The Federal Inland Revenue Service (FIRS) has clarified that while small companies will not pay corporate income tax from 2026, they are still required to calculate taxable income and file self-assessment returns.
Speaking at a webinar titled “Income Taxes: Expected Changes in 2026 and How to Stay Compliant”, Deputy Director Kehinde Kajesomo explained the distinction between tax exemption and zero percent liability.
“From 2026, small companies will pay tax, but at zero per cent,” Kajesomo said. “Before, they were exempt from tax, but now they are liable, though the payable tax will be zero. This means they will compute their taxable profits and file returns with the tax authority, but the tax due will be zero.”
Redefined Small Company Threshold
The definition of small companies has been updated: firms with an annual turnover up to N50 million and fixed assets not exceeding N250 million now qualify. These companies will pay zero percent tax, including on capital gains, which were previously taxed at 10 percent.
A minimum effective tax rate of 15 percent will apply to:
- Multinational enterprises (MNEs) with global turnover above €750 million
- Local companies with turnover exceeding N50 billion
Such firms will be subject to the Additional Tax Rule (ATR) under Section 57 of the Nigerian Tax Act.
Tax Rates for Larger Companies
Kajesomo noted that the corporate tax rate for medium and large companies remains at 30 percent, though President Bola Tinubu may reduce it to 25 percent based on advice from the National Economic Council.
“If the National Economic Council advises the president to reduce the tax rate from 30 percent, the president may lower it to 25 percent, and a relevant order will be published in the federal government gazette,” he explained.
Capital Gains Tax Clarification
Kajesomo dismissed claims that capital gains tax would rise from 10 percent to 30 percent.
“For small companies, gains will now be taxed at zero per cent. For larger companies, the effective rate aligns with their income tax rate of 30 percent. However, due to capital allowances and loss deductions, many companies may pay less than 10 percent—or even zero—on gains,” he said.
Mandatory Filing and New Levy
All companies, including small and previously exempt firms, must file tax returns. In addition, a new Development Levy of 4 percent on accessible profits will replace the Tertiary Education Tax, IT Levy, Police Trust Fund Levy, and NASENI Levy. Small companies, non-resident companies, and firms with accessible losses will be exempt from this levy.
Global Minimum Tax Rule
Under Section 57 of the tax act, companies with turnover above N50 billion or MNEs with global turnover exceeding €750 million must ensure a minimum effective tax rate of 15 percent. Nigerian parent companies with foreign subsidiaries taxed below 15 percent abroad will be required to “top up” taxes to meet this global minimum threshold under Section 6.
This clarification from FIRS provides a framework for businesses to remain compliant while navigating the upcoming corporate tax reforms in Nigeria.
