A firm turning over ₦500 million a year is not a small company under the Nigeria Tax Act 2025. That single sentence settles most of the argument before it starts.
The Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 were signed into law on 26 June 2025. The NTA repeals the Companies Income Tax Act, the Value Added Tax Act, the Personal Income Tax Act, the Capital Gains Tax Act and the Stamp Duties Act, among others, and consolidates them into one fiscal statute. The NTAA sets the procedural rules: registration, returns, assessment, enforcement.
For a firm at ₦500 million turnover, the useful question is not which exemptions apply. It is which of the new structural rules change the cash tax line, and what has to be fixed in the records to claim them. That is a documentation problem before it is a rate problem.
The classification test is binary, and the firm is on the wrong side of it
Section 202 of the NTA defines a small company as one with annual gross turnover not exceeding ₦50 million and total fixed assets not exceeding ₦250 million. Professional service providers — lawyers, accountants, consultants — are excluded from the small-company classification regardless of turnover.
At ₦500 million turnover, the firm fails the turnover ceiling by a factor of ten. It is an “any other company” and pays companies income tax at 30%. The NTA does not create a separate statutory classification for mid-sized companies.
This matters because a body of commentary still describes a ₦25 million to ₦100 million band taxed at 20%. That framing belongs to earlier Finance Act changes, not to the 2025 Act. A finance lead who plans against it will build a forecast on a rate that does not exist in the current statute.
The small-company reliefs are also off the table. The 0% CIT treatment for small companies does not reach this firm. Neither does the VAT registration and filing relief available to small businesses under the NTAA. The firm is VAT-registered, files VAT returns, and charges VAT on taxable supplies. That is the baseline, not a negotiating position.
What actually changes: four structural rules
The rate is 30% either way. The movement is in how the taxable base is computed and what can be recovered. Four changes matter for a firm at this size.
1. The deductibility test narrowed
Under the old regime, an expense had to pass the “wholly, exclusively, necessarily and reasonably” test to be deductible. The NTA replaces this with a “wholly and exclusively” test.
On its face, removing the “necessarily” and “reasonably” limbs limits the tax authority’s discretion to disallow genuine business expenses. For a firm with multiple revenue lines and a cost structure that includes shared overheads, that is a real reduction in audit risk.
But the benefit is not automatic. The test still requires the expense to be incurred wholly and exclusively for the business. A firm that has been booking mixed-purpose costs — a vehicle used for both deliveries and family errands, a portion of a residence used as an office — without a documented apportionment method is exposed under either test. The narrowed standard rewards clean records and does nothing for messy ones.
The practical work is to map each significant expense line to its business purpose and keep the evidence at the point of transaction, not at the point of audit.
2. Input VAT recovery expanded
Section 156(5) of the NTA permits registered businesses to deduct input VAT on taxable supplies, including services and fixed assets, where the input VAT is incurred for the purpose of making taxable supplies.
For a firm that buys equipment, pays for audit, legal and consulting services, or invests in buildings, this converts VAT from a cost line into a recoverable asset. The benefit is strongest where the firm produces or supplies zero-rated goods — food, agriculture, education, healthcare — because it charges 0% on the qualifying supply but may still recover input VAT on relevant production and operating costs.
The trade-off is documentation. Input VAT is recoverable only if the invoice shows the VAT line and the purchase is tied to taxable supplies. A firm that books a delivery fleet as a single lump-sum expense without separating the VAT loses the recovery. The same purchase, invoiced with VAT shown and linked to taxable supplies, changes the effective cost of the asset.
This is the change most likely to move cash for a ₦500 million firm, and it is the one most likely to be left on the table because the accounts payable process was not built to capture it.
3. Capital allowances restructured
Variable initial and annual capital allowance rates have been replaced with uniform annual rates of 10%, 20% or 25% depending on asset category. The old structure front-loaded the deduction through a larger initial allowance followed by smaller annual allowances at varying rates. The new structure applies a single annual rate to each asset category until the cost is fully written down.
For planning, this changes the year-by-year tax shield on equipment purchases. A firm that timed capex to capture a large initial allowance in the year of purchase now faces a flatter write-down. The total deduction over the asset’s life is unchanged; the timing of the shield is not.
That matters for sequencing. A firm deciding whether to buy equipment this year or next should model the tax shield under the uniform rate, not under the old initial-allowance assumption.
4. The Economic Development Tax Incentive is a credit, not an exemption
The EDTI replaces the old pioneer status regime under the repealed Industrial Development (Income Tax Relief) Act. It operates as a tax credit: the tax that would ordinarily be payable on profits from an approved priority product is converted into a credit that reduces the company’s CIT liability during a five-year incentive period. Unused credit may be carried forward for another five years, after which it expires.
