naira equals a gross annual salary of 1.2 million Naira. After deductions (pension, health insurance, housing fund, rent relief, life insurance, mortgage interest), the taxable income is lower.
- The first 800,000 Naira of taxable income is taxed at 0% (i.e., tax-exempt).
- Only income above 800,000 Naira is taxed at progressive rates, starting at 15%.
2. Self-Assessment and Responsibility
- Taxpayers must self-declare income and expenses annually (tax year: January to December).
- Filing deadlines are typically around March or April of the following year.
- Keeping proof of all expenses and receipts is crucial to claim deductions.
- Organized employment has HR handling tax deductions; informal businesses and sole proprietors must self-assess.
- The government uses intelligence tools to verify declarations, cross-referencing bank statements, expenditures, asset purchases, and travel records for inconsistencies.
Tax-Exempt Income and Benefits
| Tax-Exempt Category | Description / Conditions |
|---|---|
| Income below 800,000 Naira/year | Fully exempt from tax. |
| Gifts and Upkeep | Money given as gifts or upkeep (e.g., to parents), when clearly not payment for services, is not taxed. |
| Federal Government Savings Bonds (FGN Bonds) | Interest on FGN savings bonds remains tax exempt (unlike other short-term securities which attract 10% withholding tax). |
| Capital Gains from Stock Market Sales | Tax-exempt if: – Annual sales ≤ 150 million Naira – Gains ≤ 10 million Naira Otherwise, tax applies. However, reinvesting proceeds can defer tax. |
| Crypto Earnings | Gains are taxable considering net profits after deducting losses; net losses incur no tax. |
| Money Sent from Abroad | Transfers from Nigerians living abroad are not taxed, assuming tax was paid overseas and residency rules apply. |
| Small Companies (<100M Naira turnover) | Tax exempt if registered as a limited liability company (LLC). Sole proprietors or business name registrations do not qualify. |
| Agriculture Sector | VAT exempt indefinitely. Tax exempt for first 5 years of company operation to encourage food production. |
| Foreign Dividends | Dividends from foreign investments are tax exempt if brought through official channels (banks). |
| Sale of Personal Residence | Capital gains tax exemption applies if the property is the taxpayer’s personal house. |
| Severance Benefits | Up to 50 million Naira exempt from tax. |
| Pensions and Retirement Benefits | Fully exempt from tax, recognizing prior tax payments during working years. |
| Military Personnel Salaries and Retirement | Both salary and retirement benefits are tax exempt as a form of service recognition. |
Additional Important Details
- Money in bank accounts is not automatically taxed; taxation depends on self-declaration and verification.
- Tax evasion is tackled via cross-checking lifestyle indicators such as spending habits and asset purchases.
- Double Tax Treaties: Nigeria has tax treaties with several countries (including the UK), allowing for tax credits to avoid double taxation for Nigerians living abroad who invest or earn income in Nigeria. Some countries with tax treaties include (not exhaustive):
- United Kingdom
- Others not fully specified
- Company Registration Impact:
- Registering as an LLC offers significant tax benefits, including exemption for companies with turnover under 100 million Naira.
- Running a business under a business name or as an individual means you are taxed as an individual and cannot access these benefits.
- There are tax implications when withdrawing funds from a company as an individual.
- Informal Sector: Tax rules apply differently, with presumptive taxes and partial exemptions depending on turnover and business structure.
Summary Table of Tax Rates and Thresholds
| Income Bracket (Taxable Income) | Tax Rate | Notes |
|---|---|---|
| 0 – 800,000 Naira | 0% | Tax-exempt threshold |
| Above 800,000 Naira | 15% and progressive | Applicable on income exceeding 800,000 Naira |
*Note: Exact progressive tax bands and rates beyond 15% are *Not specified* in detail in this video.*
Practical Advice from the Speaker
- Keep detailed records of all income and expenses.
- Do not attempt to misclassify taxable income as gifts or tax-exempt income.
- Consult a professional accountant or tax expert to understand individual circumstances before making decisions about company registration or tax planning.
- Stay updated with evolving information as the law is complex and subject to further clarifications.
- Subscribe to information channels that provide ongoing analysis and explanations of the Nigerian tax law.
Conclusion
The new Nigerian tax law is a comprehensive framework designed to increase tax compliance and government revenue while providing relief and exemptions to low-income earners, small businesses, and specific sectors like agriculture. Understanding the difference between gross and taxable income, self-assessment obligations, and available exemptions is critical for all taxpayers in Nigeria.
The law also incorporates modern enforcement techniques such as cross-checking bank transactions and lifestyle indicators to curb tax evasion. While some categories such as gifts, pensions, and certain government bonds are tax-exempt, others like gains from stock sales or crypto earnings have specific conditions.
The speaker encourages proactive learning and compliance, highlighting that ignorance is not an excuse in the new tax regime. This evolving law demands attention and professional advice to navigate effectively.
Keywords
- Nigerian Tax Law 2026
- Taxable Income vs Gross Income
- Tax Exemptions Nigeria
- Self-Assessment Tax Nigeria
- Federal Government Savings Bond Tax Exempt
- Capital Gains Tax Nigeria
- Double Taxation Treaties
- Limited Liability Company Tax Exemption
- Informal Sector Tax Nigeria
- Tax Evasion Prevention Nigeria
FAQ (Based on Video Content)
Q: Will all income be taxed automatically?
A: No, income is not automatically taxed. Taxpayers must self-declare, and the government will verify declarations using intelligence tools.
Q: Are gifts taxable?
A: Genuine gifts with no exchange of services or value are not taxable.
Q: Is pension income taxable?
A: No, pension and retirement benefits are fully exempt from tax.
Q: What if I sell shares on the Nigerian stock market?
A: Gains are exempt from tax if sales and gains are below certain thresholds (150 million Naira sales, 10 million Naira gains). Otherwise, tax applies but can be deferred by reinvesting.
Q: Does registering a business as a limited liability company affect taxation?
A: Yes, companies with turnover less than 100 million Naira registered as LLCs are tax exempt. Business names and sole proprietorships are taxed as individuals.
Q: Are agricultural businesses taxed?
A: Agriculture businesses are VAT exempt indefinitely and completely exempt from tax for the first five years.
This summary captures the critical points of the new Nigerian tax law as presented in the video, providing a comprehensive guide to individuals and investors preparing for the upcoming changes.