Nigeria CIT for Small Businesses: Rates and What Counts as Small

Nigeria’s Companies Income Tax rules changed significantly from 1 January 2026. Under Section 56 of the Nigeria Tax Act, 2025, a qualifying small company is taxed at 0% Companies Income Tax (CIT), while companies outside the small-company classification are generally taxed at 30%. The classification depends on more than turnover: total fixed assets and the nature of the business also matter.

For companies filing returns for accounting periods ending before 1 January 2026, the former Companies Income Tax Act regime continues to apply. The Federal Ministry of Finance’s transition guidelines state that pre-2026 accounting periods are administered under the repealed tax laws, while accounting periods ending from 1 January 2026 onward fall under the new tax framework.

This distinction is important for Nigerian businesses because a company may have one tax filing under the old rules and a later filing under the Nigeria Tax Act, 2025.

What Is Companies Income Tax?

Companies Income Tax is a federal tax imposed on the taxable profits of companies operating in Nigeria. Under the former regime, the tax was governed principally by the Companies Income Tax Act, Cap C21, Laws of the Federation of Nigeria 2004, as amended.

The Federal Inland Revenue Service explained that CIT is imposed on the profit of a company from all sources. Under the previous general rule, the rate for companies outside the small-company exemption was 30% of total profit.

From 1 January 2026, the principal legislation is the Nigeria Tax Act, 2025. Section 56 provides the following corporate income-tax rates:

The 0% rate does not mean that a qualifying company has no tax obligations at all. The business may still have registration, record-keeping, payroll, withholding-tax, VAT, state tax and filing responsibilities, depending on its activities and transactions.

What Counts as a Small Company?

Section 202 of the Nigeria Tax Act, 2025 defines a small company using several conditions. In practical terms, a company generally needs to satisfy all relevant conditions below:

• Its annual gross turnover must not exceed ₦50,000,000.
• Its total fixed assets must not exceed ₦250,000,000.
• It must not be a business providing professional services, subject to the wording and application of the Act.
• It must be a company within the scope of the Nigeria Tax Act.

The ₦50 million figure is gross turnover, not profit. This means the test starts with sales or business income before deducting expenses.

Gross turnover versus profit

Consider a company that records:

• Sales: ₦48,000,000
• Cost of goods sold: ₦35,000,000
• Salaries and operating expenses: ₦8,000,000
• Accounting profit: ₦5,000,000

Its turnover is ₦48 million, while its accounting profit is ₦5 million. For the small-company turnover test, the relevant starting figure is ₦48 million, not ₦5 million.

If the company also satisfies the fixed-asset and business-activity conditions, its CIT rate may be 0% under Section 56.

A company with ₦51 million turnover does not become small merely because its taxable profit is only ₦2 million. The turnover threshold is separate from the profit calculation.

Small Company Thresholds in 2026

The following table summarises the key tests under the post-2025 framework.

There has been public discussion about differing thresholds in tax commentary. Some published materials referred to a ₦100 million threshold, while the enacted statutory wording and later analysis of the signed law identify ₦50 million for the “small company” definition under Section 202. For compliance purposes, businesses should read the enacted legislation and applicable official administrative guidance for the relevant accounting period rather than relying on an earlier draft or summary.

How to Calculate Nigeria CIT

CIT is calculated on taxable profit, not simply on bank deposits or total sales.

A simplified computation generally follows these stages:

1. Determine gross business income and turnover.
2. Prepare the company’s accounts for the relevant accounting period.
3. Identify allowable business expenses.
4. Adjust accounting profit for tax purposes.
5. Apply capital-allowance and other statutory adjustments where relevant.
6. Determine assessable or taxable profit.
7. Apply the applicable CIT rate.
8. Deduct eligible tax credits or withholding-tax credits where permitted.

Under Section 20 of the Nigeria Tax Act, an expense generally needs to be wholly and exclusively incurred in producing income to qualify for deduction. The company also needs adequate records and supporting documents.

