How NTA 2025 Changes CIT for Small Companies in Nigeria

Small companies in Nigeria now pay 0% CIT under the NTA 2025. Find out if you qualify, what is exempt, what you still owe, and the compliance traps to avoid.

If your company qualifies as “small” under the Nigeria Tax Act 2025, your CIT rate dropped to 0% from 1 January 2026. That is not a reduced rate — it is complete exemption from Company Income Tax, Capital Gains Tax, and the new 4% Development Levy. The NTA 2025 rewrote the rules for small companies more generously than any previous reform, but qualifying comes with conditions that trip up business owners who do not read the fine print. Professional service firms are excluded regardless of size.

The medium-company category no longer exists. And even at 0% CIT, you must still file annual returns or face penalties. This guide breaks down the new definition, what is exempt, what is not, and the compliance obligations that remain even when your tax bill is zero.

The New Small Company Definition

Under Section 202 of the NTA, a small company is defined as a company that earns gross turnover of ₦50,000,000 or less per annum with total fixed assets not exceeding ₦250,000,000, provided that any business providing professional services shall not be classified as a small company.

Three criteria must all be met simultaneously:

1. Gross turnover does not exceed ₦50 million per year. This is your total revenue — everything your business earned before deducting costs. Not profit, not net income, but gross turnover.
2. Total fixed assets do not exceed ₦250 million. Fixed assets include land, buildings, machinery, equipment, vehicles, and other tangible capital assets. This is measured at book value, not market value, though the NRS can challenge valuations on audit.
3. The business does not provide professional services. This exclusion covers law firms, accounting practices, medical and dental practices, consulting firms, architectural firms, engineering firms, and similar professional service providers. If your core business is a professional service, you are not a small company under the NTA — even if your turnover is ₦5 million and your fixed assets are a laptop.

The old threshold under the Companies Income Tax Act was ₦25 million in turnover. The NTA 2025 doubled this to ₦50 million, bringing significantly more businesses into the exempt category. The previous three-tier structure — small, medium, and large — has been replaced with a binary classification: you are either a small company (0% CIT) or you are not (30% CIT). The medium-company category (which previously attracted 20% CIT) no longer exists.

A Note on the ₦100 Million Figure

Some commentary references a ₦100 million threshold for small businesses. This comes from Section 22(4) of the Nigeria Tax Administration Act 2025 (NTAA), which provides a separate “small business” classification for VAT filing purposes — exempting companies with turnover under ₦100 million and fixed assets under ₦250 million from the obligation to file monthly VAT returns. This is a different classification from the “small company” definition in Section 56/202 of the NTA that determines CIT exemption. The two thresholds apply to different obligations. For CIT purposes, the threshold is ₦50 million.

What Small Companies Are Exempt From

Qualifying small companies enjoy exemption from three major tax charges under the NTA 2025:

1. Company Income Tax (0% Rate)

Section 56(a) of the NTA applies a 0% CIT rate to small companies on their assessable profits. This is not a deduction or a credit — it is a zero rate, meaning no CIT is payable on any amount of profit. Under the old regime, small companies (turnover up to ₦25 million) were also exempt, but the higher ₦50 million threshold now captures many more businesses.

2. Capital Gains Tax

Small companies are exempt from CGT on the disposal of chargeable assets. This is significant because the NTA 2025 increased the corporate CGT rate from 10% to 30% — aligning it with the CIT rate. For standard companies, selling property, equipment, or other capital assets now attracts a 30% tax on the gain. Small companies pay nothing.

For example, if a qualifying small company bought commercial property for ₦15 million and sells it for ₦25 million, the ₦10 million gain is CGT-free. A non-qualifying company would owe ₦3 million (30% of ₦10 million) on the same transaction.

3. The 4% Development Levy

Section 59 of the NTA introduces a 4% development levy on the assessable profits of all companies except small companies and non-residents. The levy replaces the Tertiary Education Tax, NASENI Levy, IT Levy, Police Trust Fund levy, and other previously fragmented charges. Small companies are completely exempt — they pay nothing.

For a standard company with ₦100 million in assessable profits, the development levy alone is ₦4 million per year. For a qualifying small company, it is zero.

What Small Companies Are NOT Exempt From

The 0% CIT rate does not mean you are invisible to the tax system. Small companies still have obligations that many business owners overlook:

VAT

VAT exemption is separate from CIT exemption. If your business makes taxable supplies, you must register for VAT and charge 7.5% on those supplies — regardless of your small company status. The NTAA provides a separate filing exemption for small businesses with turnover under ₦100 million and assets under ₦250 million (excluding professional services), but this only removes the monthly filing obligation. If you voluntarily register or make supplies to VAT-registered buyers, VAT still applies.

