Core Tax Calculators

Value Added Tax (VAT) is a consumption tax charged on the supply of goods and services in Nigeria. It was introduced in 1993 and is currently administered by the Nigeria Revenue Service (NRS), formerly the Federal Inland Revenue Service (FIRS). Under the Nigeria Tax Act 2025–2026, the VAT framework has been modernised with clearer rules on input tax recovery, zero-rating, and exemptions.

VAT is an indirect tax — meaning the final consumer bears the cost, while businesses act as collection agents. Registered businesses charge VAT on their sales (output VAT), deduct VAT paid on their purchases (input VAT), and remit the difference to the NRS.

The standard VAT rate in Nigeria remains 7.5% as of 2026. Despite earlier proposals to increase the rate progressively, the NTA 2025 maintained the 7.5% rate. Businesses whose taxable supplies exceed the registration threshold are required to register for VAT, collect it from customers, file monthly returns, and remit the tax to the NRS by the 21st day of the following month.

Under the NTA 2025, businesses can now recover input VAT on all purchases (goods, services, and fixed assets) tied to taxable supplies — a significant improvement from the previous regime where input VAT recovery was limited.

The NTA 2025 expanded the list of exempt and zero-rated items to protect low-income Nigerians. Understanding the difference matters: exempt items carry no VAT and the seller cannot recover input VAT on related costs. Zero-rated items carry 0% VAT but the seller can recover input VAT — making zero-rating more favourable for businesses.

VAT-Exempt items include: basic food items (raw foodstuffs, grains, tubers, fruits, vegetables), medical and pharmaceutical products, educational materials and school fees, baby products, agricultural equipment and inputs, and services by community banks and mortgage institutions.

Zero-rated items include: exported goods and services, basic food staples, educational materials, medical supplies, and electricity transmission. The zero-rating means suppliers can still claim back any VAT they paid on inputs used to produce these goods.

The NTA 2025 mandates that VAT-registered businesses adopt NRS-mandated electronic invoicing systems. While phased implementation is expected from 2026, businesses should prepare by building or acquiring compliant invoicing systems, training finance staff, and testing integration with accounting software. False VAT claims now attract liability for repayment plus 100% penalty and interest at the CBN monetary policy rate.

Expenses without VAT or import duty properly paid are not deductible for CIT, Hydrocarbon Tax, or PPT purposes — making accurate VAT documentation essential for overall tax compliance.

Any person or business that makes taxable supplies of goods or services in Nigeria is required to register for VAT. Under the NTA 2025, small businesses below the qualifying threshold may be exempt from VAT filing obligations, provided their operations fall within qualifying economic activities and do not include professional or specialised services. All other businesses must register, file monthly returns, and remit collected VAT to the NRS.

Company Income Tax is a direct tax levied on the profits of incorporated entities operating in Nigeria. Under the Nigeria Tax Act 2025–2026, CIT applies to all companies — whether resident or non-resident — that derive income from Nigeria. Resident companies are taxed on worldwide income; non-resident companies are taxed only on Nigeria-sourced profits.

The NTA 2025 fundamentally restructured the corporate tax landscape by repealing the Companies Income Tax Act (CITA), Capital Gains Tax Act, and several other laws, consolidating them into a single unified framework. Capital gains are no longer taxed separately — for companies, gains are now taxed at the CIT rate of 30%.

Under the NTA 2025, companies are classified into just two categories — a major simplification from the previous three-tier system:

Small Companies are defined as those with annual gross turnover of ₦100 million or below AND total fixed assets not exceeding ₦250 million. These companies are fully exempt from CIT, Capital Gains Tax, and the Development Levy. However, companies providing professional services (legal, accounting, medical, engineering, etc.) cannot qualify as "small" regardless of their turnover — they are always classified as Standard.

Standard Companies are all other companies. They pay CIT at 30% on taxable profits plus the 4% Development Levy. Large multinational companies with global revenue of ₦50 billion or more (or €750 million) are also subject to a minimum effective tax rate of 15% — if their actual tax burden falls below this due to incentives or deductions, a top-up tax applies.

