Nigeria’s new tax reform laws, scheduled to take effect from 1 January 2026, introduce 50 wide-ranging tax exemptions and reliefs aimed at easing the cost of living, supporting low-income earners, encouraging entrepreneurship, and stimulating economic growth.
These reforms cut across personal income tax, company income tax, VAT, capital gains tax, stamp duties, pensions, agriculture, healthcare, education, and essential goods, making them some of the most far-reaching fiscal changes in recent years.
This article provides a clear, structured breakdown of the 50 tax exemptions and reliefs every Nigerian, business owner, startup founder, and investor should know about.
Overview of the 2026 Tax Reforms
The new reforms are designed to:
- Reduce the tax burden on low- and middle-income earners
- Support small businesses, startups, and SMEs
- Encourage job creation and wage increases
- Lower the cost of essential goods and services
- Promote investment, agriculture, and innovation
1. Personal Income Tax (PAYE) Exemptions and Reductions
- Individuals earning the national minimum wage or below are fully exempt from personal income tax.
- Annual gross income up to ₦1,200,000 (approximately ₦800,000 taxable income) is tax-free.
- Reduced PAYE rates apply to individuals earning up to ₦20 million annually.
- Gifts received by individuals are exempt from tax.
2. Allowable Deductions and Personal Reliefs
- Pension contributions to approved Pension Fund Administrators (PFAs).
- Contributions to the National Health Insurance Scheme (NHIS).
- National Housing Fund (NHF) contributions.
- Interest paid on loans for owner-occupied residential housing.
- Life insurance and annuity premiums.
- Rent relief equal to 20% of annual rent, capped at ₦500,000.
3. Pension, Retirement, and Compensation Exemptions
- Pension funds and assets managed under the Pension Reform Act are exempt.
- Pension and retirement benefits received under the Act are tax-free.
- Compensation for loss of employment up to ₦50 million is exempt.
4. Capital Gains Tax (CGT) Exemptions
- Sale of an owner-occupied residential property.
- Sale of personal effects or chattels valued up to ₦5 million.
- Sale of up to two privately owned vehicles per year.
- Gains on shares below ₦150 million per year or gains of ₦10 million.
- Share gains above the threshold if proceeds are reinvested.
- Capital gains of pension funds, charities, and non-commercial religious institutions.
5. Company Income Tax (CIT) and Business Reliefs
- Small companies (turnover not exceeding ₦100 million and fixed assets not above ₦250 million) pay 0% company income tax.
- Eligible labelled startups are fully exempt from company income tax.
- Compensation relief: 50% additional tax deduction for salary increases, wage awards, or transport subsidies for low-income workers.
- Employment relief: 50% tax deduction on salaries of newly hired employees retained for at least three years.
- Five-year tax holiday for agricultural businesses, including crop production, livestock, and dairy farming.
- Tax exemption on gains from investments in labelled startups by venture capital funds, private equity firms, accelerators, and incubators.
6. Other Business-Related Tax Exemptions
Development Levy
- Small companies are exempt from the 4% development levy.
Withholding Tax (WHT)
- Small companies, manufacturers, and agricultural businesses are exempt from withholding tax on their income.
- Small companies are also exempt from withholding tax on payments made to suppliers.
7. Value Added Tax (VAT) and Consumption Tax Exemptions
- Basic food items attract 0% VAT.
- Residential rent is VAT-exempt.
- Educational services and materials attract 0% VAT.
- Healthcare and medical services are VAT-exempt.
- Pharmaceutical products attract 0% VAT.
- Small companies with turnover not exceeding ₦100 million are exempt from charging VAT.
- VAT exemption or suspension on diesel, petrol, and solar power equipment.
- VAT refunds on assets used to produce VAT-able or zero-rated goods and services.
- Agricultural inputs such as fertilisers, seeds, seedlings, animal feed, and live animals.
- Purchase, lease, or hire of agricultural equipment.
- Disability aids including wheelchairs, hearing aids, and braille materials.
- Shared passenger road transport (non-charter).
- Electric vehicles and electric vehicle parts.
- Humanitarian and relief supplies.
- Baby and infant products.
- Sanitary towels, sanitary pads, and tampons.
- Land and buildings.
8. Stamp Duty Exemptions
- Electronic money transfers below ₦10,000.
- Salary payments.
- Intra-bank transfers.
- Transfers of government securities or shares.
- All documents relating to the transfer of stocks and shares.
What These Tax Reforms Mean for Nigerians
- Low-income earners benefit from zero or significantly reduced income tax.
- SMEs and startups gain major tax reliefs, improving cash flow and sustainability.
- Agriculture, healthcare, and education become more affordable due to VAT exemptions.
- Investors and entrepreneurs are incentivised through capital gains and startup tax reliefs.
- Consumers benefit from lower prices on essential goods and services.
Final Thoughts
The 2026 tax reforms represent a major shift towards a more inclusive and growth-oriented tax system in Nigeria. By targeting relief at households, workers, startups, and essential sectors, these exemptions aim to reduce financial pressure while encouraging productivity, investment, and economic resilience.
Staying informed about these changes is crucial for individuals, businesses, and organisations seeking to maximise available benefits and remain compliant.
For more funding opportunities, policy updates, and resources that support growth and impact, stay connected with GrantsDatabase.
