Taxation
By Olamilekan Abayomi
The Nigerian government has introduced 50 tax exemptions and reliefs to ease financial hardship for low-income earners, small businesses, and vulnerable groups. These exemptions are part of the new tax reform laws, scheduled for implementation on January 1, 2026. Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, disclosed that the reforms aim to benefit a broad range of citizens, including low-income earners, average taxpayers, and small businesses nationwide.
Individuals earning the national minimum wage or less are exempt from paying personal income tax. Additionally, annual gross income up to ₦1,200,000 is exempt, translating to about ₦800,000 taxable income. Reduced PAYE tax applies to those earning annual gross income up to ₦20 million. Gifts are also exempt from tax. Other exemptions include pension contributions to PFA, National Health Insurance Scheme, and National Housing Fund contributions.
Small companies with a turnover of not more than ₦100 million and total fixed assets not exceeding ₦250 million pay 0% tax. Eligible startups are exempt, and agricultural businesses enjoy a tax holiday for the first five years. Small companies are also exempt from the 4% development levy and withholding tax deduction on their income.
VAT exemptions include basic food items, rent, education services, health and medical services, pharmaceutical products, and sanitary towels. Diesel, petrol, and solar power equipment are VAT-suspended or exempt. Humanitarian supplies and disability aids are also exempt. Electronic money transfers below ₦10,000 are exempt from stamp duty, along with salary payments, intra-bank transfers, and transfers of government securities or shares.
These tax reforms aim to promote economic growth, increase disposable income, and alleviate poverty. By exempting essential goods and services from VAT, the government hopes to reduce the financial burden on low-income earners and small businesses. The reforms also aim to stimulate economic activity by encouraging entrepreneurship and investment.
