No — Nigeria's small company tax exemption under the Nigeria Tax Act 2025 does not excuse a business from filing returns. It waives Companies Income Tax and the 4% Development Levy for companies with gross turnover of ₦100 million or less and fixed assets under ₦250 million — nothing more. VAT, PAYE, withholding tax, pension remittances, and the annual return itself all remain compulsory, and skipping the filing draws a real penalty even where zero tax is owed.
What Exactly Qualifies a Company as "Small" Under the 2025 Tax Act?
A company is "small" only if it clears both tests in the same year of assessment: gross turnover of ₦100 million or less, and total fixed assets not exceeding ₦250 million. Miss either threshold and the company is treated as a large company for that year, taxed at the standard 30% Companies Income Tax rate and liable for the 4% Development Levy. There is no "medium company" band left in between — the Act now sorts companies into just two categories.
- Small company: turnover ₦100 million or less AND fixed assets ₦250 million or less — 0% Companies Income Tax, no 4% Development Levy.
- Large company: turnover above ₦100 million OR fixed assets above ₦250 million — 30% Companies Income Tax, plus the 4% Development Levy.
What Does the Exemption Actually Cover?
The 0% rate and the Development Levy waiver apply to one thing only: the company's own profit tax. They say nothing about the taxes a company collects or deducts on behalf of government, employees, and vendors — and that distinction is where most of the costly mistakes happen.
What Do "Exempt" Small Companies Still Have to Do?
Every one of these obligations survives the small company exemption:
- File annual returns, including a Nil Return. Exemption is not automatic — it has to be claimed and evidenced through the return filed with the Nigeria Revenue Service (NRS) each year.
- Deduct and remit PAYE on every employee's salary, on schedule.
- Charge and remit VAT at 7.5% on standard-rated supplies, and register for VAT regardless of turnover.
- Deduct withholding tax on qualifying payments to vendors and contractors — WHT is a credit against final liability, not a tax the company escapes by being small.
- Remit pension contributions within 7 working days of payroll, plus NSITF and ITF levies where they apply.
- Verify contractor Tax Identification Numbers before treating their invoices as deductible expenses.
What Happens If a Small Company Skips Its Returns?
Section 101 of the Nigeria Tax Administration Act 2025 sets the penalty at ₦100,000 for the first month a return is late or missing, and ₦50,000 for every subsequent month until the business complies. The same penalty applies whether a return was never filed or was filed incomplete or inaccurate — there is no discount for having genuinely owed nothing. A company that reads "small and exempt" as "nothing to do" can end up carrying months of accumulated penalties before an NRS audit or a bank loan application forces the return into daylight.
A related mistake is treating withholding tax already deducted by a customer as the end of the story. WHT is a prepayment against year-end tax, not a substitute for filing — it still has to be reconciled through the company's annual return.
What This Means for Your Business
- Treat the small company exemption as a CIT and Development Levy waiver only — build VAT, PAYE, WHT, and pension compliance into your calendar regardless of turnover.
- File your Nil Return every year the company qualifies as small — it is the only paperwork that formally establishes the exemption. We've seen how costly a misread exemption can get in our look at NGO income and the 2025 Tax Act.
- Recheck your turnover and fixed-asset numbers every year — crossing ₦100 million or ₦250 million moves you into the large-company bracket automatically, with no phased transition.
- If VAT filing on Rev360 is new to your finance team, our step-by-step VAT filing guide walks through the process.
VOG Global Consult helps Nigerian businesses confirm their small company status, file accurate returns on time, and stay ahead of the FIRS/NRS obligations that exemption doesn't remove. Talk to our tax team before your next filing deadline.
FAQ
Does the small company exemption cover VAT?
No. VAT registration and remittance apply to small companies in the same way as larger ones; the exemption only removes Companies Income Tax and the Development Levy on the company's own profit.
What turnover figure decides if my company is "small"?
Under the Nigeria Tax Act 2025, a company qualifies as small only if its gross turnover is ₦100 million or less and its total fixed assets do not exceed ₦250 million in the same year of assessment — both conditions must be met.
Is there a penalty for filing a Nil Return late?
Yes. Section 101 of the Nigeria Tax Administration Act 2025 imposes ₦100,000 for the first month of default and ₦50,000 for every subsequent month, whether the return was missing, late, or incomplete.