Excellium

Nigeria Tax Act 2025

12 Types of Non-Taxable Income in Nigeria

12 Types of Non-Taxable Income in Nigeria (New 2026 Tax Law Updates)

Leave a Comment / Compliance Audits, Excellium Blog, Tax Acts 2026 /

This is a question most Nigerian taxpayers can’t answer with confidence: Which parts of my income are legally tax-free? If you’re unsure, you’re not alone. Thousands of Nigerians overpay their taxes every year simply because they are unaware of legal exemptions. This often leads to financial losses caused by incorrect payroll configurations that mistakenly tax-exempt income. Understanding tax-free income isn’t about finding loopholes—it’s about knowing your legal rights under Nigeria’s tax laws. With the landmark 2025 tax reforms set to take effect in January 2026, this knowledge has never been more valuable. On June 26, 2025, the President of Nigeria signed four new tax reform bills into law, which are considered the most significant overhaul of the country’s tax structure since 1999. These reforms will fundamentally reshape taxation starting January 2026. Your Complete Guide to Tax-Free Income in Nigeria Earnings Below ₦800,000: The New Freedom Threshold  From January 2026, if your annual gross income is ₦800,000 or less, you owe no personal income tax. The new progressive tax regime provides significant relief to low-income earners, while higher-income earners will be taxed at a higher rate. This translates to roughly ₦66,667 monthly. For entry-level employees, small business owners, traders, and freelancers operating at this level, tax season becomes significantly simpler. Current provision: Those earning only the minimum wage (₦70,000 monthly) are currently exempt. Retirement Gratuities: Your Lifetime of Work, Protected Gratuities are specifically exempted from PITA and are listed among tax-exempt items under Nigerian law. This includes properly approved lump-sum payments received upon retirement and end-of-service benefits from your employer. The rationale is clear: these payments represent your lifetime of service and should remain intact to support your retirement years. No percentages, no deductions, no exceptions. Also exempt: National Pension Scheme contributions deducted from your salary are not subject to personal income tax. Compensation Payments: Protection When You Need It Most When employment ends unexpectedly or injury occurs, Nigerian law protects you. The exemption threshold for compensation for loss of employment will increase from ₦10,000,000 to ₦50,000,000 under the new tax reforms. This provision recognizes that such payments aren’t income—they’re compensation for loss or harm. Whether you’re laid off, restructured out, or receive settlement for workplace injury, amounts up to this threshold remain untouched by taxation. Foreign Income Remittances: Bringing Money Home Without Penalty This exemption is particularly valuable for encouraging the repatriation of foreign currency. The new tax laws retain and clarify key exemptions for investment income and foreign-earned income brought into Nigeria. What is Exempt from Nigerian Tax: Investment Income Repatriation (for Nigerian Residents): Dividends, interest, rent, or royalties earned abroad and repatriated into Nigeria through government-approved banking channels. This is an exemption from the general rule that Nigerian residents are taxed on their worldwide income. Export Proceeds: Dividends received from wholly export-oriented businesses are exempt. Profits of any Nigerian company in respect of exported goods or services are exempt, provided the proceeds are repatriated through official channels. Government Bonds: The exemption for income earned from Federal Government bonds is retained. The exemption also extends to some state bonds and other government-issued securities. Critical Requirement: You must use government-approved banking channels (i.e., any financial institution authorized by the Central Bank of Nigeria to deal in foreign currency transactions). This documentation is essential for claiming the exemption. Important Distinction: Residency and Tax Liability Nigerian Residents: Individuals legally defined as resident in Nigeria are liable to pay tax on their worldwide income (both domestic and foreign). The exemption above is a crucial relief on foreign passive income (dividends, interest, rent, royalty). Non-Residents: Individuals legally defined as non-resident are only liable to Nigerian tax on income derived from Nigeria. Income earned outside Nigeria by a non-resident is generally not subject to Nigerian tax, regardless of whether it is remitted. Agricultural Income: Encouraging Food Security Income derived from agriculture, livestock, horticulture, or fishing benefits from significant tax incentives. Any small or medium sized company engaged in primary agricultural production shall be granted, pursuant to an application to the President, through the minister, an initial tax-free period of four years. This may be extended, subject to the satisfactory performance of such primary agricultural production, for an additional maximum period of two years. Additionally, with these new laws, food, education, transport, and agriculture will be VAT-free, according to the Executive Chairman of FIRS. This exemption serves Nigeria’s food security objectives while recognizing that many agricultural workers operate at subsistence levels. Statutory Contributions: Building Your Future Tax-Free The following deductions are exempted from PITA: National Housing Fund Contribution, National Health Insurance Scheme, Life Assurance Premium, National Pension Scheme, Gratuities. Certain mandatory contributions don’t just reduce your taxable income—they’re entirely exempt: National Pension Scheme contributions – Building retirement security while reducing current tax National Housing Fund (NHF) payments – Contributing toward homeownership, tax-free National Health Insurance Scheme (NHIS) contributions – Health protection without tax penalties Life insurance premiums – Securing your family’s future (for yourself or spouse) These exemptions create powerful incentives for long-term financial planning while lowering your immediate tax burden. Investment Returns: Strategic Exemptions The Act retains the exemption of income earned from federal government bonds and extends the exemption to state bonds, making them attractive for risk-averse investors seeking stable returns. However, the exemption does not extend to corporate bonds. Share transactions: The tax exemption threshold for the sale of shares in Nigerian companies has been increased to ₦150 million (from ₦100 million) in any 12 consecutive months, provided that the gains do not exceed ₦10 million. These provisions encourage participation in Nigeria’s capital market and government financing. Insurance Benefits: Protection Without Taxation Life insurance payouts and legitimate claim settlements are tax-free. When you receive a life insurance benefit or successfully claim on your policy, the amount remains intact. This makes insurance more effective as a financial protection tool, encouraging more Nigerians to secure coverage. Gifts Received by Individuals: Under the new laws, non-cash gifts received by individuals are explicitly exempt from income tax, simplifying tax planning. Capital Gains on Personal Assets (Up

