MSME Tax.
Explained Simply.
Everything MSMEs need to understand about the new tax laws, what has changed, and how to stay compliant without paying more than necessary.
What’s Changed Recently
Small Businesses Pay Zero Tax
Businesses with annual turnover of ₦100 million or less and assets below ₦250 million are exempt from Company Income Tax, VAT, Capital Gains Tax, and the Development Levy. Filing tax returns is still required, even when no tax is payable.
Simplified Development Levy
Multiple development-related levies have been merged into a single 4% Development Levy. Only companies above ₦100 million turnover are affected, while small businesses remain exempt.
Higher Capital Gains Tax
Capital Gains Tax has increased from 10% to 30% on the sale of assets such as property, equipment, and investments. Gains below ₦10 million on shares are exempt if total sale proceeds are under ₦150 million.
Recover VAT Paid
Businesses can now recover VAT paid on services and capital assets. Several essentials are also zero-rated, including food, education, and exports, reducing overall VAT burden.
Export Tax Exemption
Profits from goods exported out of Nigeria are fully exempt from income tax, provided proceeds are repatriated through official banking channels.
Agricultural Tax Holiday
New agricultural businesses enjoy a five-year income tax holiday covering farming, processing, and storage, subject to proper registration and compliance.
Fuel Levy
A new 5% levy applies to petrol and diesel, replacing previous road maintenance charges. Kerosene, LPG, and CNG remain exempt.
ABCs of Business Tax
Common tax terminologies every business owner should know.
A
Accounting Period – The financial year used to calculate your business taxes. Usually 12 months
Allowable Expenses – Business costs that can legally be deducted before tax is calculated.
Asset – Anything your business owns that has value, such as equipment, land, or vehicles.
Assessment – The tax authority’s review of your tax return to determine what you owe.
B
Back Taxes – Old taxes that were not paid when due.
Balance Sheet – A snapshot showing what your business owns and what it owes at a point in time.
C
Capital Allowance – Tax relief you get for buying big items like machinery or vehicles for your business.
Capital Asset – Long-term items your business uses, not things you sell every day.
Capital Gain – The extra money you make when you sell an asset for more than you bought it.
Capital Gains Tax (CGT) – Tax charged on profit made from selling assets.
Cash Flow – How money moves in and out of your business.
Company Income Tax (CIT) – Tax on company profits. Small businesses may qualify to pay zero.
D
Development Levy – A single levy that replaced several older business charges.
Disallowed Expenses – Costs you cannot use to reduce your tax, even if you spent the money.
Documentation – Receipts, invoices, and records that support your tax filings.
E
Exemption – A legal reason why you do not have to pay a particular tax.
Export Proceeds – Money you earn from selling goods outside Nigeria.
F
Filing – Submitting your tax information to the tax office.
Fuel Levy – Extra charge added to petrol or diesel purchases.
G
Gross Income – All the money your business earns before expenses.
I
Income Tax – Tax charged on income earned by individuals or businesses.
Input VAT – VAT you pay when you buy goods or services for your business.
L
Levy – A compulsory charge collected by the government.
M
Minimum Tax – Tax some businesses must pay even when profits are low, subject to exemptions.
N
Nil Return – A tax return you file when you do not owe any tax.
Non-Compliance – Failing to meet tax requirements, which can lead to penalties.
O
Output VAT – VAT you charge your customers.
P
Penalty – Extra money charged when tax rules are broken.
Profit – What is left after you subtract expenses from income.
PAYE – Tax deducted from employees’ salaries and paid to the government.
R
Repatriation – Bringing export earnings back into Nigeria through official banks.
Returns – Forms or documents used to declare your business income and tax position.
S
Small Business – A business within the turnover and asset limits defined by law.
Stamp Duty – Tax paid on certain legal documents or agreements.
T
Tax Audit – When the tax office checks your records.
Tax Authority – The government office that collects and manages taxes.
Tax Clearance Certificate – Proof that your business has met its tax obligations.
Tax Filing Deadline – The last day you are allowed to submit your tax returns.
Tax Holiday – A period when a business is allowed to operate without paying certain taxes.
Tax Incentive – A benefit designed to reduce tax and encourage business growth.
Tax Planning – Arranging your business activities legally to reduce tax.
Tax Risk – The chance of penalties or disputes due to errors.
Tax Relief – Any legal reduction in the amount of tax you pay.
Tax Return – A report showing your income, expenses, and tax status.
Tax Threshold – The income level that determines whether a tax applies to your business.
Turnover – Total money earned by the business in a year before expenses.
U
Underpayment – Paying less tax than you should.
V
VAT (Value Added Tax) – Tax added to certain goods and services.
VAT Recovery – Claiming back VAT paid on eligible business purchases.
Y
Year of Assessment – The tax year being reviewed.
Need Help With Business Tax Filing?
Through our partners, The Business Hub, you can get professional support with tax filing, documentation, and compliance.
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