How FG’s 50 New Tax Exemptions Will Impact Salaries, Rent, and Small Businesses

As part of its ongoing fiscal policy reforms designed to ease the burden on low-income earners and boost business competitiveness, the Federal Government has announced 50 new tax exemptions and reliefs set to take effect from January 1, 2026.

The wide-ranging measures, contained in the Tax Reform Laws, were unveiled by the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, and form a key component of the administration’s agenda to promote inclusive growth, reduce inequality, and stimulate job creation across vital sectors.

According to details shared by Oyedele on X (formerly Twitter), the new laws will restructure Nigeria’s tax regime to favour low- and middle-income earners, micro, small and medium enterprises (MSMEs), startups, and strategic sectors such as agriculture, manufacturing, and technology.

Key Highlights of the New Tax Exemptions and Reliefs

1. Personal Income Tax (PAYE) Exemptions

• Individuals earning the national minimum wage or less will be fully exempt from paying Personal Income Tax.
• Annual gross incomes of up to ₦1.2 million (about ₦800,000 taxable income) will attract no tax.
• A progressive PAYE structure will reduce tax obligations for those earning up to ₦20 million yearly.
• Certain allowances and gifts will be tax-exempt.

2. Allowable Deductions

• Contributions to the National Pension Scheme, National Health Insurance, National Housing Fund, and life insurance/annuity premiums will remain deductible.
• Rent relief of up to 20% of yearly rent, capped at ₦500,000, will apply.

3. Retirement and Compensation Benefits

• Pension funds, gratuities, and retirement benefits under the Pension Reform Act (PRA) will remain tax-exempt.
• Compensation for job loss up to ₦50 million will not be taxed, offering relief for displaced workers.

4. Capital Gains Tax (CGT) Reliefs

• Gains from the sale of an owner-occupied home, personal effects worth up to ₦5 million, or two private vehicles per year will be exempt from CGT.
• Investors will enjoy exemptions on share transactions below ₦150 million annually or up to ₦10 million.
• Reinvested share proceeds, pension funds, charities, and non-commercial religious institutions will remain tax-free.

Corporate Tax Incentives

• Small companies with annual turnover not exceeding ₦100 million and fixed assets below ₦250 million will pay zero per cent Companies Income Tax (CIT).
• Eligible startups will enjoy full CIT exemptions.
• Companies that increase staff salaries, grant wage awards, or offer transport subsidies to low-income employees will qualify for a 50% additional tax deduction under compensation reliefs.
• Businesses that hire and retain employees for at least three years will receive a 50% employment deduction.

Agriculture & Startups:

• Agricultural enterprises in crop production, livestock, and dairy will enjoy a five-year tax holiday.
• Investors in certified startups will receive tax reliefs on qualifying venture capital, private equity, or accelerator funding.

Value Added Tax (VAT) Adjustments

• Basic food items, rent, educational materials, healthcare services, pharmaceuticals, and agricultural inputs will attract 0% VAT or be fully exempt.
• Diesel, petrol, and solar equipment will have VAT suspended.
• Small companies earning below ₦100 million annually will be exempt from charging VAT.
• Other VAT-free items include disability aids, baby and sanitary products, shared passenger transport, electric vehicles and parts, and humanitarian supplies.

Withholding Tax and Stamp Duties

• Small companies, manufacturers, and agricultural firms are exempted from withholding tax deductions on their income and supplier payments.
• Under Stamp Duties, electronic transfers below ₦10,000, salary payments, intra-bank transfers, and transfers of government securities or shares will now be exempt from charges.

Experts’ Reactions

Tax experts have described the reforms as one of Nigeria’s most ambitious fiscal overhauls in recent years, aimed at simplifying the nation’s complex tax system while making it fairer and more inclusive.

They noted that the initiative aligns with government efforts to reduce the tax burden on productive sectors, enhance voluntary compliance, and boost revenue efficiency without stifling economic activity.

By targeting low- and middle-income earners, MSMEs, and strategic industries, the new policy aims to spur consumption, investment, and employment generation key drivers needed to revitalize the economy amid global uncertainties.

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