From January 1, 2026, the new tax reform laws will introduce 50 exemptions and reliefs designed to ease financial pressure on low-income earners, small businesses, and average taxpayers. Officials say this reform is one of the most inclusive changes in Nigeria’s tax system. “The aim is to protect the masses and encourage economic growth,” a finance ministry source said.
Personal Income Tax or PAYE
1. Individuals earning the national minimum wage or less will be completely exempt.
2. Annual gross income up to ₦1,200,000, which equals about ₦800,000 taxable income, will not attract any tax.
3. Those earning annual gross income up to ₦20 million will enjoy reduced PAYE tax rates.
4. Gifts received by individuals will be fully exempt.
These reliefs are part of efforts to make tax more progressive and fair for workers.
Allowable Deductions and Reliefs for Individuals
5. Pension contributions to Pension Fund Administrators will be deductible.
6. Payments to the National Health Insurance Scheme qualify for relief.
7. Contributions to the National Housing Fund are allowable.
8. Interest on loans used for owner-occupied residential housing will be deductible.
9. Life insurance or annuity premiums are eligible for tax relief.
10. Rent relief up to 20% of annual rent, capped at ₦500,000, is allowed.
These measures aim to promote savings, healthcare, and home ownership among Nigerians.
Pensions and Gratuities – Exempt
11. Pension funds and assets under the Pension Reform Act are exempt from tax.
12. Pension, gratuity, or other retirement benefits given in line with the Act are not taxable.
13. Compensation for loss of employment up to ₦50 million will be tax-free.
This section provides protection for retirees and laid-off employees.
Capital Gains Tax (CGT) – Exempt
14. Sale of an owner-occupied house will be exempt.
15. Personal effects or chattels worth up to ₦5 million are excluded.
16. Sale of up to two private vehicles per year is exempt.
17. Gains on shares below ₦150 million per year or gains up to ₦10 million will not be taxed.
18. Gains above the exemption limit will still qualify if reinvested.
19. Pension funds, charities, and religious institutions operating non-commercially will remain exempt.
These CGT exemptions will encourage investments and reduce unnecessary tax burdens.
Companies Income Tax (CIT) – Exempt
20. Small companies with turnover not more than ₦100 million and total fixed assets not more than ₦250 million will pay 0% tax.
21. Approved startups will be exempt from company income tax.
22. A 50% additional deduction is allowed for salary increases, wage awards, or transport subsidies given to low-income workers.
23. Businesses that hire and retain new employees for at least three years can deduct 50% of their salaries.
24. Agricultural businesses such as crop production and livestock farming will enjoy a five-year tax holiday.
25. Gains from investment in a recognized startup by venture capitalists, private equity firms, and incubators are exempt.
These incentives are targeted at boosting job creation and supporting small businesses.
Development Levy – Exempt
26. Small companies are exempt from the 4% development levy.
This move reduces operational costs for new and growing businesses.
Withholding Tax – Exempt
27. Small companies, manufacturers, and agricultural businesses will not have withholding tax deducted from their income.
28. Small businesses are also exempt from withholding tax on payments to their suppliers.
This relief will help small firms maintain liquidity and cash flow.
Value Added Tax (VAT) – 0% or Exempt
29. Basic food items will continue to attract 0% VAT.
30. Rent on residential properties is exempt.
31. Education services and learning materials are VAT-free.
32. Health and medical services remain exempt.
33. Pharmaceutical products are charged at 0% VAT.
34. Small companies with turnover below ₦100 million are not required to charge VAT.
35. Diesel, petrol, and solar power equipment are VAT-exempt or suspended.
36. Refund of VAT on assets and overheads used to produce VATable or 0% goods is allowed.
37. Agricultural inputs such as fertilizers, seeds, seedlings, feeds, and live animals are VAT-free.
38. Equipment for agricultural use, whether purchased, leased, or hired, is exempt.
39. Disability aids like hearing aids, wheelchairs, and braille materials are VAT-exempt.
40. Shared passenger road transport (non-charter) is exempt.
41. Electric vehicles and related parts will not attract VAT.
42. Humanitarian supplies are VAT-free.
43. Baby products will remain exempt.
44. Sanitary pads, towels, and tampons will not be taxed.
45. Land and building transactions are also exempt.
The Federal Government said these VAT exemptions will keep prices stable and support social welfare.
Stamp Duties – Exempt
46. Electronic money transfers below ₦10,000 are exempt.
47. Salary payments are not subject to stamp duty.
48. Intra-bank transfers are exempt.
49. Transfers of government securities or shares will not be taxed.
50. All documents for the transfer of stocks and shares are free from stamp duties.