Eligibility requires operation in a priority sector listed in the Tenth Schedule of the NTA — manufacturing, agriculture, solid minerals and infrastructure are among them — a minimum prescribed spend on qualifying capital assets such as machinery or production facilities, and commencement of actual production.
For a ₦500 million firm, the EDTI is worth evaluating but not assuming. The qualifying-capital-spend threshold is the binding constraint. A trading firm with modest fixed assets will not clear it. A manufacturer in the Ogun industrial belt investing in production machinery may. The eligibility test is sector and spend, not turnover.
Where the firm is close to the threshold, the timing of a single large purchase can determine eligibility. That is why capital allowances and the EDTI should be sequenced together rather than evaluated as separate line items.
The compliance pre-work that every relief depends on
None of the reliefs above can be claimed without the administrative basics in place. The NTAA sets three that matter for a firm at this size.
Tax ID validity. A Tax ID is a condition for entering into a contract with any federal or state ministry, department or agency and local government. Banks are also required to verify Tax ID status for business accounts. Without a valid Tax ID, a firm cannot claim withholding tax exemptions, process VAT credits or access refunds.
Change notification. Every taxable person must notify the relevant tax authority of a change in particulars within 30 days of the occurrence of the change. The list includes name, trading name, location of business, telephone numbers, email address, registered address, and — for incorporated persons — any person holding 5% or more of share capital, plus sale, liquidation, acquisition, takeover or merger details. A firm that has moved premises, changed directors or restructured shareholding without notifying is carrying a compliance gap that surfaces at the worst possible time.
Record-keeping. Every exemption, deduction and relief claim must be supported by records. The most common pitfall is poor documentation. The second is misclassification — applying a relief intended for a different business size or sector. Both expose the firm to reassessment and penalties.
What the firm should actually do
The work resolves into a one-page checklist the finance lead can run before the next filing cycle.
Confirm classification. Verify turnover and fixed assets against the ₦50 million and ₦250 million thresholds. At ₦500 million turnover the answer is settled, but the exercise confirms the firm is not accidentally claiming small-company treatment it does not qualify for.
Map each significant expense to the “wholly and exclusively” test. Identify mixed-purpose costs and document the apportionment method. Keep the evidence at the point of transaction.
Reconcile input VAT claims. Check that invoices for services and fixed assets show the VAT line and are tied to taxable supplies. Fix the accounts payable process so the VAT is captured at booking, not reconstructed at year-end.
Model capex timing under the uniform capital allowance rates. Compare the tax shield for a purchase this year against next year under the 10/20/25% structure, not the old initial-allowance assumption.
Test EDTI eligibility against sector and spend. Confirm whether the firm’s sector is in the Tenth Schedule and whether qualifying capital spend clears the prescribed minimum. If the firm is close, sequence the purchase against the incentive window.
Verify Tax ID status and diarise change notifications. Confirm the Tax ID is valid and current. Check whether any change in particulars in the last 12 months went unreported.
FAQ
Does a ₦500 million-turnover firm qualify as a small company under the 2025 Act?
No. The small-company ceiling is ₦50 million annual gross turnover and ₦250 million total fixed assets. A firm at ₦500 million turnover is an “any other company” and pays CIT at 30%.
Is there a mid-sized company rate under the NTA 2025?
No. The NTA does not create a separate statutory classification for mid-sized companies. Commentary describing a ₦25 million to ₦100 million band at 20% refers to earlier Finance Act changes, not the 2025 Act.
Can the firm still recover input VAT on services and equipment?
Yes, under Section 156(5) of the NTA, where the input VAT is incurred for the purpose of making taxable supplies. The invoice must show the VAT line and the purchase must be tied to taxable supplies.
Is the EDTI available to any firm in a priority sector?
No. Eligibility requires operation in a priority sector listed in the Tenth Schedule, a minimum prescribed spend on qualifying capital assets, and commencement of actual production. The spend threshold is the binding constraint for many firms at this size.
What happens if the firm crosses the small-company threshold mid-year?
The classification test is annual. A firm that crosses the threshold carries the direct tax consequences of the higher category. Monitoring turnover across the year matters for firms sitting close to the line.
What is the deadline for notifying a change in particulars?
Within 30 days of the occurrence of the change, under the NTAA.
Sources
Nigeria Tax Act 2025, Federal Republic of Nigeria Official Gazette No. 117, Vol. 112, 26 June 2025. Gazette PDF.
Nigeria Tax Administration Act 2025, Federal Republic of Nigeria Official Gazette No. 117, Vol. 112, 26 June 2025. Gazette PDF.
Jude T. U. Nnodum Jnr., Chimeremeze Nwachukwu and Nnamso Ekpenyong, “Opportunities for small and mid-sized companies in the 2026 tax reforms: Exemptions, reliefs, and growth incentives”, BusinessDay, 6 August 2026. BusinessDay.