Last week’s Tax Reform Clinic reminded us why these conversations are necessary and why they’re best had in the community.
The room was engaged, curious, and refreshingly honest, filled with founders, creatives, and business owners asking practical questions about how the new tax reforms actually affect their work.
Guided by Muna Igbinedion from Masal Consultants, our facilitator, the session struck the right balance between technical clarity and real-world application. Rather than drowning participants in policy language, Muna broke down what has changed, what matters most now, and how business owners can respond thoughtfully and strategically.
The energy in the room shifted quickly from anxiety to understanding. This wasn’t just about compliance; it was about relief, opportunity, and smarter planning.
Company Size Now Matters More Than Ever
One of the most reassuring conversations centred on Corporate Income Tax (CIT) and how the reforms better recognise the realities of small businesses.
Businesses with an annual turnover of ₦100 million or less and with total fixed assets not exceeding ₦250 million are now classified as small companies, a significant increase from the previous threshold of ₦25 million. The impact? These businesses are fully exempt from CIT and the new Development Levy.
For larger companies earning above ₦100 million, the standard 30% CIT still applies, with provisions to potentially reduce this to 25% in the coming years.
Fewer Levies, Less Confusion
To reduce the burden of multiple small taxes, several levies have been consolidated into a single 4% Development Levy on assessable profits. This replaces the Tertiary Education Tax, NASENI Levy, Police Trust Fund, and IT Levy.
Importantly, small companies and non-resident companies are exempt, which many participants noted as a meaningful step toward fairness and simplicity.
Operational Changes: VAT, PIT, and Incentives
While VAT remains 7.5%, you can now recover the tax paid on all business expenses, including services and overheads, not just raw materials. Plus, essential items such as basic food, education materials, and healthcare are now strictly zero-rated, which could significantly lower costs for businesses operating in those sectors.
For sole proprietors, the relief is even more personal. If you earn ₦800,000 or less, you’re now exempt from income tax entirely. Everyone else can now claim a 20% rent deduction (up to ₦500,000) against their taxable income, which is a massive win for home-based creatives.
For the creative crowd (film, music, production), the old Pioneer Status is now the Economic Development Incentive (EDI), giving you a 5% tax credit on your big equipment and infrastructure investments.
Administration, Compliance & What to Watch
On the administrative side, participants learned that the Federal Inland Revenue Service (FIRS) has now become the Nigeria Revenue Service (NRS), designed to act as a single window for tax matters.
A Tax Identification Number (TIN) is now mandatory for all business bank accounts, and for individuals, the NIN will function as a tax ID.
While the reforms offer relief in many areas, Muna also emphasised that penalties for non-compliance have increased significantly. The reassurance, however, was that early engagement and transparency often allow for negotiation and payment plans.
The Big Takeaway
If there was one clear message from the clinic, it was this: the tax system is becoming more structured, but also more forgiving if you understand how to navigate it.
The session left participants feeling more confident, better informed, and less intimidated by the language of tax. Most importantly, it reframed compliance as a tool for sustainability, not just an obligation.
We’re deeply grateful to Muna for her clarity, patience, and practical insight, and to everyone who showed up with thoughtful questions and openness to learn.
More conversations like this are coming, and if you missed this one, we hope you’ll join us next time.
Frequently Asked Questions (FAQ)
Q: My annual revenue is under ₦100 million. Do I still need to charge customers VAT?
A: No. Under the new reform, businesses with an annual turnover below ₦100 million are exempt from VAT registration and collection. You only start charging and remitting VAT once you cross that ₦100 million threshold.
Q: Should my TIN be on my invoices when collecting VAT?
A: Yes, absolutely. If you are VAT-registered, your Tax Identification Number (TIN) must be visible on every invoice. It validates the charge to your customer and is required for them to claim their own input VAT credits.
Q: How do my employees take advantage of the new tax reliefs?
A: They don’t need to do anything manually. Reliefs like the new 0% tax bracket for low earners and standard deductions are applied automatically during your monthly PAYE (Pay As You Earn) computations.
Q: Is the new “Rent Relief” the same as the old “Housing Allowance”?
A: No. A housing allowance is a component of a salary. Rent Relief is a specific tax deduction of 20% of annual rent paid (capped at ₦500,000). To claim this, employees must provide proof of rent (like a receipt or tenancy agreement) to their employer or the NRS.
Q: I have a Limited Liability business, but I’m the only “staff.” How is the tax split?
A: Legally, you and the business are separate. The company’s profits are subject to Company Income Tax (CIT) (though it pays 0% if turnover is under ₦100M). You only pay Personal Income Tax (PIT) on the specific salary or director’s draw you take out for yourself.
Q: I already have a Personal Tax ID from a previous employer, can I use that for my own business?
A: Yes. You have one TIN for life. You do not need to apply for a new one if you change jobs or start a side business as a sole proprietor. If you register a Limited Liability company, however, that company will get its own separate TIN.
Q: I manufacture beauty products. What taxes should I be looking at?
A: You are generally subject to:
- CIT: Based on your turnover (0% if under ₦50m).
- VAT: If your turnover exceeds ₦50m.
- WHT: On qualifying vendor transactions.
