To claim capital allowances in Nigeria in 2026, list each qualifying asset, confirm that VAT or import duty was paid on it, place it in the right rate class (10%, 20% or 25%), and claim one straight-line allowance a year. The initial allowance is gone, and any asset bought without the VAT or duty paid trail can lose its claim.
Capital allowances are the tax relief you get for buying machinery, vehicles, buildings and software. Get them right and your cash tax falls every year. Get them wrong and the Nigeria Revenue Service (NRS) can disallow the claim at your next review.
How do capital allowances work under the Nigeria Tax Act 2025?
Capital allowances replace accounting depreciation for tax purposes. Your auditor depreciates an asset in the financial statements, but the tax computation adds that depreciation back and deducts the capital allowance instead.
The old regime gave a large initial allowance in the year of purchase, followed by annual allowances. PwC's Worldwide Tax Summaries reports that the Nigeria Tax Act 2025 eliminated the initial allowance. Allowances are now computed on a straight-line basis at a fixed rate for each asset class.
What are the capital allowance rates in Nigeria?
PwC groups qualifying assets into three classes:
10% a year: buildings, agricultural assets, masts, intangible assets and heavy transportation expenditure.
20% a year: plant, agricultural equipment, furniture and fittings, mining and other equipment.
25% a year: motor vehicles, software and other capital expenditure.
Secondary summaries of the Act do not always agree on where intangibles and software sit, so check each unusual asset against the First Schedule before you file.
What condition must an asset meet before you can claim?
Section 27 of the Act ties the claim to tax paid on the purchase. EY's tax news summary of the Act says only capital expenditure on which VAT or import levies have been paid qualifies. PwC adds that where VAT was due but not charged, the expense is not deductible for income tax.
In practice, a supplier who does not charge VAT on a generator or a delivery truck can cost you the allowance, even if the asset sits in your yard earning revenue. Priority-sector companies also need a Certificate of Acceptance of Fixed Assets (CAFA) for qualifying assets.
How to claim capital allowances step by step
Step 1: Update the fixed asset register. Record cost, purchase date, supplier, location and asset class for every item. Auditors and the NRS both start here.
Step 2: Test the VAT or duty condition. Match each purchase to a valid VAT invoice, or to import duty receipts for imported items. Flag any purchase where VAT was due but not charged.
Step 3: Classify each asset. Assign it to the 10%, 20% or 25% class and record why. A one-line note now saves an argument later.
Step 4: Compute the allowance. Multiply qualifying cost by the class rate. A ₦40 million production machine at 20% gives an allowance of ₦8 million a year. The Act also requires you to keep 1% of cost (₦400,000 here) on the books as a notional residual value until disposal. PwC notes this retained amount does not increase or reduce the allowance.
Step 5: Check for proration. EY reports that proration is not required when non-taxable income is below 10% of total income. If your non-taxable income is higher, split the allowance between taxable and non-taxable activities.
Step 6: File the computation with your return. Attach the schedule to your company income tax filing on Rev360 and keep the register and invoices ready for review.
What does this mean for your business?
At the 30% company income tax rate, the ₦8 million allowance above saves ₦2.4 million in tax every year. Over five years of use, that is ₦12 million of relief from one machine. Multiply that across a fleet, a plant or a farm and the register becomes a real financial asset.
Construction and oil and gas firms with heavy equipment, and agribusinesses with farm machinery, should review purchases made in 2026 first. The change in rates and the loss of the initial allowance alter the timing of relief, so budgets built on the old front-loaded pattern will overstate early tax savings.
Do this before year-end. Our 11-week year-end audit checklist (vog.global/blog/year-end-audit-preparation-nigeria-checklist-2026-10-13) covers the wider close, and our note on what replaced Pioneer Status (vog.global/blog/what-replaced-nigerias-pioneer-status-tax-incentive-2026-08-21) explains the separate 5% Economic Development Incentive credit that may sit alongside your allowances.
FAQ
Is there still an initial allowance in Nigeria? No. PwC reports that the Nigeria Tax Act 2025 eliminated it. You now claim a single straight-line allowance each year at the rate for the asset class.
Can I claim an allowance on a vehicle bought without VAT? Probably not. The Act limits qualifying expenditure to items on which VAT or import levies were paid. Speak to your tax adviser before claiming, and ask the supplier for a corrected VAT invoice where one is due.
What is the 1% notional residual value? It is 1% of an asset's cost that you keep on the books until you dispose of it, instead of writing the asset down to a token naira amount. It does not change the allowance you claim each year.
Need a second pair of eyes on your fixed asset register before year-end? Contact VOG Global through vog.global and our tax and audit team will review your capital allowance claims with you.