COMMONLY ASKED QUESTIONS & ANSWERS ON THE NEW NIGERIA TAX LAW (Adapted from the Nigeria Tax Act, 2025 with SPECIFIC FOCUS ON INDIVIDUALS AND SMALL BUSINESSES)
As a form of introduction, It is important that readers understand that a tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities.
Taxation is central to building strong, prosperous and inclusive societies by helping to raise the revenues needed to deliver much needed public goods and services in the society.
There are various kinds of tax: Individual Income Tax, Company Income Tax, Petroleum Taxes,value Added Tax, Withholding Tax, Stamp Duties, Fossil Fuel Surcharge, Incentives & Exemptions, Development Levy To know more about these kindly visit https://www.nrs.gov.ng/
However, this article will present to you common questions people have about tax and appropriate responses for your education.
🟢 Q1: When will the new Nigeria Tax Act take effect?
A1: The new Nigeria Tax Act takes effect from 1st January 2026.
Q2:
Which specific individuals does the Nigerian Tax Law apply to?
A2: It applies to all individuals who 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 (salary, business profits, or interest) 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. 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 since they are not income. Interest income earned by Fairmoney will be taxed in their 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, you pay Company Income Tax.
🟢 Q9:
If I sell shares and make a profit, will I pay tax in 2026?
A9: NO. If shares sold are not more than ₦150 million and gain not above ₦10 million. Above this, the gain is taxable.
🟢 Q10:
I am a pensioner. Will my pension income be taxed in 2026?
A10: NO. Approved pension and retirement benefits are tax-exempt.
🟢 Q11:
Are military salaries taxable?
A11: NO. Salaries of military officers are tax-exempt.
🟢 Q12:
Do creatives (authors, musicians, sportsmen) still enjoy tax exemptions on foreign income?
A12: NO. They must pay Nigerian tax on income earned both within Nigeria and abroad.
🟢 Q13:
Are crypto gains taxable?
A13: YES. Profits from crypto, NFTs, and other digital assets are taxable.
🟢 Q14:
Who is exempt from personal income tax?
A14: Individuals earning the national minimum wage or less, or below ₦800,000 annually.
🟢 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: No tax if ₦50 million or less. Above that, taxed using the progressive tax bands.
🟢 Q17:
If I earn dividends or rent from abroad, will Nigeria tax it?
A17: Dividends, interests, rent, and royalties earned from outside Nigeria are exempt if brought through approved channels (banks).
🟢 Q18:
If a soldier or armed forces member gets injured and receives a disability pension, will it be taxed?
A18: NO. Disability pensions are completely tax-exempt.
🟢 Q19:
My uncle wants to start an agricultural company next year. Will it be taxed in Nigeria?
A19: NO. Agricultural companies (crops, livestock, forestry, dairy, cocoa processing) enjoy a 5-year tax holiday from start.
🟢 Q20:
Is income from Federal or State Government bonds taxable?
A20: NO. All government bonds are tax-exempt.
🟢 Q21:
What does rent relief entail under the new tax law?
A21: From 2026, individuals can claim rent relief of 20% of annual rent paid, capped at ₦500,000. Must declare actual rent to the 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
Total tax = ₦896,000
New law:
Rent relief = ₦500k
Taxable income = ₦6m − ₦500k = ₦5.5m
Applying new bands:
First ₦800k @0% = 0
Next ₦2.2m @15% = ₦330k
Remaining ₦2.5m @18% = ₦450k
Total tax = ₦780k, saving ₦116k
🟢 Q23:
If my company’s turnover is below ₦50 million, will I pay tax?
A23: NO. Small companies with turnover < ₦50m are tax-exempt.
🟢 Q24:
As a remote worker in Nigeria for an international organisation, will I pay tax?
A24: YES. You pay tax in Nigeria unless exempted by treaty/diplomatic arrangement.
🟢 Q25:
Will a foreigner earning a salary in Nigeria be taxed?
A25: NO. If employer is a start-up or operates in tech/creative arts, and income is taxed in country of residence.