12 Types of Non-Taxable Income in Nigeria (New 2026 Tax Law Updates) Read More »

Nigeria’s E-Invoicing Tax Reform 2025: Your Benefits and Compliance Guide

Leave a Comment / Tax Acts 2026, Customer /

The landscape of business and taxation in Nigeria is undergoing a significant and immediate transformation. With the Federal Inland Revenue Service (FIRS) mandating the adoption of e-invoicing platforms—the Merchant-Buyer Solution (MBS), the era of paper-based compliance is officially over. Crucially, as of November 17, 2025, the mandatory compliance deadline of November 1, 2025, for all Large Taxpayers has passed. The FIRS has successfully transitioned the country’s biggest companies onto this digital validation system. Failure to comply now exposes large taxpayers to significant penalties, including fines of ₦200,000 plus 100% of the tax due for non-use, along with interest This isn’t just a regulatory hurdle; it’s a strategic shift that promises substantial benefits for both the government and all VAT-registered taxpayers, including the Small and Medium Enterprises (SMEs) who are rapidly approaching their own mandatory compliance date. At Excellium, we understand that navigating regulatory changes is complex, and time is now the essence. I will be breaking down the core advantages of embracing e-invoicing and clarifying the staggered compliance timeline to ensure your business remains on the right side of the law. Understanding Nigeria’s E-Invoicing Mandate and Tax Compliance Requirements What is E-Invoicing in the Nigerian Context?  The FIRS’s e-invoicing system is a digital framework designed to validate and process invoices in real-time. For Business-to-Business (B2B) and Business-to-Government (B2G) transactions, this involves a pre-clearance model where invoices must be submitted to FIRS, validated, and stamped with a unique Cryptographic Stamp Identifier (CSID) and an Invoice Reference Number (IRN) before they are legally valid to send to the buyer. This system is based on structured data formats like UBL/XML and aligns with global standards. Enhancing Transparency and National Revenue Assurance (The FIRS’s Role)  The main reason for the FIRS MBS system is to create a secure tax environment and stop revenue loss. This change helps compliant businesses by making the rules clearer and fairer. 1. Real-Time Revenue Visibility: The MBS platform provides FIRS with instant, granular access to transactional data. This pre-clearance model effectively eliminates the time lag in tax reporting, enabling FIRS to monitor commercial transactions as they occur, which is a powerful deterrent against fraud. 2. Enhanced Compliance and Reduced Evasion: The mandatory CSID and IRN ensure invoice authenticity and non-repudiation. Taxpayers can no longer claim Input VAT for transactions without this FIRS digital stamp, making tax evasion via fake invoices virtually impossible. 3. Improved Data Accuracy and Completeness: By standardizing invoice formats to a digital schema, the system ensures data uniformity, reducing the resources needed for manual data cleaning, and leading to highly reliable data for precise fiscal oversight and revenue forecasting. Why Nigerian Businesses Should Adopt E-Invoicing: Benefits for Nigerian Businesses For businesses, the shift to e-invoicing offers substantial improvements in operational efficiency and audit readiness. Significant Efficiency and Cost Savings: Automation & Reduced Errors: E-invoicing automation in Nigeria minimizes manual data entry, reduces human errors (a common source of audit trouble), and virtually eliminates printing, postage, and physical archival costs. Faster Processing & Payments: Digital transmission (ERP-to-ERP) accelerates invoice delivery and processing, which can significantly reduce payment cycles and improve cash flow management). E-invoice processing costs are often twice as low as paper-based processes, making e-invoicing benefits for Nigerian SMEs particularly significant. 2.  Improved Audit Readiness: With every significant transaction digitally cleared and stamped by FIRS, tax audit preparation in Nigeria becomes streamlined. Records are inherently more precise, verifiable, and tamper-proof. This allows for quick, simplified compliance checks under FIRS tax compliance 2025 requirements, significantly reducing the burden and duration of traditional tax audits. 3. Seamless System Integration: The structured format allows for seamless interoperability with existing ERP systems using recognized global standards like ISO 20022 and UBL . This future-proofs IT systems for digital commerce. 4. Increased Data Security: Data transmission and storage are protected via encryption and aligned with global standards like ISO 27001 for information security management and the Nigerian Data Protection Act (NDPA). This offers better security than paper records or unencrypted emails. 5. Better Access to Financial Services: The transparent, verifiable nature of FIRS-stamped e-invoices increases their credibility. Financial institutions can instantly verify the authenticity of receivables, which facilitates quicker access to financing tools like invoice factoring and improves the overall ease of obtaining working capital. Preparing Your Business for Nigeria’s E-Invoicing Future The FIRS e-invoicing mandate is more than a regulatory requirement; it’s a non-negotiable step toward a modern, efficient, and transparent business environment. This is a good time for you to get your E-invoice if you havent whether as a big sized or small sized company. Nigerian businesses embracing digital invoicing will future proof their operations, enhance financial integrity, and unlock new efficiencies through this Nigeria tax reform benefits initiative.

