Company Tax in Nigeria: What the 2025 Reform Changes for Founders

On 1 January 2026, the Nigeria Tax Act 2025 took effect and reset the rules that determine what a company owes. For most early-stage businesses the direction is favourable: the turnover threshold below which a company pays no income tax has risen from 25 million to 100 million naira. The obligation to register and file, however, has not relaxed. What follows is a practical account of what your company now owes, how tax applies when you operate across more than one country, and the filing failures that most often create problems.

The reform: three changes that matter to founders

A higher small-company threshold. A small company is now one with annual turnover of up to 100 million naira and fixed assets of up to 250 million naira. A company that meets both tests is exempt from company income tax, capital gains tax, and the new development levy (EY’s summary of the Act). Under the previous 25 million naira threshold, many early-stage companies sat within the tax net. A large share no longer do.

A renamed authority. The Federal Inland Revenue Service (FIRS) has been reconstituted as the Nigeria Revenue Service (NRS). The change is administrative and does not affect a company’s underlying obligations.

A new development levy. Companies above the small-company threshold now pay a development levy of 4 percent of assessable profits, in addition to company income tax. Small companies are exempt. Founders approaching 100 million naira in turnover should build the levy into their forecasts, as it applies from the point the threshold is crossed (PwC’s overview of the reform).

Exemption does not remove the compliance burden

An exemption from company income tax does not release a company from its wider obligations. Three apply regardless of whether any tax is due.

• Registration and filing. Every company must be registered with the NRS and file annual returns, including companies that are loss-making or exempt.
• Value Added Tax. VAT of 7.5 percent applies to most goods and services once a company meets the registration requirement.
• Substantiation. The exemption is a position the company must be able to evidence, which requires maintained accounting records.

A common and costly failure at this stage is non-filing. It typically occurs when a founder assumes an exempt or loss-making company has nothing to submit. Penalties and interest attach to the missed return itself, independent of any tax liability.

Operating across borders

A company with operations in more than one country has obligations in each. A Nigerian company and a second entity in the US, the UK or an EU country file separately, with the Nigeria Revenue Service and with the IRS, HMRC or the relevant European authority, each to its own deadlines.

Double taxation is a smaller risk than founders often assume, though the relief works differently depending on where the second entity sits. Nigeria has tax treaties with the UK, Canada and several EU countries, so a treaty and foreign tax credits generally keep the same profit from being taxed in full twice. Nigeria has no treaty with the United States, so relief for a US entity runs through the foreign tax credit rather than a treaty, which usually reaches the same result but takes more care (Nigeria’s treaty network). The greater exposure, in every case, is a failure to file where a taxable presence exists. A company or income in a country creates an obligation to report there, wherever the founder is based.

This is where corporate structure and cross-border cash flows carry direct tax consequences. A holding company in one jurisdiction and an operating company in another creates filing obligations in both, and the transactions between them must be priced and documented under transfer-pricing rules. Weak documentation is a frequent and avoidable source of tax exposure.

How founders draw income

The way a founder is paid carries its own tax treatment. Salary is processed through payroll and taxed as employment income. Dividends are distributed from post-tax profit and taxed under a separate regime. The efficient balance depends on the company’s position and the founder’s own circumstances, which is why how much to pay yourself is a decision worth taking deliberately. If you live outside Nigeria, how that pay is then taxed depends on your country of residence, and the US, UK and EU each treat it differently, covered in paying yourself when you live abroad.

What this means for founders

For most early-stage companies in Nigeria, the 2025 reform reduces the tax due. It does not reduce the compliance burden; accurate record-keeping and timely filing now matter more, not less. Most companies that run into difficulty do so through a failure to register or file, on the assumption that an exemption removed every obligation. It does not.

Cross-border tax rewards getting the structure and the filing right early rather than correcting them later. If your company is approaching the point where tax, structure, and cross-border obligations intersect, book a conversation and we will help you put the right position in place.