Example 1: Qualifying small company

ABC Foods Limited has the following figures for its 2026 accounting year:

Assuming the company is not engaged in excluded professional services and satisfies the other statutory conditions:

• Turnover is below ₦50 million.
• Fixed assets are below ₦250 million.
• The company falls within the small-company category.
• Taxable profit: ₦6,500,000.
• CIT rate: 0%.
• CIT payable: ₦0.

The result is not based on the company having a low profit. It results from qualifying for the statutory small-company rate.

Example 2: Turnover above the threshold

Bola Manufacturing Limited records:

Although fixed assets are below ₦250 million, turnover exceeds ₦50 million. On the stated small-company test, the company is outside the qualifying small-company category.

A simplified CIT calculation is:

[ ₦12,000,000 \times 30% = ₦3,600,000 ]

Estimated CIT before considering applicable credits, adjustments or other statutory provisions: ₦3,600,000.

Example 3: Fixed assets above the limit

Chinwe Digital Services Limited has:

• Gross turnover: ₦30,000,000
• Total fixed assets: ₦280,000,000
• Taxable profit: ₦9,000,000

Turnover is within the ₦50 million limit, but fixed assets exceed ₦250 million. The company therefore does not satisfy all the stated small-company conditions.

At the general 30% rate:

[ ₦9,000,000 \times 30% = ₦2,700,000 ]

This is a simplified educational example. Actual computations may involve tax adjustments, capital allowances, withholding-tax credits, exemptions and other provisions.

Professional Services and the Small-Company Rule

The Nigeria Tax Act’s small-company definition excludes businesses providing professional services. This matters because a professional practice may have turnover below ₦50 million and fixed assets below ₦250 million but still fall outside the small-company treatment.

Professional services can include activities where income is earned primarily from specialised professional expertise. The precise application depends on the business structure, services provided and statutory interpretation.

For example, the following businesses require careful classification:

• Legal practices.
• Accounting and audit practices.
• Architectural practices.
• Engineering consultancies.
• Medical or dental practices.
• Management and specialist consultancies.
• Other regulated or expertise-based practices.

A company should not classify itself solely by its CAC registration description. Its actual income-generating activity, contracts, invoices and operational model are relevant to tax analysis.

The Old ₦25 Million Rule

Before the 2026 tax framework, the former CITA regime provided a small-company exemption based on gross turnover not exceeding ₦25 million. FIRS guidance under the former law described profits of a qualifying small company as exempt from CIT and identified companies with gross turnover of ₦25 million or less as exempt from the applicable minimum-tax rule.

That threshold should not automatically be used for accounting periods beginning under the new framework.

The transition position can be illustrated as follows:

The key issue is the accounting period, not merely the date when a company submits its return.

Filing Returns and Compliance

A 0% CIT rate does not remove the need for proper corporate tax administration.

Under the former FIRS guidance, existing companies generally filed income-tax returns within six months after the end of their accounting year. Newly incorporated companies had a filing deadline of 18 months from incorporation or six months after the end of the accounting period, whichever came first.

The post-2025 administration framework may contain updated procedures, portal requirements and filing forms. A company should retain records supporting:

• Sales invoices and receipts.
• Bank statements.
• Payroll records.
• Supplier invoices.
• Asset registers.
• Import and customs documents.
• Loan and financing records.
• Withholding-tax certificates.
• VAT records where applicable.
• Audited or approved financial statements where required.
• Evidence supporting its fixed-asset balance.

Why records matter

A company claiming the 0% small-company rate needs evidence for each qualifying test. For example:

• Turnover records support the ₦50 million threshold.
• An asset register supports the ₦250 million fixed-asset threshold.
• Contracts and invoices help establish whether the company provides professional services.
• Financial statements support the taxable-profit computation.
• Tax filings show how the company applied the law.