Nigeria’s E-Invoicing Tax Reform 2025: Your Benefits and Compliance Guide Read More »

Nigeria Tax Act 2025

Nigeria Tax Act 2025: What Every Business Owner Needs to Know

Leave a Comment / Tax Acts 2026 /

On June 26, 2025, President Bola Ahmed Tinubu signed the Nigeria Tax Act (NTA) 2025 into law—a landmark moment that signals the most ambitious tax reform Nigeria has seen in decades. While the effective date is January 1, 2026, the countdown to transformation has already begun. Whether you’re a business owner, HR manager, or CFO, this unified tax framework will reshape how you operate, file taxes, and plan for growth. But here’s the thing: this isn’t something to fear. It’s actually a streamlined, modernized system designed to simplify compliance and create a fairer tax environment. Let’s break down what’s changing and why it matters for you. The Framework: Nigeria’s Unified Tax System Imagine managing tax compliance across twelve different tax laws—conflicting provisions, overlapping regulations, confusing interpretations. That was the old Nigeria. The NTA 2025 consolidates these into one unified legislation, repealing outdated acts including the Personal Income Tax Act, Companies Income Tax Act, Value Added Tax Act, and Capital Gains Tax Act. The goal? Reduce administrative burden, eliminate nuisance taxes, and create transparency. For businesses, this means fewer headaches and clearer rules on the road ahead. The Seven Highlights You Should Know 1. Personal Income Tax: ₦800k Relief + Progressive Rates The NTA introduces the first major personal income tax reform since 2012—and it’s surprisingly balanced: Tax-free zone: Individuals earning ₦800,000 or less annually are exempt from personal income tax entirely. This provides much-needed relief for entry and junior-level professionals. Progressive tax rates: High earners face progressive rates up to 25% on the highest band. Expanded relief: Compensation for loss of office is now exempt up to ₦50 million (increased from ₦10 million), offering better protection for executives during transitions. New residency definitions: The Act clearly defines tax residents—those domiciled in Nigeria, with permanent residences, substantial economic ties, or who spend 183+ days in Nigeria. This eliminates ambiguity for companies managing international assignees. 2.Global Minimum Tax: Large Companies Pay Their Fair Share For companies, the NTA introduces three game-changing provisions: Global Minimum Tax: Companies with ₦50 billion+ annual turnover or multinational enterprises earning over €750 million globally must pay a minimum effective tax rate (ETR) of 15%. If your actual tax falls short, a top-up tax applies. This prevents profit-shifting and ensures large corporations pay their fair share. Development Levy: A unified 4% levy on assessable profits replaces multiple overlapping sector taxes (Tertiary Education Tax, IT Levy, NASENI Levy, Police Trust Fund). This reduction in nuisance taxes streamlines operations—fewer payments to track, one clear obligation. Controlled Foreign Company Rules: Nigerian parent companies can no longer indefinitely defer taxes by keeping profits in foreign subsidiaries. The NTA requires taxation of undistributed profits from controlled foreign entities, promoting transparency and compliance. 3. Value Added Tax (VAT): More Exemptions, Same Rate The VAT rate remains at 7.5%, but the Act expands zero-rated items to include: Essential foods and basic commodities Educational materials and services Electricity and water services Medical goods and healthcare services Exports (excluding oil and gas) For businesses, mandatory e-invoicing and digitalized VAT systems become non-negotiable. This isn’t just paperwork—it’s about real-time compliance and reduced audit risks. 