- A Professional Analysis of the New Pro-People Tax Regime
The enactment of the Nigeria Tax Act (NTA) 2025, the Nigeria Tax Administration Act (NTAA) 2025, and related fiscal reform laws marks a historic milestone in Nigeria’s taxation landscape.
Effective 1 January 2026, the new tax regime introduces comprehensive reliefs, exemptions, and incentives deliberately crafted to ease the tax burden on low-income earners, strengthen household purchasing power, support MSMEs, and stimulate inclusive economic growth.
This article provides a professional analysis of the 50 major exemptions and reliefs under the new tax laws and explains their implications for individuals, families, and businesses.
Personal Income Tax (PIT) / PAYE Reliefs
A. Exemptions for Low-Income Earners
- Full exemption for individuals earning the national minimum wage or less. This provision ensures that Nigeria’s lowest earners are entirely shielded from income taxation.
- Exemption for annual gross income up to ₦1,200,000 (equivalent to about ₦800,000 in taxable income). This expands the tax-free threshold and significantly benefits individuals in the lower-income bracket.
- Reduced PAYE taxes for individuals earning up to ₦20 million annually. Middle-income earners receive marginal rate reductions to ease cost-of-living pressures.
- Gifts received by individuals are exempt from PIT. This removes previous ambiguity regarding the taxability of gifts and supports social transfers within families and communities.
Deductions and Reliefs for Individuals
- These statutory deductions lower taxable income and encourage socially beneficial financial behaviour.
- Pension contributions under the Pension Reform Act (PRA).
- National Health Insurance Scheme (NHIS) contributions.
- National Housing Fund (NHF) contributions.
- Interest on loans for owner-occupied residential property.
- Life insurance and annuity premiums.
- Rent relief of 20% of annual rent, capped at ₦500,000.
Significance: These deductions encourage long-term savings, health insurance adoption, home ownership, and financial stability for individuals and households.
Pensions and Retirement Benefits (Exempt)
- Pension funds and assets under the PRA remain tax-exempt.
- Pensions, gratuities, and retirement benefits paid under the PRA are exempt from PIT.
- Compensation for loss of employment up to ₦50 million is exempt.
- These provisions ensure retirees and displaced workers retain more of their income during critical life transitions.
Capital Gains Tax (CGT) Exemptions
- Gains from the sale of an owner-occupied residential house.
- Personal effects valued up to ₦5 million.
- Sale of up to two private vehicles annually.
- Capital gains on shares below ₦150 million per year, or gains up to ₦10 million.
- Rollover relief for reinvested share proceeds.
- CGT exemption for pension funds, charities, and religious institutions (non-commercial activities).
- These measures encourage asset ownership and capital market participation while protecting household assets from unnecessary taxation.
Companies Income Tax (CIT) Exemptions
A. Reliefs to Boost MSMEs, Startups, and Job Creation
- Small companies (turnover ≤ ₦100 million and fixed assets ≤ ₦250 million) pay 0% CIT.
- Tax exemption for eligible labeled startups.
- 50% Compensation Relief for companies that increase staff wages, grant wage awards, or provide transport subsidies for low-income workers.
- 50% Employment Relief for salaries paid to newly hired employees retained for at least three years.
- Five-year tax holiday for qualifying agricultural businesses (crop production, livestock, dairy, etc.).
- Tax exemption on gains from investment in labeled startups by venture capitalists, private equity firms, accelerators, and incubators.
Impact: These incentives significantly lower the cost of doing business, support job creation, and stimulate innovation, especially among youth-led enterprises.
Development Levy Exemption
Small companies are fully exempt from the 4% development levy.
This eases compliance burden and protects MSMEs from excessive statutory costs.
Withholding Tax (WHT) Exemptions
Small companies, manufacturers, and agricultural businesses are exempt from WHT deductions on income they earn.
Small companies are also exempt from WHT on payments they make to suppliers.
These improvements free up working capital and address long-standing MSME liquidity challenges.
Value Added Tax (VAT) Exemptions and 0% Items
A. Reliefs for Households and Consumers
- Basic food items – 0% VAT.
- Rent on residential property – exempt.
- Education services and educational materials – 0% VAT.
- Health and medical services – exempt.
- Pharmaceutical products – 0% VAT.
- Small companies (≤ ₦100m turnover) are exempt from charging VAT.
- B. Reliefs for Businesses and Critical Sectors
- VAT suspended or exempt on diesel, petrol, and solar power equipment.
- VAT refunds allowed on assets and overheads used to produce VATable or 0% goods/services.
- Agricultural inputs: fertilizers, seeds, seedlings, feeds, live animals – exempt.
- Agric equipment: purchase, lease, or hire – exempt.
- Disability aids: hearing aids, wheelchairs, braille materials – exempt.
- Shared passenger road transport services – exempt.
- Electric vehicles and component parts – VAT exempt.
- Humanitarian relief supplies – exempt.
- Baby products – exempt.
- Sanitary towels, pads, and tampons – exempt.
- Land and building transactions – exempt.
Impact: These VAT exemptions directly reduce the cost of living, especially food, healthcare, education, and energy—key drivers of inflation in Nigeria.
Stamp Duties Exemptions
- Electronic money transfers below ₦10,000.
- Salary payments.
- Intra-bank transfers.
- Transfers involving government securities or shares.
- Documents relating to the transfer of stocks and shares.
- These reforms promote financial inclusion, reduce transaction charges, and encourage formal financial activity.
Broader Impact of the Reforms
- A. Impact on Individuals
- Lower tax burden for low- and middle-income earners.
- Improved financial security through pension and insurance incentives.
- Reduced cost of everyday essentials.
- Simplified compliance and enhanced transparency.
B. Impact on MSMEs
Zero percent income tax for most small businesses.
Elimination of WHT deductions enhances cashflow.
VAT exemption reduces administrative burdens.
Incentives support hiring, innovation, and scaling.
C. Impact on the Economy
Encourages formalisation of businesses.
Expands the tax base sustainably.
Boosts investment in agriculture, technology, and startups.
Supports inflation moderation and shared prosperity.
Conclusion
The 50 tax exemptions and reliefs under the 2025 Nigerian tax reforms constitute one of the most people-focused and MSME-supportive tax frameworks ever introduced in Nigeria. By easing the tax burden on households and businesses, the government aims to drive inclusive economic growth, increase compliance, and create a more equitable tax system.
This reform is more than a fiscal adjustment; it represents a structural shift towards fairness, competitiveness, and long-term economic stability. The provisions will help Nigerians save more, invest more, and do business with greater confidence.
Olatunji Abdulrazaq CNA,ACTI,ACIArb(UK)
Founder/CEO,Taxmobile.Online
