Nigeria Gives Tax Authorities Wider Powers . New presumptive tax rules allow revenue authorities to use taxpayers’ assets, spending patterns and community information to estimate business turnover, putting proper record-keeping at the centre of tax compliance.
Nigeria’s efforts to bring more businesses into the tax net are taking a more assertive turn, with new regulations allowing tax authorities to look beyond conventional financial records when determining how much a business earns.
Under the Presumptive Tax Regulations, 2026, revenue officials can consider a taxpayer’s lifestyle, assets, business location, electronic and cash transactions, and information obtained from their community when estimating business turnover that cannot be reliably established from available records.
The provision, which has drawn attention following a report by The Punch, is part of a wider government effort to address tax gaps in Nigeria’s informal economy and improve revenue collection. The regulations were issued under Section 29 of the Nigeria Tax Act, 2025, and took effect on 1 January 2026. The Joint Revenue Board identifies the framework as a measure for taxing individuals whose income cannot be properly determined because of inadequate records.
Nigeria Gives Tax Authorities Wider Powers : Lifestyle and assets become part of tax assessment
Regulation 10(2) gives the relevant tax authority the power to estimate a taxpayer’s turnover using its best judgement where adequate information is unavailable. The factors it may consider include the nature of the business, the taxpayer’s lifestyle and assets, the location of the business, community intelligence, and the volume of electronic and cash transactions.
This means tax assessments may no longer depend solely on the sales figures or financial statements presented by a business. Where records are insufficient or relevant information has been deliberately withheld, tax officials can use other indicators to arrive at an estimate of business activity.
For example, a trader who does not maintain proper sales records may have their turnover estimated using the nature and scale of the business, its location, observed assets and available transaction information.
The regulations also cover cases where taxpayers deliberately conceal or misrepresent information, making it difficult for authorities to establish their actual income.
However, the power to estimate turnover does not mean that every asset or personal expense automatically becomes taxable income. The assessment is intended to establish business turnover for the purpose of applying the presumptive tax rules. It must also be distinguished from an assessment of personal wealth.
What the presumptive tax means for businesses
The regulations introduce a presumptive income tax of one per cent of actual or estimated annual turnover for eligible businesses covered by the regime.
The framework is particularly relevant to businesses that operate without adequate accounting records and whose taxable income cannot be reliably established through conventional assessment methods.
For instance, if an eligible business is assessed to have an annual turnover of N20 million, its presumptive tax liability would be N200,000 under the one per cent rate. This calculation is based on turnover rather than profit, which means the tax may apply even where the business’s actual profit cannot be determined.
Where only daily sales can reasonably be estimated, the regulations provide for annual turnover to be calculated using up to 300 working days. A business estimated to generate N50,000 in daily sales could therefore have an annual turnover of N15 million, resulting in a presumptive tax assessment of N150,000.
There is, however, an exemption for qualifying nano businesses with annual turnover not exceeding N12 million, subject to the applicable conditions. KPMG’s review of the regulations notes that the exemption applies to businesses within the threshold that have no fixed business premises and no employees. Certain specified businesses and persons exempt under the Nigeria Tax Act are also excluded.
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Asset disposals also fall within the framework
Beyond business turnover, the regulations introduce a two per cent presumptive tax on the gross consideration received from certain transactions that give rise to chargeable capital gains.
These transactions include the disposal of land, buildings, movable assets, shares and intangible property, except where an exemption applies under the Nigeria Tax Act, 2025.
The tax is payable within 30 days of the transaction being concluded or the consideration being received, whichever occurs first. This extends the framework beyond routine business sales to certain asset disposal transactions.
A wider tax net, but with protections for small operators
The government has presented the presumptive tax framework as a way to improve compliance without placing additional pressure on the smallest businesses. The Federal Ministry of Finance said the regulations were designed to protect nano and small businesses, broaden the tax base and provide a more structured approach to taxing the informal sector.
Several low-income informal occupations are specifically exempted under the regulations. These include petty food vendors, roadside traders, mobile barbers, manual tailors, local cobblers, newspaper vendors, wheelbarrow pushers, roadside car washers and sachet water hawkers, among others.
Eligible operators can obtain tax exemption stickers or certificates from the relevant tax authority at no cost. These certificates are valid for one year and may be renewed after their eligibility is confirmed.
The regulations also provide for the registration of individuals who do not have Tax Identification Numbers, allowing tax authorities to assign identification numbers and bring more economic activities into the formal tax system.
Record-keeping becomes more important
Although the framework offers a simplified method of assessing businesses with inadequate records, it also creates a stronger incentive for operators to maintain proper accounts.
Businesses that can provide reliable records may be better positioned to have their actual income assessed rather than relying on estimates. KPMG has noted that businesses exceeding the exemption threshold could face higher tax obligations under the presumptive regime than they might under self-assessment, making proper bookkeeping particularly important.
The regulations also allow taxpayers to challenge assessments. Under the Nigeria Tax Administration Act, 2025, a taxpayer who disputes an assessment may submit a written objection within 30 days of receiving the assessment, stating the specific grounds for disagreement and providing supporting information.
Balancing revenue collection with fair taxation
The introduction of lifestyle-based indicators represents a significant development in Nigeria’s approach to informal sector taxation. For years, limited bookkeeping, cash-based transactions and unregistered business activities have made it difficult for tax authorities to establish the actual earnings of many operators.
The new framework gives revenue agencies additional tools to address these gaps and potentially improve the country’s tax base. However, its effectiveness will depend on how consistently and fairly the rules are applied.
Estimating turnover from assets, lifestyle and community information could create challenges where personal wealth is mistaken for business income or where estimates fail to reflect operating costs, seasonal fluctuations and actual business performance.
For the government, the challenge is to improve tax compliance without creating uncertainty or discouraging small businesses from operating and expanding. For business owners, the message is increasingly clear: maintaining accurate transaction records is no longer just good business practice. It is an important part of managing tax exposure under Nigeria’s evolving tax system.