A business that does not charge CIT may still face questions during a tax review if its records do not support the classification.

Other Taxes That May Still Apply

Small-company CIT treatment should not be confused with a general exemption from all Nigerian taxes.

Depending on its transactions, a company may still encounter:

• Value Added Tax on taxable supplies.
• Withholding Tax deductions on relevant payments.
• Pay-As-You-Earn obligations on employee income.
• Pension and other employment-related remittances.
• Stamp duties on qualifying instruments.
• Import duties and customs charges.
• State and local government levies.
• Tax obligations arising from non-resident transactions.
• Taxes relating to dividends, chargeable gains or specific transactions.

The tax treatment of a company’s profit is different from the tax treatment of a customer’s payment, an employee’s salary or a supplier’s invoice.

For example, a small company may have a 0% CIT rate but still need to account for VAT on taxable supplies and comply with payroll obligations for employees.

Development Levy and Small Companies

The Nigeria Tax Act introduced a development levy framework for companies other than categories excluded by the Act. Published technical analysis of the Act states that the development levy is imposed on companies other than small companies and non-resident companies.

This means a qualifying small company may receive relief from both the 0% CIT rate and the development levy, subject to the statutory conditions and the relevant accounting period.

Businesses should calculate the development levy separately from CIT where it applies. It is not correct to assume that a company outside the small-company category pays only one corporate tax charge.

Using ToolBase for the Calculation

A practical way to organise the computation is to use a ToolBase profit and tax calculator alongside a turnover tracker.

First, enter:

• Total annual sales.
• Other business income.
• Cost of goods sold.
• Staff costs.
• Rent and utilities.
• Professional fees.
• Depreciation and asset purchases.
• Withholding-tax credits.
• Tax adjustments.

Then review the result against the legal classification tests:

• Is gross turnover no more than ₦50 million?
• Are total fixed assets no more than ₦250 million?
• Does the company provide professional services?
• Does the accounting period fall before or from 1 January 2026?
• Are there other taxes or filing obligations?

You can also use ToolBase’s invoice template to keep sales records consistent. Clear invoices help support turnover calculations and make it easier to reconcile sales to bank statements and accounting records.

For payroll-heavy businesses, the ToolBase PAYE calculator can be used separately because employee deductions are not the same as the company’s CIT liability.

Common Mistakes

Treating turnover as profit

The small-company threshold uses gross turnover. A company cannot reduce turnover for the purpose of the threshold by subtracting rent, salaries or stock costs.

Looking only at CAC company status

Being registered as a private limited company does not automatically make a business a small company for tax purposes. Turnover, fixed assets and business activity also matter.

Using the old ₦25 million threshold

The former threshold may apply to a pre-2026 accounting period, but the Nigeria Tax Act framework applies to relevant accounting periods from 1 January 2026.

Ignoring fixed assets

A business can be below ₦50 million turnover and still fail the small-company test if its total fixed assets exceed ₦250 million.

Assuming 0% CIT means no filing

A zero tax rate and a zero filing obligation are different concepts. The company may still need to submit returns and maintain records.

Deducting unsupported expenses

Expenses without invoices, receipts, contracts or payment evidence may create problems when taxable profit is reviewed.

Conclusion

For accounting periods covered by the Nigeria Tax Act, 2025, a small company is generally one with annual gross turnover of no more than ₦50 million, total fixed assets of no more than ₦250 million, and no excluded professional-services activity. Under Section 56, a qualifying small company is taxed at 0% CIT, while other companies are generally taxed at 30%.

The former ₦25 million rule remains relevant when reviewing accounting periods governed by the previous tax laws. Businesses need to identify the correct accounting period, calculate gross turnover accurately, verify fixed assets, classify their activities and retain documents supporting the tax position.

This article is for educational purposes only and does not constitute professional advice. Consult a qualified professional for your specific situation.

Last Updated: 26 September 2026