Academy · Glossary

Nigerian tax, term by term

Plain-English definitions under the Nigeria Tax Act 2025. Written for the HopperTax Academy, useful to anyone who files.

Nigeria Tax Act 2025: The substantive tax law of Nigeria since 1 January 2026. It merged the old Companies Income Tax Act, Personal Income Tax Act, VAT Act, Capital Gains Tax Act and Stamp Duties Act into one statute, so questions of what is taxed, who is taxed and at what rate now have a single home.
Nigeria Tax Administration Act 2025 (NTAA): The procedural companion to the Nigeria Tax Act. It standardises registration, filing, assessments, objections, appeals, refunds, enforcement and penalties across every tax authority in the country. If the question is how, when, or what happens if not, the answer is here.
Nigeria Revenue Service (NRS): The federal revenue collection agency, created in 2025 as the successor to the Federal Inland Revenue Service (FIRS). It collects company taxes and VAT nationally, and personal income tax for a narrow group: non-residents with Nigerian income, members of the armed forces and foreign service officers.
State Internal Revenue Service (SIRS): Each state's own tax authority, for example LIRS in Lagos. It collects personal income tax from individuals resident in that state, through PAYE deducted by employers and through direct assessment of the self-employed.
Joint Revenue Board (JRB): The coordination body between federal and state tax authorities, successor to the Joint Tax Board. Its job is making sure the same rule means the same thing in every state.
Tax Appeal Tribunal: The specialist tribunal a formal tax dispute goes to when an objection to an assessment fails. Sitting between the taxpayer and the courts, it hears appeals against decisions of the tax authorities.
Tax Ombud: An independent office that hears taxpayer complaints about the conduct of tax authorities themselves: delay, unfair treatment, process abuse. It is about behaviour, not the amount of an assessment.
Tax Identification Number (TIN / Tax ID): The unique number that identifies a taxpayer to the authorities. Individuals and companies register once and use it on every return, payment and correspondence. Registration procedure lives in the Nigeria Tax Administration Act.
Personal income tax (PIT): Tax on the income of individuals, charged at progressive rates. Under the 2026 rules the first ₦800,000 of annual income is taxed at zero and the bands rise to a top marginal rate of 25%. Collected by the state of residence for most people.
PAYE (Pay As You Earn): The system where employers deduct income tax from salaries every month and remit it to the tax authority of the state where each employee is resident. For most employees, PAYE is how the bulk of their income tax gets paid.
Direct assessment: How the self-employed, freelancers, landlords and investors pay personal income tax: they declare their income, are assessed on it, and pay the tax themselves to their state of residence, rather than having an employer deduct it.
Tax residence: The anchor of personal taxation in Nigeria. The state where an individual is resident, not where they work or where the employer is registered, decides which authority taxes their income. Cross-border residence rules decide whether Nigeria taxes a person at all.
Chargeable income: The income that actually gets taxed: gross income minus the reliefs and deductions the law allows, such as pension contributions and rent relief. The progressive bands apply to chargeable income, not to gross pay.
Rent relief: A deduction introduced by the Nigeria Tax Act 2025 for individuals who pay rent: 20% of annual rent, capped at ₦500,000, subtracted from income before the tax bands apply.
Companies income tax (CIT): Tax on company profits, charged at 30% for larger companies. The base is profit, never revenue: a company that made no profit owes no CIT regardless of turnover.
Small company exemption: Companies with annual turnover at or below ₦100,000,000 pay companies income tax at 0%. The exemption exists so early-stage and small businesses can formalise without being taxed out of existence.
Capital allowances: The tax system's version of depreciation: instead of deducting the cost of assets like machinery or vehicles in one year, a company deducts a prescribed percentage each year against its profits. They reduce taxable profit for businesses and companies.
Development Levy: A 4% levy on the assessable profits of larger companies, introduced by the 2025 reform to consolidate several earlier earmarked levies into one charge. Small companies are exempt.
Value added tax (VAT): A 7.5% tax on supplies of goods and services, collected by registered businesses and remitted to the NRS. A wider list of essentials, including basic food, medical and educational items, is zero-rated under the 2025 reform.
Zero-rated supplies: Goods and services taxed at 0% VAT. The seller charges no VAT to the buyer but can still recover the VAT paid on inputs, which makes zero-rating more generous than a simple exemption.
Withholding tax (WHT): An advance collection mechanism, not a separate tax. The payer of certain income, for example dividends, rent or contract fees, deducts a percentage at source and remits it. The recipient gets credit for it when their income tax is assessed.
Capital gains: The profit made on disposing of an asset for more than it cost. Under the Nigeria Tax Act 2025 chargeable gains are brought into the income tax net rather than taxed under a separate act as before.
Stamp duties: Duties charged on instruments, that is documents like agreements, leases and share transfers. Company instruments fall to the federal authority; instruments between individuals belong to the states.
Assessment: The tax authority's formal determination of how much tax a taxpayer owes for a period, whether accepted from the return as filed or raised by the authority itself. Payment obligations and objection deadlines run from it.
Objection: The taxpayer's formal challenge to an assessment they believe is wrong, filed with the authority that raised it within the statutory window. If the objection fails, the dispute can go to the Tax Appeal Tribunal.
Tax Clearance Certificate (TCC): The authority's confirmation that a taxpayer's affairs are in order for the relevant years. Routinely demanded in Nigeria for government contracts, licences, some banking and visa processes, which makes it one of the most practical reasons to file properly.

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