It is Sunday morning, and across Nigeria millions are in churches and mosques. So it is a good day to answer a question we hear often at VOG Global: do religious organisations pay tax in Nigeria? The short answer under the Nigeria Tax Act 2025 is this: income from worship, such as tithes, offerings, donations and zakat applied to the organisation's religious objects, remains exempt. Income from commercial ventures, such as schools, hospitals, bookshops, event centres and rental property, is now firmly inside the tax net.
That single distinction, exempt the spiritual and tax the commercial, is reshaping the relationship between faith institutions and the Nigerian state. It also carries a larger lesson about how a country funds its development.
What does the Nigeria Tax Act 2025 actually say?
Nigerian tax law has always carved out an exemption for organisations established for the advancement of religion, charity or education for the benefit of the public. That exemption now lives in section 162(1)(a)(iii) of the Nigeria Tax Act 2025, which replaced the Companies Income Tax Act from 1 January 2026. The protection has two conditions that are easy to state and easy to fail: the organisation must be of a public character, and the income must not be derived from a trade or business.
The new framework also tightens the definition of public character and places administration under one roof, the Nigeria Revenue Service, with digital filing and data matching. As a recent review of the reforms puts it, core worship activities remain protected, but income from church-owned or mosque-owned commercial enterprises is taxable, and personal gifts to clergy can be assessed as income or benefits in kind where they are not clearly separated from institutional assets.
What is exempt, and what is taxable?
Exempt: tithes, offerings, donations, zakat and endowment income received and applied to the organisation's religious and charitable objects, where the organisation is of a public character and the income does not come from trade.
Taxable: profits of the fee-paying school, the hospital, the printing press and bookshop, the event centre, the guest house, the media business and the rental portfolio, even where the owner is a religious body and the profits fund good works. The activity is commercial, so the profit is taxable.
Always in scope: employment income. Pastors, imams, administrators and all salaried workers of a religious organisation earn taxable income, and the organisation must register for and operate PAYE like any other employer. VAT also applies to taxable commercial supplies the organisation makes.
What about zakat and religious giving?
The reform has opened an honest national conversation. Prominent Islamic scholars have argued that zakat, an obligatory payment for working Muslims, should rank as an allowable deduction, otherwise the faithful are effectively charged twice on the same earnings, once by religious duty and once by the state. Similar questions arise for Christian giving. How the Nigeria Revenue Service and the National Assembly respond will shape compliance and trust in the years ahead.
Why does this matter for economic development?
Religious institutions are among the largest non-state economic actors in Nigeria. They run some of our best schools and hospitals, employ hundreds of thousands, build estates and own media houses. An economy cannot fund roads, security, primary health care and basic education on a narrow tax base, and a tax system loses legitimacy when visible wealth sits outside it while small traders are pursued for every kobo.
That is why economists have argued that bringing religious commercial wealth fairly into the net, while protecting genuine worship income and the poor, is a question of equity and public trust, not an attack on faith. Other African countries have walked this road: Ghana's 2016 reforms brought religious universities and hospitals into partial taxation while leaving worship untouched.
There is also a stewardship argument that resonates on a Sunday. Render to Caesar what is Caesar's, and to God what is God's. A faith organisation that keeps clean books, pays lawful tax on its commercial income and accounts transparently for donations strengthens its moral witness. It models the very integrity it preaches, and it contributes to the development of the society it serves.
What should a religious organisation do on Monday morning?
1. Separate the books. Keep worship income and commercial income in distinct accounts and, where the ventures are substantial, in distinct registered entities. Mingled funds are the single biggest source of exposure.
2. Register and file. Obtain tax identification for the organisation and its commercial arms, and file returns for the taxable ventures even where tax payable is nil.
3. Operate PAYE properly. Put every worker, clergy included, on a payroll, deduct and remit monthly, and document allowances and benefits in kind.
4. Document gifts to clergy. Keep personal gifts clearly separate from institutional assets, with board minutes and records, so they are not recharacterised during a review.
5. Get a compliance review. A short diagnostic now, covering income classification, VAT, PAYE and withholding, costs far less than an NRS review later with interest running.
FAQ
Are tithes and offerings taxable in Nigeria?
No, not where the organisation is of a public character and the funds are applied to its religious and charitable objects. The exemption is lost where the income comes from a trade or business.
Is a church school or mosque-owned hospital taxable?
Generally yes, where it charges fees and operates commercially. The profits of the venture are taxable even though the owner is a religious body. Structure and records determine the outcome, so take advice on your specific facts.
Do pastors and imams pay personal income tax?
Yes. Salaries, allowances and benefits in kind are taxable employment income under PAYE. Undocumented personal gifts that mix with institutional funds can also be assessed as income.
Does your church, mosque or faith-based organisation need its books structured for the Nigeria Tax Act 2025? Contact VOG Global in Area 10, Garki, Abuja, or visit vog.global, and we will review your income streams, PAYE and filings with you. Building Rewarding Partnerships.