QUESTIONS & ANSWERS ON THE NEW NIGERIA TAX LAW

 

GOOD MORNING ONCE AGAIN. 

I WAS PRIVILEGE TO ATTEND THE NEW TAX REFORM CONFERENCE RECENTLY. 

I BELIEVE THE INFORMATION MAY BE USEFUL TO SOMEONE. 

**TO WHOM IT MAY CONCERN ; JUST TO KEEP YOU INFORMED**

QUESTIONS & ANSWERS ON THE NEW NIGERIA TAX LAW

* (SPECIFIC FOCUS ON INDIVIDUALS AND SMALL BUSINESSES)

🟢 Q1: * When will the new Nigeria Tax Act take effect?

A1: * The new Nigeria Tax Act takes effect from 1st January 2026.

🟢 Q2:  * Which specific individuals does the Nigerian Tax Law apply to?

 A2:* It applies to all individuals who earn income in Nigeria (workers, content creators, remote workers, influencers, traders, etc.) and to Nigerians earning income abroad if they are tax residents in Nigeria.

🟢 Q3: * Will transfers and deposits into my bank account be taxed?

 A3: * NO. Moving money around (via POS, transfers, deposits, or withdrawals) is not a taxable event. What is taxed is income earned.

🟢 Q4: * Will the money I KEEP in my bank account be taxed from 2026?

A4* NO.

*  Just having money in your account is not taxable. 

* Only the income you earn (like salary, business profits, or interest) is what can be taxed.

🟢 Q5 :

* I’m a student with no job. Will I pay tax in 2026?

A5:

* NO.

*  If you have no taxable income, you won't pay tax.

🟢 Q6:

* Will tax authorities now monitor bank accounts of businesses more closely?  

A6:

* YES,

* It will be easier for authorities to track compliance. 

However, 

* Your bank balances will not be taxed; profits and income are.

🟢 Q7 :

* Will I pay tax on the loan I borrow from Fairmoney or any lender?

 A7:

* NO. 

* Loans are not taxable given that they are not income. 

* However, the interest income earned by Fairmoney will be taxed in their own hands.

🟢 Q8:

* I run a one-man business. 

* Do I pay personal income tax or company income tax?

 A8:

* If registered as an enterprise (business name), you pay Personal Income Tax. 

* If registered as a limited liability company then you pay Company Income Tax.

🟢 Q9:

* If I sell shares and make a profit, will I pay tax in 2026?

 

A9:

* NO, 

* as long as the shares you sold are not more than ₦150 million in value, and the gain is not above ₦10 million. 

* However, if it is higher than this threshold, the gain becomes taxable.

🟢 Q10:

* I am a pensioner. 

* Will my pension income be taxed in 2026?

 A10: 

* NO. 

* Approved pension and retirement benefits are exempt from tax.

🟢 Q11:

* Are military salaries taxable?

A11:

* NO.

*  The salaries of military officers are now tax-exempt.

🟢 Q12:

* Do creatives (authors, musicians, sportsmen) still enjoy tax exemptions on foreign income?

A12:

* NO.

*  They must now pay Nigerian tax on their income earned within Nigeria and outside.

🟢 Q13:

* Are crypto gains taxable?

A13:

* YES.

*  Profits from crypto, NFTs, and other digital assets are now taxed.

🟢 Q14:

* Who is exempt from personal income tax?

A14:

* Individuals earning the national minimum wage or less, and those earning below ₦800,000 annually, are exempt.

🟢 Q15:

* What are the new progressive tax bands? 

A15:

👉First ₦800,000 @ 0%

👉Next ₦2.2m @ 15%

👉Next ₦9m @ 18%

👉Next ₦13m @ 21%

👉Next ₦25m @ 23%

👉Above ₦50m @ 25%

🟢 Q16:

* If I get a big severance package when leaving my job, will I pay tax on it?

 A16:

* You won't pay tax if it is ₦50 million or less, 

* BUT if it is more than the extra amount, it will be taxed using the progressive tax band in no 15 above.

🟢 Q17 :

* If I earn dividends or rent from abroad, 

* Will Nigeria tax it?

 A17: 

* Dividends, interests, rent, royalties earned from outside Nigeria are EXEMPT from tax provided they are brought into Nigeria through approved channels (banks).

🟢 Q18:

* If a soldier or anyone in the armed forces gets injured in service and starts receiving a disability pension, will it be taxed in Nigeria?

 A18:

* NO. 

* The disability pensions earned by the soldier or anyone in the armed forces will be completely tax-exempt.

🟢 Q19: 

* My uncle wants to start an agricultural company next year. 

* Will his company be taxed in Nigeria?

 A19:

* NO. 

* Agricultural companies such as those in crop production, livestock, forestry, dairy, and cocoa processing will enjoy a 5-year tax holiday from the date they begin operation.

🟢 Q20:

*  Is income from Federal or State Government bonds taxable?

 A20: 

* NO, 

* All government bonds are exempt from tax.

🟢 Q21: 

* What does rent relief entail under the new tax law?

 

A21:

* YES. 

* From 2026, individuals can claim rent relief of 20% of the annual rent paid, but capped at ₦500,000.

For instance,

* If your yearly rent is ₦5 million, 20% would be ₦1 million, but the law caps it at ₦500,000. 

* To enjoy this relief, you must declare your actual rent and provide the details to the relevant tax authority.

🟢 Q22:

* I earn 6m yearly, will I be better off under the new tax law?

A22:

*  Old law:

👉CRA = 20% of ₦6m (₦1.2m) + ₦200k = ₦1.4m.

👉Taxable income = ₦6m − ₦1.4m = ₦4.6m.

👉Applying old tax bands gives a total tax of ₦896,000.

👉New law (NTA 2025):

* Rent relief = ₦500k (must declare actual rent).

👉Taxable income = ₦6m − ₦500k = ₦5.5m.

👉Applying new bands:

* 👉First ₦800k @0% = 0

* 👉Next ₦2.2m @15% = ₦330k

* Remaining ₦2.5m @18% = ₦450k

* Under the new law, tax reduces from ₦896k to ₦780k, saving ₦116k. 

* This will increase your net pay (take-home pay).

🟢 Q23:

* If my company's turnover is below ₦50 million, will I pay tax?  

A23:* NO.  * Small companies with a turnover of less than ₦50m are exempt from taxes.

🟢 Q24: * As a remote worker in Nigeria for an international organisation, will I pay tax?

 A24: * YES, * You will pay tax in Nigeria if the country where the international organisation is based exempts your salary under a treaty or diplomatic arrangement.

🟢 Q25: * Will a foreigner earning a salary in Nigeria be taxed?

 

A25:

* NO, 

* if their employer is a start-up, 

* or operates in tech or creative arts, and their income is already taxed in their country of residence.

I  Hope This Will Help Someone.

PROF. OKECHUKWU   Z.   IWEGBU