The small company exemption is one of the most valuable parts of the 2026 tax reforms, and one of the most misunderstood. Some owners assume every company under ₦100m pays no tax at all. Others don't realise they qualify. Here are the tests, the catches and what to do next.
What is a small company under the Nigeria Tax Act 2025?
A small company meets all of these tests:
- Annual gross turnover of ₦100 million or less. Gross turnover means total sales before expenses.
- Total fixed assets of ₦250 million or less. This covers equipment, vehicles, property and similar assets.
- It does not provide professional services.
If you fail any one test, you are not a small company for that year.
What does a small company get?
| Tax | Small company | Other companies |
|---|---|---|
| Company income tax | 0% | 30% of taxable profit |
| Development levy | Exempt | 4% of assessable profit |
| Capital gains tax | Exempt | 30% |
| VAT | Exempt from charging VAT (can opt in) | Charge 7.5% |
| Annual returns | Still required | Required |
Who counts as providing "professional services"?
The exclusion is aimed at firms that sell professional expertise, for example consulting, legal, accounting, audit, tax advisory, engineering, architecture and similar regulated professions. A small law firm or audit practice with ₦40m turnover still pays company income tax.
For digital agencies, software companies and marketing firms the line is less clear. Design, development and media buying are not traditional regulated professions, but advisory and consulting work may be treated as professional services. How you describe your services in contracts and invoices matters. Get a written view from your tax adviser, and keep it on file.
Worked example: two companies with the same turnover
Company A is a creative agency with ₦85m turnover, ₦30m of equipment and no consulting services. It passes all three tests. It pays ₦0 company income tax and no development levy, and doesn't charge VAT unless it opts in.
Company B is a management consultancy with ₦85m turnover and ₦12m profit. It fails the professional services test, so it pays company income tax at 30% on taxable profit, plus the 4% development levy on assessable profit.
Should a small company still charge VAT?
It can choose to. Many corporate and government clients prefer suppliers that issue VAT invoices, because the VAT they pay you becomes input VAT they can recover. Registering also lets you recover input VAT on your own costs. If most of your clients are large companies, opting in may make you more competitive, not less. Compare both options with your accountant.
What must a small company still do?
- File annual returns with the Nigeria Revenue Service, even when the tax due is zero.
- Keep proper books: invoices, receipts, bank statements and a fixed asset register. You need them to prove you pass the tests.
- Deduct and remit PAYE for staff, and pension if you have 3 or more employees.
- Monitor turnover during the year. A good year can push you over ₦100m, and then the next return is at standard rates.
How do I check my own numbers?
- Add up all sales invoiced in your last financial year. That's gross turnover, before VAT.
- List your fixed assets at cost (equipment, laptops, vehicles, fit-out) and add them up.
- Write down honestly whether any revenue comes from professional or advisory services.
- If you're close to either limit, look at your trailing 12 months every quarter, not only at year end.
Try the free company income tax calculator to check your status in seconds. BizBooks also shows your trailing 12-month sales against the ₦100m limit on the Taxes page, and changes its guidance if you've marked the company as providing professional services.
Frequently asked questions
What is the turnover limit for a small company in Nigeria in 2026?
₦100 million annual gross turnover, together with total fixed assets of ₦250 million or less. Some early summaries of the reform quoted ₦50 million, so check the latest official guidance with your adviser.
Do small companies pay company income tax in Nigeria?
No. Small companies pay 0% company income tax under the Nigeria Tax Act 2025, but they must still file annual returns.
Are consultancies small companies?
No. Companies providing professional services are excluded from the small company definition regardless of their turnover.
Do small companies pay the development levy?
No. Small companies are exempt from the 4% development levy and from capital gains tax.
Can a small company still register for VAT?
Yes. Small companies are exempt from charging VAT but can opt in, which lets them issue VAT invoices and recover input VAT.