Nigeria’s 2026 tax law introduced major reliefs for small companies, while also clearly defining how company income tax, dividends, and director payments are taxed.
This guide explains company taxation in Nigeria (2026) in clear, practical terms — whether you run a small company, growing SME, or large business.
What Is a Company Under Nigerian Tax Law?
A company refers to:
- Limited Liability Companies (Ltd)
- Private and public companies
- Companies registered with CAC (RC number)
Companies are taxed separately from their owners.
Small Companies: Understanding the 0% Company Income Tax Rate
Under section 56 of the Nigeria Tax Act 2025, qualifying small companies pay company income tax at 0%.
The Act’s definition uses annual gross turnover of ₦50 million or less and total fixed assets not exceeding ₦250 million. However, the Federal Ministry of Finance’s published transition guidelines refer to a ₦100 million turnover threshold.
Because these published provisions differ, companies should confirm their classification under current Nigeria Revenue Service (NRS) guidance before relying on the small-company tax treatment.
Important: Businesses providing professional services do not qualify as small companies under the Act, even where their turnover and assets fall within the stated limits.
👉 Taxify helps you confirm eligibility and file correctly.
Companies That Do NOT Qualify as Small
Example: Understanding Company Income Tax
Suppose a company has taxable profits of ₦20,000,000 and the applicable company income tax rate is 30%.
- Taxable profit: ₦20,000,000
- Illustrative company income tax: ₦6,000,000
Company income tax is calculated on taxable profits determined under the applicable law, not simply on gross turnover. Taxable profits may differ from accounting profits because the tax rules determine which deductions, adjustments and other items apply.
Paying tax on revenue instead of profit is a costly mistake.
Let Taxify review your company tax computation.
Professional Services Companies: An Important Exception
The Nigeria Tax Act excludes businesses providing professional services from the small-company classification.
Consequently, a company should not assume that it qualifies for the 0% small-company rate solely because its turnover and fixed assets fall below the relevant limits.
Professional services may include consulting, accounting, audit, tax, legal, engineering and other qualifying professional activities. The classification depends on the applicable legal definitions and the activities actually carried on.
Before applying the small-company treatment, confirm the classification and relevant tax obligations with the NRS or a qualified tax adviser.
Paying Yourself From a Company
Option 1: Salary
- Treated as personal income
- Taxed under PAYE
- Deductible expense for the company
Option 2: Dividends
Dividends paid to individual shareholders are generally subject to 10% withholding tax. For an individual recipient, this is generally the final tax on that dividend, subject to the applicable rules. The treatment of dividends received by a company can differ.
Example:
- Dividend declared: ₦5,000,000
- Withholding tax (10%): ₦500,000
- You receive: ₦4,500,000
Global Minimum Tax (Large Companies Only)
Minimum Effective Tax Rate: Which Companies Need to Check?
Section 57 of the Nigeria Tax Act 2025 provides for an additional tax where a company’s effective tax rate falls below 15%, subject to the statutory calculation rules.
The provision applies to:
- A company that is a constituent entity of a multinational enterprise (MNE) group.
- Any other company with aggregate turnover of ₦20 billion or more in the relevant year of assessment.
The calculation depends on the Act’s definition of effective tax rate, covered taxes and profits.
Most standalone small businesses below the relevant threshold will not fall within this rule merely because they operate in Nigeria. However, a company that forms part of an MNE group must examine the applicable provisions rather than assuming that the local subsidiary’s size alone settles the question.
Obtain specialist tax advice before determining whether additional tax is due.
Development Levy (4%) — When It Applies
Development Levy: The 4% Rule
Section 59 of the Nigeria Tax Act 2025 imposes a development levy of 4% on the assessable profits of companies chargeable under the relevant provisions of the Act, other than small companies and non-resident companies.
The levy is separate from the company’s company income tax calculation and should be assessed according to the rules that apply to the entity.
Before estimating a company’s overall tax liability, establish its classification, assessable profits and eligibility for any relevant exclusion.
The levy supports designated education, technology, security and development funds under the statutory allocation framework.
Final Word for Company Owners
Nigeria’s 2026 company tax system is designed to:
- Support small businesses
- Ensure fairness
- Encourage compliance
The key is proper classification, correct filing, and smart structuring.
Need help filing company tax, claiming reliefs, or planning dividends?
Contact Taxify Solutions Technology Limited today.