The previous "medium" category (₦25M–₦100M at 20%) has been completely abolished, greatly simplifying the system.

One of the most significant changes in the NTA 2025 is the introduction of the Development Levy at 4% of assessable profits. This single levy replaces four separate legacy charges that previously created confusion and compliance burden: the Tertiary Education Tax (TET) at 2.5%, the Information Technology Development Levy (ITDL) at 1%, the National Agency for Science and Engineering Infrastructure (NASENI) levy, and the Police Trust Fund (PTF) levy.

The consolidation means businesses now deal with one levy instead of four, significantly simplifying compliance. Small companies are exempt from the Development Levy entirely. For standard companies, the effective combined tax rate becomes 34% (30% CIT + 4% Development Levy) before any applicable incentives or deductions.

Under the NTA 2025, CGT has been harmonised with income tax rates. For companies, capital gains are now taxed at 30% (the same as the CIT rate), up from the previous 10%. For individuals, capital gains are taxed at personal income tax rates (0%–25% depending on income band). Small companies are exempt from CGT entirely.

The exemption threshold for share disposals has been increased to ₦150 million (from ₦100 million) in any 12 consecutive months, provided total gains do not exceed ₦10 million. The NTA also introduces CGT on indirect share transfers — where shares in offshore holding companies that derive substantial value from Nigerian assets are disposed of, Nigerian CGT is triggered (subject to treaty protections).

The NTA 2025 introduces CFC rules for the first time in Nigeria. If a Nigerian company has a controlling interest in a foreign subsidiary, and that subsidiary could have paid dividends without harming its operations but chose not to, the undistributed profits may be taxed in Nigeria. This provision targets profit shifting through offshore entities and aligns Nigeria with international tax standards.

Withholding Tax is a method of collecting tax at source. Instead of the recipient paying tax on income received, the payer deducts the tax before making payment and remits it directly to the tax authority. WHT applies to specific types of payments including dividends, rent, royalties, contracts, professional fees, and more.

WHT is not an additional tax — it is an advance payment of the recipient's income tax liability. The recipient can offset the amount withheld against their final tax liability when filing returns. If the WHT exceeds the final tax due, the excess can be claimed as a refund or credit.

WHT rates in Nigeria vary based on the type of transaction and the residency status of the recipient. For resident recipients, most payments attract 10% WHT, while contracts, construction, and haulage attract 5%. For non-resident recipients, a flat 10% rate generally applies across all transaction types — though double taxation treaties between Nigeria and other countries may reduce these rates.

The Deduction of Tax at Source (Withholding) Regulations, 2024 remain operational under the new regime. Small companies and unincorporated entities are exempt from deducting or suffering WHT if they hold a valid Tax Identification Number (TIN) and the total value of transactions in a calendar month does not exceed ₦2 million.

Any person or entity making qualifying payments is required to deduct WHT at the applicable rate. This includes companies, partnerships, government bodies, statutory organisations, and individuals making payments to contractors or service providers. The payer must remit the deducted tax to the NRS within 30 days of deduction and issue a WHT credit note to the recipient.

Failure to deduct or remit WHT attracts penalties. The payer becomes personally liable for the undeducted tax plus interest and may face prosecution for serious or repeated non-compliance.

When making payments to non-resident individuals or companies, Nigerian payers must deduct WHT at the applicable rate — typically 10% for most transaction types. However, Nigeria has double taxation agreements (DTAs) with several countries that may reduce these rates. Treaty benefits must be claimed by the non-resident before or at the time of payment, with appropriate documentation including a certificate of residence from the non-resident's home country tax authority.

Under the NTA 2025, the "force of attraction" rule expands the scope of non-resident taxation. If a non-resident has a permanent establishment in Nigeria, income from transactions of the same or similar nature — even if conducted outside the permanent establishment — may be taxable in Nigeria.