4. Capital Gains Tax: Closing Loopholes The Act introduces an innovative anti-avoidance provision: gains from disposing of shares in non-Nigerian entities that derive substantial value from Nigerian assets are now subject to Nigerian CGT. This closes the offshore holding structure loophole and signals the government’s intent to broaden the tax base fairly. 5. Non-Residents & Foreign Investors: New Rules, New Clarity Non-residents now pay tax on Nigeria-sourced income, including digital services. Key changes: Previous broad exemptions for non-resident employees have been significantly narrowed. Digital and virtual asset gains are now taxable (reflecting our modern economy). Double Tax Agreements (DTAs) take precedence in disputes—providing investors with clarity and treaty protection. 6. Digital Assets & Virtual Services: Welcome to the Modern Economy The NTA recognizes the reality of today’s business landscape by introducing: Taxation of digital/virtual asset gains and prizes Mandatory registration for Virtual Asset Service Providers (VASPs) Tax obligations for content creators, influencers, and digital traders This modernization creates certainty for businesses operating in the digital space—no more gray areas. 7. FIRS Becomes the Nigeria Revenue Service (NRS) The Federal Inland Revenue Service (FIRS) transitions to the Nigeria Revenue Service (NRS), a more autonomous, digitally-enabled body with expanded mandate. The NRS now collects both tax and non-tax revenues, with: Advanced Rulings: Get pre-approval on specific transactions or structures, reducing disputes and uncertainty. Enhanced Enforcement Powers: Better data access and coordination across government agencies. Tax Ombudsman: An independent office to resolve taxpayer grievances outside the formal appeal system. Joint Revenue Board (JRB): A harmonizing body coordinating federal, state, and local tax administration. This is about fairness and consistency—taxpayers finally have a clearer voice and recourse. What You Need to Do Right Now Before January 1, 2026: Audit your current tax structure and payroll systems Update systems for new tax bands and e-invoicing requirements Ensure your business is digitally ready for NRS compliance Get clarity on which rules apply to your specific operations The Critical Requirement: Proper Financial Records Under the NTA 2025, maintaining comprehensive and accurate financial records is no longer optional—it’s mandatory. The NRS expects businesses to track every transaction, maintain digital audit trails, and provide real-time compliance data. Missing or poorly organized records can result in penalties, disputes, and unnecessary tax audits. This is where most businesses struggle. Manual spreadsheets and fragmented systems create gaps, inconsistencies, and compliance risks. At Excellium, our Finance & ERP solutions are built to solve this exact problem. Our software automates expense tracking, maintains real-time financial records, ensures e-invoicing compliance, and gives you complete visibility into your tax obligations across all operations. You’ll never scramble during tax season again. Critical Next Step: If you’re unsure which financial records to gather and maintain for the new tax season, check out our detailed guide: https://excellium.biz/firs-2026-tax-season-5-critical-financial-records-that-could-save-your-business-%e2%82%a6millions/ It walks you through exactly what documents you’ll need to avoid costly compliance gaps. Why This Matters for Your Bottom Line: The NTA 2025 is

Nigeria Tax Act 2025: What Every Business Owner Needs to Know Read More »

FIRS 2026 Tax Season: 5 Critical Financial Records That Could Save Your Business ₦Millions

