Is Small Business Owner Income Taxable in Nigeria?
Quick Answer
Small businesses with turnover under ₦100 million pay 0% Company Income Tax (CIT). But you still have other obligations: PAYE for employees, VAT if turnover exceeds ₦50M, and Development Levy.
Under the Nigeria Tax Act 2025 (effective January 1, 2026), all income earned by Nigerian residents is subject to Personal Income Tax (PIT). This includes income earned from Nigerian sources and, for residents, income earned abroad.
The good news is that the 2026 tax law introduced a ₦800,000 tax-free threshold. If your total annual income is below this amount, you won't owe any income tax.
How Small Businesses Typically Get Paid
All of these income sources are taxable and should be reported in your annual tax return. KeepAm helps you track each income type separately for accurate reporting.
Tax Rates for Small Businesses (2026)
Small Businesses pay the same Personal Income Tax rates as all Nigerian residents.
| Annual Taxable Income | Tax Rate | Cumulative Tax |
|---|---|---|
| ₦0 - ₦800,000 | 0% | ₦0 |
| ₦800,001 - ₦3,000,000 | 15% | ₦330,000 |
| ₦3,000,001 - ₦12,000,000 | 18% | ₦1,950,000 |
| ₦12,000,001 - ₦25,000,000 | 21% | ₦4,680,000 |
| ₦25,000,001 - ₦50,000,000 | 23% | ₦10,430,000 |
| Above ₦50,000,000 | 25% | Variable |
Note: These are marginal rates. You don't pay 15% on all your income—only on the portion above ₦800,000. Use our calculator for an exact breakdown.
Small Business Owner Tax Calculator
Enter your annual income to see your tax estimate
Deductible Expenses for Small Businesses
Reduce your taxable income by claiming legitimate business expenses.
Business premises only (not home unless home office)
All employee compensation is deductible
Cost of goods sold
All legitimate marketing expenses
Accountant, lawyer, consultant fees
Business insurance premiums
On business accounts and loans
Capital allowances on equipment and vehicles
Important: Keep receipts and documentation for all business expenses. Without proper records, you cannot claim these deductions if audited by FIRS.
Example Tax Calculation
Small Retail Business
A retail shop with ₦80 million annual turnover, ₦50 million cost of goods, and ₦15 million in operating expenses.
What About Foreign Income?
Many small businesses earn income in foreign currencies. Here's how it's taxed.
If you're a Nigerian tax resident, all your worldwide income is taxable, including payments received in USD, GBP, EUR, or any other currency.
Foreign income should be converted to Naira at the exchange rate on the date of receipt. KeepAm automatically tracks exchange rates and converts your foreign income for tax purposes.
If you've already paid tax on foreign income in another country, you may be able to claim Foreign Tax Credit to avoid double taxation. Nigeria has tax treaties with several countries.
Should You Register a Company?
At higher income levels, operating as a company may offer tax advantages.
Sole Proprietor
- • Simpler setup and compliance
- • Personal tax rates (0% - 25%)
- • Easier to manage
- • Best for income under ₦30M/year
Limited Company
- • 0% CIT if turnover ≤₦100M
- • 20% CIT for medium (₦100M-₦500M)
- • Better for multiple income streams
- • Consider when earning ₦30M+/year
Note: Company registration involves additional compliance requirements including annual returns, audited accounts, and potentially VAT registration. Consult a tax professional before making this decision.
How to File Taxes as a Small Business Owner
Get Your TIN
Track All Income
Document Expenses
Calculate Your Tax
File Before March 31
Filing Deadline
Personal Income Tax returns must be filed by March 31 each year for the previous tax year. Late filing attracts penalties of ₦50,000 for the first month plus ₦25,000 for each subsequent month.
Common Tax Mistakes Small Businesses Make
Company Income Tax Rates (2026)
| Company Size | Annual Turnover | CIT Rate |
|---|---|---|
| Small | Up to ₦100 million | 0% |
| Medium | ₦100M - ₦500M | 20% |
| Large | Over ₦500 million | 25% |
Great news for small businesses: If your turnover is under ₦100 million, you pay zero Company Income Tax. Focus on growth, not CIT!
Other Taxes & Levies for Businesses
VAT (Value Added Tax)
7.5% on goods and services. Registration required if turnover exceeds ₦50 million. File monthly by the 21st.
PAYE (Pay As You Earn)
Deduct from employee salaries and remit by the 10th of each month. Use the personal income tax brackets.
Withholding Tax (WHT)
Deduct 5-10% from payments to contractors and suppliers. Remit within 21 days and issue WHT credit notes.
Development Levy
4% of assessable profits (reducing to 2% by 2030). Applies to companies with profit over ₦50 million.
Annual Compliance Calendar
Frequently Asked Questions
Ready to Take Control of Your Taxes?
KeepAm is built specifically for Nigerian small businesses like you. Track income, maximize deductions, and file with confidence.