Nigeria Tax Act 2025: What SMEs need to know for 2026

A new tax era is in place and why it matters

Big changes have come to Nigeria’s tax system, and small businesses can’t afford to ignore them. The Nigeria Tax Act (NTA) 2025, signed in June and became effective on 1 January 2026, is the biggest tax overhaul in decades. It replaces old laws, introduces new rules, and reshapes how businesses of all sizes will be taxed.

For small and medium enterprises (SMEs), this reform brings both relief and new responsibilities. Understanding the changes now will save you stress, penalties, and unnecessary costs later.

What’s changing and how it affects small businesses

Tax relief for small companies

Good news: more SMEs now qualify for major tax relief. A small company is now defined as one with:

• ₦50 million or less in annual turnover, and

• ₦250 million or less in total fixed assets.

If you fit this category, you get:

• 0% corporate income tax

• 0% capital gains tax (CGT), and

• exemption from the new Development Levy.

Note: professional service firms (law, accounting, consulting) don’t qualify, even if they’re small.

A new 4% development levy

Instead of multiple confusing levies, there’s now one simple charge:

• 4% of assessable profits, but only for medium and large companies

• Small companies are fully exempt.

Capital gains tax jumps to 30%

• CGT for companies rises from 10% to 30%

• Plus, a new rule taxes “indirect transfers”, meaning if a foreign parent company sells shares that derive value from Nigerian assets, Nigeria can tax the gain.

This mainly affects businesses with foreign ownership structures, but SMEs with investors should take note.

Mandatory digital compliance

Every VAT‑registered business must switch to:

• government‑approved e‑invoicing, and

• real‑time digital reporting systems.

This is a major shift and SMEs need to prepare early to avoid penalties.

What SMEs should do now

1 - Check if you qualify as a small company

This determines whether:

you pay 0% tax

you’re exempt from the development levy and how the new CGT rules apply.

A quick financial review now can save you money later.

2 - Upgrade your invoicing and finance systems

Digital compliance is not optional.

Start planning for:

• new invoicing software

• system integrations

• staff training.

Budgeting early prevents last‑minute panic.

3 -  Update payroll and employee benefits

The Act clarifies how benefits‑in‑kind (like housing) should be valued and introduces rent relief for individuals.

Make sure your payroll system reflects the new rules so PAYE deductions stay accurate.

4 -Confirm your Tax Identification Number (TIN)

Your TIN must be:

• active

• correct, and

• linked to all business accounts.

You’ll need it for filing, exemptions, and digital reporting.

Summary

For SMEs, the Nigeria Tax Act 2025 is a big shift, but not a bad one.

SMEs stand to gain from tax relief, simpler levies, and clearer rules. The challenge lies in having your systems and processes ready.

Businesses that are well prepared will avoid penalties and position themselves for smoother operations under the new tax regime. Think of this reform not as extra admin, but as an opportunity to modernise and strengthen your financial foundation.

If you need help with setting up this new tax regime, please email us at: enquiries@ovacgroup.com for a free consultation with our team specialists.