Leave a Comment / Tax Acts 2026 /

January 1, 2026 is coming fast, and if you’re running a Nigerian business, the new tax law is about to shake things up big time. The FIRS is transforming into the Nigeria Revenue Service (NRS), and they’re not playing around anymore. They’ve got expanded powers, digital tracking systems, and stricter compliance requirements that mean they can now connect the dots between your business bank accounts, corporate registrations, and other government databases. Here’s what’s real: businesses with solid financial records are going to breeze through 2026. Businesses without them? They’re looking at penalties, missed deductions, and audit headaches that’ll give you sleepless nights. So let’s cut through the noise and talk about what you actually need to have in place right now. What’s Actually Happening in 2026? Look, the new tax reform is consolidating a bunch of different tax laws into one big unified system. It’s introducing stricter penalties for people who mess up, and the NRS is getting powers to cross-check your business data directly with your bank and other government agencies. Honestly, if you’re organized, this is good news. If you’re not, well… that’s a problem. The changes that directly affect your wallet are pretty straightforward. If your company’s annual turnover hits ₦100 million or higher, you’re paying Company Income Tax. If you’re an individual earning less than ₦800,000 a year, congratulations—you don’t pay personal income tax (but you still need to file returns and keep records). If you’re making money from abroad as a remote worker or freelancer, you’re now looking at up to 23% tax on foreign earnings. And here’s something a lot of people miss: you can claim 20% of your rent as a deductible expense, capped at ₦500,000 per year. The bottom line? Your financial records need to be on point. Record 1: Sales & Revenue Documentation Every income your business receives must be properly documented. This includes invoices, receipts, bank deposit slips, and payment confirmations—whether from local or international transactions. Why does this matter so much right now? Because with the corporate income tax rate fixed at 30%, your business’s tax bill is directly tied to how accurately you document every naira earned. That means invoices, receipts, bank deposits, and payment confirmations—especially for international transactions—are no longer optional. And if you’re earning money from abroad through online platforms or remote work, the new tax laws demand full transparency. Starting January 2026, freelancers and remote workers in Nigeria will be taxed just like traditional employees, with rates reaching up to 25% depending on income level.  Those days of quietly receiving payments through payment platforms or crypto wallets without scrutiny? They’re over. Nigeria’s tax authorities are expanding their reach to include digital earners, aiming to boost the country’s tax-to-GDP ratio and close long-standing revenue gaps. The smartest move you can make is to start using accounting software that automatically tracks all your sales. Take digital copies of every payment receipt you get and organize them by month. That’s what the NRS is expecting to see when they come knocking. Record 2: Business Expenses & Deductions This is honestly where you can reduce what you actually owe the government. Every legitimate business expense—your office rent, utilities, equipment, staff meals during business meetings, office supplies, professional services like accounting or legal help, advertising and marketing spend—all of it counts as long as you’ve got receipts to back it up. But here’s something that just changed and most people don’t know about yet: you can now claim 20% of whatever you pay as rent as a deductible expense, but here’s the catch—it’s capped at ₦500,000 per year. That’s basically free money if you just document it properly. On top of that, if you’re exporting goods from Nigeria, any profits you make from those exports are completely exempt from income tax—as long as the money comes back into Nigeria through official legal channels. That’s huge if you’re in the export business. What you need to do is photograph every receipt the moment you get it. Create folders or categories for different types of expenses—rent, utilities, supplies, marketing—and keep them organized. The FIRS requires you to hold onto these for at least six years, so make sure your storage system can handle that. Record 3: Payroll & Employment Records If you’ve got people working for you, listen up—this is non-negotiable stuff. The FIRS watches payroll like a hawk because it connects to multiple types of taxes. They’re checking employee names, their TINs, gross salaries paid, every deduction (whether it’s tax, pension contributions, or health insurance), net pay, and exactly when payments were made—all of this for every single pay period. The real talk is that doing payroll manually or with spreadsheets is asking for trouble. Use professional payroll software or hire a payroll service. Yeah, there’s a cost, but it’s way cheaper than paying FIRS penalties for getting it wrong. And you’ve got to keep these records for a minimum of six years. Record 4: Bank Statements & Reconciliation Your bank statements are basically your audit trail. Every deposit that goes in should match up with your income records. Every withdrawal should line up with your expenses. When there are gaps or things don’t match, that’s when the FIRS gets interested and starts asking questions. What most businesses don’t do but absolutely should is reconcile their bank accounts every single month. Don’t wait until tax season is breathing down your neck. Monthly reconciliation catches mistakes early, stops fraud before it happens, and gives you a real picture of whether your business is actually making money or bleeding cash. The best way to do this is using accounting software that automatically pulls in your transactions from your bank. It saves you hours and cuts down on errors. Keep your bank statements for at least six years—honestly, you should probably keep them forever since they don’t take up much space digitally. Record 5: Fixed Assets & Depreciation Records This is the one a lot of Nigerian business owners completely overlook, but it matters.

FIRS 2026 Tax Season: 5 Critical Financial Records That Could Save Your Business ₦Millions Read More »