Use our VAT Calculator to check the VAT on your transactions.

PAYE on Employees

If you employ staff, you must deduct PAYE from their salaries and remit it to the relevant State Internal Revenue Service. Your company’s CIT status has no bearing on your employees’ personal income tax obligations. The NTA 2025 PAYE bands (0% to 25%) apply to your employees the same way they apply to everyone else.

Withholding Tax

The WHT exemption for small businesses has specific conditions. Under the Deduction of Tax at Source (Withholding) Regulations, small companies are exempt from deducting or suffering WHT if they hold a valid TIN and total monthly transaction values do not exceed ₦2 million. If your transactions exceed ₦2 million in any month, normal WHT rules apply for that month. And if your clients deduct WHT from payments to you despite your exempt status, you must obtain the WHT credit note and use it against future obligations or apply for a refund.

Annual Return Filing

This is the most commonly missed obligation. Even at 0% CIT, small companies must file annual CIT returns with the NRS within six months of their accounting year-end. A company with a December year-end must file by 30 June. Failure to file — even when no tax is payable — attracts a penalty of ₦25,000 for the first month and ₦5,000 for each subsequent month. The NRS does not waive this because your tax bill is zero.

File your returns through the NRS Self-Service Portal at selfservice.nrs.gov.ng.

Record-Keeping

The NTAA requires all taxpayers, including small companies, to maintain accurate financial records for a minimum of six years. The NRS can audit your records to verify your turnover and asset values. If an audit reveals that your turnover exceeded ₦50 million or your fixed assets exceeded ₦250 million, you will be reclassified as a standard company — retrospectively — and assessed for CIT at 30% plus the 4% development levy, plus penalties.

The Professional Services Exclusion

This exclusion catches more businesses than people expect. The NTA states that “any business providing professional services shall not be classified as a small company.” The exclusion is absolute — it applies regardless of your turnover or asset size. A one-person law practice earning ₦3 million per year with a single laptop as its only asset is not a small company under the NTA.

Professional services explicitly covered include legal practice, accounting and auditing, medical and dental practice, consulting (management, tax, IT, and other advisory services), architecture, and engineering. The list is not exhaustive — any service that requires professional accreditation or registration may fall within the exclusion.

If you are a professional service firm, you pay CIT at 30%, CGT at 30%, and the 4% development levy on your profits — the same as any large company. You also remain subject to standard WHT rules and monthly VAT filing obligations.

The rationale, as noted in legal commentary, is that professional service firms are presumed to generate higher margins relative to their scale. A consultancy with ₦40 million in turnover and ₦2 million in fixed assets might generate ₦25 million in profit — significantly more than a manufacturer with the same turnover but ₦200 million in equipment.

Before and After: What the Change Means in Practice

Example 1: Qualifying Small Company — Retail Business

Profile: A retail shop in Abuja selling household goods. Annual turnover: ₦35 million. Fixed assets (shop fittings, delivery van): ₦18 million. Assessable profit: ₦8 million.

Under old CITA (pre-2026):

• Classification: Small company (turnover under ₦25 million — wait, this company earned ₦35 million, so under the old law it would have been a medium company)
• CIT at 20%: ₦1,600,000
• Tertiary Education Tax (2.5%): ₦200,000
• Total tax: ₦1,800,000

Under NTA 2025:

• Classification: Small company (turnover ₦35 million — under the new ₦50 million threshold)
• CIT at 0%: ₦0
• Development levy: ₦0 (exempt)
• CGT: ₦0 (exempt)
• Total tax: ₦0

Annual saving: ₦1,800,000. This company goes from paying nearly two million naira in corporate taxes to paying nothing. That is money available for reinvestment, hiring, or working capital.

Example 2: Company That Loses Small Status — Growing Manufacturer

Profile: A small factory producing plastic containers. Annual turnover: ₦55 million (just over the threshold). Fixed assets: ₦180 million. Assessable profit: ₦12 million.

Under NTA 2025:

• Classification: Standard company (turnover exceeds ₦50 million)
• CIT at 30%: ₦3,600,000
• Development levy (4% of assessable profits): ₦480,000
• Total: ₦4,080,000

The cliff is steep. At ₦50 million turnover, this company pays ₦0. At ₦55 million, it pays over ₦4 million. There is no graduated phase-out — you are either in or you are out. This creates a genuine incentive for companies near the threshold to carefully manage reported turnover, and a genuine enforcement challenge for the NRS.

