Understanding Tax Compliance in Nigeria: A Comprehensive Guide for SMEs

Companies income tax

CIT is charged on profits. Small companies with turnover of ₦25 million or less pay 0%, medium companies above ₦25 million and up to ₦100 million pay 20%, and large companies pay 30%. Returns are due within six months of your financial year end, or eighteen months from incorporation for a new company, whichever is earlier.

Filing a nil or zero-rated return still matters — the exemption applies to the tax, not the obligation to file.

Value added tax

VAT is charged at 7.5% on taxable supplies. Registration is mandatory for all companies, and returns are due monthly by the 21st of the following month. Businesses with turnover below the ₦25 million threshold are not required to charge VAT but should still file.

Withholding tax and PAYE

Withholding tax is deducted at source on qualifying payments — typically 5% or 10% depending on the transaction — and remitted by the 21st day of the following month, with credit notes issued to the payee.

PAYE is deducted from employee salaries under the graduated personal income tax scale and remitted to the relevant state internal revenue service by the 10th of the following month, with annual employer returns due by 31 January.

Penalties for non-compliance

Late filing attracts fixed penalties that escalate monthly, and unpaid tax attracts interest. Persistent default triggers best-of-judgement assessments, which are based on the authority's estimate rather than your actual results, and can lead to bank account restrictions and enforcement.

Building a compliance calendar

Map every obligation to a fixed monthly and annual schedule, assign an owner, and reconcile filings to your ledgers each month. Most of the penalty exposure we see at clients comes from missed deadlines, not from disputed positions.