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Nigeria’s New Tax Reform: What You Need to Know Before 2026 Implementation

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The Federal Government of Nigeria has officially signed the new tax reform law, which will take effect from the 2026 fiscal year. The legislation introduces significant changes to personal and corporate taxation, aiming to simplify compliance, broaden the tax base, and promote fiscal equity.

Under the new framework, individuals earning below ₦800,000 per year will be exempted from personal income tax, while companies with annual turnovers below ₦100 million will not be liable for Company Income Tax (CIT).

However, taxpayers and businesses must still comply with filing requirements and record-keeping obligations. Below is a breakdown of key highlights and what they mean for you.


1. Do I need to file a tax return if I earn below ₦800,000 annually?

Yes. Even if you earn below the ₦800,000 threshold, you are still required to file a tax return.

According to Section 29 of the new Tax Act, where a taxpayer’s income cannot be easily verified or proper records are not kept, the authorities are empowered to assess income under a presumptive tax regime.

In simple terms: even if you qualify for a tax exemption, you must still file and maintain basic records. Failure to do so allows tax authorities to estimate your income and apply taxes accordingly.


2. Who is responsible for filing taxes — my employer or me?

You are.

Under the new system, the responsibility to claim tax deductions now rests with individual taxpayers rather than employers.

In the old framework, a 20% automatic payroll deduction was applied across the board. The new law replaces that with deductions tied to specific contributions, including:

  • Retirement Savings Account (RSA) contributions

  • Life insurance premiums

  • National Housing Fund (NHF) contributions

  • National Health Insurance Scheme (NHIS) payments

To fully enjoy these deductions, employees must file their annual individual tax returns, even when employers remit Pay-As-You-Earn (PAYE) taxes.


3. Is income from illegal or immoral activities taxable?

Yes — the tax authorities tax income, not morality.

Regardless of the legality or ethical standing of a business, all income is taxable under Nigerian law. This aligns with global tax practices.

For example, infamous gangster Al Capone was convicted in 1931 for income tax evasion, not for his other crimes. Similarly, the U.S. Internal Revenue Service (IRS) explicitly requires taxpayers to declare all income — including bribes or illegal gains — in Publication 525: Taxable and Nontaxable Income.

In short: if you earn it, the government can tax it.


4. Will my bank account or transfers be taxed directly?

No. Simply holding or transferring money is not taxable.

The new law does not impose taxes on bank balances or account transfers. Instead, taxation applies to income earned, such as salaries, business profits, interest, dividends, or rent.

Turnover and assets are only used to determine whether a taxpayer meets the threshold for assessment, not as a basis for tax itself.


Key Takeaways

  • Tax filing remains mandatory for all individuals, even those earning below ₦800,000.

  • Self-reporting is critical — individuals must claim their own deductions.

  • Corporate tax applies only above ₦100 million in annual turnover.

  • Illegal income is still taxable.

  • Bank balances and transfers are not taxed, but income generated from them (like interest) is.


Final Word

The 2026 tax reform marks one of Nigeria’s most comprehensive fiscal updates in recent years. To avoid penalties or presumptive tax assessments, individuals and businesses should begin preparing early — maintaining accurate records, tracking eligible deductions, and consulting qualified accountants or tax advisers.

Best practice: Stay compliant, stay transparent, and file on time.


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