Example 3: Excluded Professional Firm — Consulting Practice

Profile: A management consulting firm in Lagos. Annual turnover: ₦20 million. Fixed assets: ₦5 million. Assessable profit: ₦12 million.

Under NTA 2025:

• Classification: Standard company (professional services are excluded from small company status)
• CIT at 30%: ₦3,600,000
• Development levy: ₦480,000
• Total: ₦4,080,000

Despite a turnover well below ₦50 million and minimal fixed assets, this firm pays the full standard rate. The professional services exclusion overrides the turnover and asset thresholds entirely.

The Cliff Edge Problem

The binary classification — small (0%) or standard (30%) — creates a sharp cliff edge at the ₦50 million turnover mark. A company earning ₦49.9 million pays ₦0 in CIT. A company earning ₦50.1 million pays 30% on its entire assessable profit plus 4% development levy. There is no transition zone, no reduced rate for companies just above the threshold, and no phased introduction.

Under the old regime, the medium-company category (₦25 million to ₦100 million turnover) provided a 20% CIT rate — a stepping stone between exemption and the full 30%. The NTA 2025 removed this entirely. Companies that previously paid 20% as medium companies must now determine whether they fall under or over ₦50 million. Those above pay 30% — a 10 percentage point increase from their old rate.

This creates practical questions for growing businesses. If your turnover is approaching ₦50 million, you face a decision point: do you manage growth to stay below the threshold, or do you push through and accept the significantly higher tax burden? The answer depends on your profit margins, growth trajectory, and how much of the additional revenue translates into assessable profit. Use our CIT Calculator to model both scenarios.

What the NRS Checks on Audit

The NRS is empowered under the NTAA to audit small companies and verify that they genuinely qualify for the exemption. Here is what auditors look at:

• Turnover accuracy. All revenue streams must be included in gross turnover — not just your main product line. If you have rental income, investment returns, or income from a secondary activity, it all counts. Understating turnover to stay below ₦50 million is an offence that triggers reclassification, back-duty assessments, and penalties.
• Fixed asset valuation. Fixed assets are measured at book value (cost less accumulated depreciation). The NRS may challenge valuations that appear artificially low — for example, if assets were transferred to a related party to bring the total below ₦250 million.
• Professional service activity. If your company provides any professional services — even as a secondary activity — the exclusion may apply. A company that primarily sells goods but also provides consulting services could be challenged on its classification.
• Related-party arrangements. Splitting a single business across multiple entities to keep each one below the ₦50 million threshold is a classic avoidance strategy. The NRS has anti-avoidance powers under the NTAA to look through artificial structures and aggregate connected businesses.

The consequences of failed verification are serious: reclassification as a standard company, retrospective CIT assessment at 30% for all affected years, the 4% development levy, compound interest on unpaid tax, and administrative penalties.

Compliance Checklist for Small Companies

1. Verify your qualification annually. Check both your gross turnover and fixed asset total at the end of each accounting year. If either exceeds the threshold, you are no longer a small company for the following year.
2. File your CIT return on time. Due within six months of your accounting year-end. File through the NRS portal at selfservice.nrs.gov.ng. Even at 0% tax, the return must be filed.
3. Maintain records for six years. Keep financial statements, fixed asset registers, invoices, bank statements, and any documentation that supports your turnover and asset figures.
4. Collect WHT credit notes. If clients deduct WHT from payments to you, obtain the credit note. You can use it to claim a refund or offset against future obligations.
5. Handle VAT separately. CIT exemption does not mean VAT exemption. If you make taxable supplies, comply with VAT registration and remittance rules.
6. Deduct and remit PAYE for employees. Your staff’s income tax obligations are independent of your CIT status.
7. Register your TIN. A valid Tax Identification Number is required for all tax interactions, banking, and government contracts. Verify yours at taxid.nrs.gov.ng.

Common Mistakes Small Companies Make

• Assuming “exempt” means “invisible.” CIT exemption does not exempt you from filing, VAT, PAYE, or record-keeping. The NRS knows you exist — your TIN is in the system, and your bank reports transactions above certain thresholds.
• Not filing because no tax is owed. This is the most expensive mistake. The late filing penalty accrues monthly regardless of your tax liability. A company that qualifies for 0% CIT but does not file for two years accumulates ₦145,000 in penalties (₦25,000 + 23 months × ₦5,000) — for a tax bill of zero.
• Ignoring the professional services exclusion. If your company provides legal, accounting, consulting, medical, or engineering services, you do not qualify — full stop. Operating through a limited liability company does not change this. The exclusion looks at the nature of the service, not the legal structure.
• Failing to collect WHT credit notes. When a client deducts WHT from a payment to your small company, the deduction is technically in error (if you qualify for the WHT exemption and the transaction is below ₦2 million). But the credit note is your only way to recover the over-deduction. Without it, the money is gone.
• Splitting the business to stay below the threshold. The NRS can aggregate related entities and treat them as a single taxpayer. Artificial fragmentation is a red flag that invites audit and reclassification.
• Not preparing for growth past ₦50 million. If your business is growing, the jump from 0% to 30% CIT (plus 4% development levy) is a financial shock. Plan for it by modelling the impact on cash flow and setting aside reserves before you cross the threshold.

