50 things that won’t be taxed under Nigeria’s new tax law

For those keeping an eye on Nigeria’s evolving tax reform legislation and concerned about its implications on personal finances, there is encouraging news. The Presidential Fiscal Policy & Tax Reforms Committee unveiled a comprehensive list of 50 tax exemptions and relief measures set to be implemented starting January 1, 2026.

These reforms are strategically designed to ease the financial burden on low-income earners, average taxpayers, and small enterprises, enabling them to retain a larger portion of their earnings. The updated tax framework introduces focused reliefs across key tax categories such as Personal Income Tax (PAYE), Companies Income Tax (CIT), Value Added Tax (VAT), and Capital Gains Tax (CGT).

Expanded VAT Exemptions on Essential Goods and Services

The revised VAT regulations eliminate tax on a broad spectrum of necessities, including staple food products, infant care items, feminine hygiene products, medicines, healthcare services, and educational resources. Additionally, residential rent, public transportation, assistive devices for persons with disabilities (such as hearing aids and wheelchairs), and transactions involving land and buildings are now VAT-exempt.

To bolster agricultural productivity and affordability, inputs like fertilizers, seeds, animal feed, and livestock, as well as farming equipment purchases or leases, are exempt from VAT. Energy-related items such as diesel, petrol, and solar power apparatus also enjoy VAT relief, with producers eligible to claim VAT refunds on equipment and operational costs tied to VAT-exempt products.

Electric vehicles and their components, alongside humanitarian aid supplies, are VAT-free, reducing costs for transportation and emergency response sectors. Furthermore, small businesses with annual revenues of ₦100 million or less are no longer required to charge VAT, helping to prevent indirect price hikes for consumers. This VAT exemption framework aims to keep essential living costs manageable.

Personal Income Tax (PAYE) Benefits for Employees

1. Individuals earning the national minimum wage or less-currently ₦70,000 monthly-are exempt from PAYE deductions.
2. Annual gross incomes up to ₦1,200,000 are fully exempt from income tax, effectively shielding approximately ₦800,000 of taxable income.
3. Tax rates are reduced for those earning up to ₦20 million annually, lowering their PAYE obligations.
4. Monetary gifts received are not subject to taxation.

Permitted Deductions to Lower Taxable Income

Taxpayers can subtract certain qualifying expenses from their gross income before tax calculation, thereby reducing their taxable base. These allowable deductions include:

5. Contributions to the Pension Fund Administrator.
6. Payments made to the National Health Insurance Scheme (NHIS).
7. Contributions to the National Housing Fund (NHF).
8. Mortgage interest payments on owner-occupied homes.
9. Premiums paid for life insurance policies or annuities.
10. Up to 20% of annual rent payments, capped at ₦500,000, can be deducted.

Tax-Free Pensions and Severance Payments

11. All pension-related funds and benefits, including gratuities under the Pension Reform Act (PRA), are exempt from taxation.
12. Severance or job loss compensation payments are tax-exempt up to ₦50 million.

Capital Gains Tax (CGT) Exemptions on Common Assets

Capital Gains Tax, which applies to profits from asset sales, now excludes several personal assets under the new rules:

13. Proceeds from selling your primary residence are exempt from CGT.
14. Personal items sold for up to ₦5 million annually are tax-free.
15. Individuals can sell up to two personal vehicles per year without incurring CGT.
16. Profits from shares up to ₦150 million annually-or ₦10 million for small investors-are exempt.
17. Reinvesting gains exceeding exemption limits into Nigerian companies shields those profits from CGT.
18. Pension funds, charitable organizations, and religious institutions are exempt from CGT on their non-commercial assets.

Supportive Company Income Tax (CIT) Measures for SMEs

The reforms provide substantial tax relief to small businesses, encouraging growth and employment generation:

19. Small enterprises with turnover below ₦100 million and assets under ₦250 million pay zero company income tax.
20. Startups officially recognized for tax relief are exempt from CIT obligations.
21. Firms that increase wages or offer transport subsidies to low-income employees receive a 50% additional tax deduction.
22. Employers gain a 50% tax deduction on salaries for new hires retained for at least three years.
23. Agricultural businesses benefit from a five-year tax holiday, suspending tax payments during this period.
24. Investors such as venture capitalists and private equity funds investing in qualifying startups are exempt from tax on their gains.
25. Small companies are exempt from the 4% development levy, which consolidates several levies including the Tertiary Education Tax and Information Technology Levy.
26. Withholding tax is not deducted from small companies’ income or supplier payments, easing cash flow.

Stamp Duty Exemptions on Select Transactions

Stamp duty, typically applied to legal documents and certain financial transfers, will no longer apply to the following:

28. Transfers below ₦10,000.
29. Salary payments.
30. Intra-bank transfers between users.
31. Transfers involving government bonds and securities.
32. Documents related to stock and share transfers.

These comprehensive tax reforms aim to alleviate financial pressure on low-income individuals and small businesses, while simultaneously fostering investment and job creation. Although the provisions appear promising on paper, their true effectiveness will hinge on efficient implementation. Starting in 2026, most Nigerians earning minimum wage or above can expect to retain a greater share of their income, reducing the tax burden significantly.