Planning for Growth: What Happens When You Cross the Threshold

If your turnover exceeds ₦50 million or your fixed assets exceed ₦250 million, you lose small company status for the following assessment year. The full suite of standard company obligations kicks in:

• CIT at 30% on assessable profits
• 4% Development Levy on assessable profits
• CGT at 30% on disposal of chargeable assets
• Standard WHT obligations — both deducting from payments you make and suffering deductions on payments you receive
• Full monthly VAT filing (if not already filing)
• Audited financial statements required with your CIT return (signed by an ICAN-licensed auditor)

The transition year is the critical planning window. Work with a tax adviser to estimate your first-year CIT liability, build the cost into your pricing and cash flow projections, and ensure your accounting systems can produce the tax computations and capital allowance schedules that standard company returns require. Find a qualified adviser through our Tax Professional Directory.

Final Thoughts

The NTA 2025 delivered a genuine windfall for qualifying small companies. Zero CIT, zero CGT, zero development levy, and reduced WHT exposure — all for businesses under ₦50 million in turnover with fixed assets below ₦250 million. For the thousands of Nigerian SMEs that fall within this bracket, the reform eliminates their most significant annual tax cost and frees up capital for reinvestment.

The trade-off is compliance discipline. The exemption is not a free pass to ignore the tax system. You must still file returns, keep records, handle VAT and PAYE, and be prepared to prove your qualification on audit. And if your business grows past the threshold, the transition from 0% to 30% is steep — plan for it well in advance.

Check your figures with our CIT Calculator to see where you stand. If you are unsure whether your business qualifies — particularly if you offer any services that might be classified as “professional” — consult a tax adviser from our Tax Professional Directory. For the official text of Section 56 and the small company definition, visit the NRS website at nrs.gov.ng.

FAQs About CIT for Small Companies Under the NTA 2025

What is the turnover threshold for a small company?

Under Section 56 and Section 202 of the NTA 2025, a small company is one with gross annual turnover of ₦50,000,000 or less and total fixed assets not exceeding ₦250,000,000. Both conditions must be met. Professional service firms are excluded regardless of turnover or asset size.

Is my consulting firm exempt even though turnover is below ₦50 million?

No. The NTA explicitly excludes businesses providing professional services from the small company classification. This covers law, accounting, consulting, medical, dental, architectural, and engineering firms. The exclusion applies regardless of your turnover or asset size — you pay CIT at 30%.

Do I still need to file a CIT return at 0% tax?

Yes. Small companies must file annual CIT returns with the NRS within six months of their accounting year-end, even when the tax payable is zero. Failure to file attracts penalties of ₦25,000 for the first month and ₦5,000 for each subsequent month of default.

What happens if my turnover exceeds ₦50 million next year?

You lose small company status for the following assessment year. You will be classified as a standard company and subject to CIT at 30%, CGT at 30%, and the 4% development levy. There is no graduated transition — the change from 0% to 30% is immediate once you cross the threshold.

Are small companies exempt from VAT?

Not automatically. CIT exemption and VAT exemption are separate. If your business makes taxable supplies, you must comply with VAT rules. A separate “small business” classification under Section 22(4) of the NTAA exempts businesses with turnover under ₦100 million from monthly VAT filing, but this does not exempt you from VAT itself if you are registered or choose to register.

What is the penalty for understating turnover to qualify as small?

The NRS can reclassify your company as standard, assess CIT at 30% for all affected years, add the 4% development levy, impose compound interest on unpaid tax, and apply administrative penalties. In cases of deliberate misstatement, the NTAA allows the NRS to audit beyond the standard six-year limitation period.

Can I split my business into two entities to stay below ₦50 million each?

The NRS has anti-avoidance powers under the NTAA to disregard artificial arrangements. If the split lacks genuine commercial substance — for example, two entities with the same directors, premises, and customer base — the NRS can aggregate the entities and treat them as a single taxpayer. This is a well-known audit trigger.