Company Income Tax and the 4% Development Levy Explained

For most Nigerian companies, corporate tax under the 2025 reform is a binary question rather than a calculation. Either you qualify as a small company and pay nothing, or you do not and pay 34% of profit across two charges. There is very little in between.

The two tests

Both must be satisfied at the same time. Meeting one is not enough.

Qualify and you are outside Companies Income Tax, outside Capital Gains Tax, and outside the Development Levy.

What failing costs

Three companies, each with ₦20,000,000 of profit, differing only in size.

Company C is the instructive one. Its sales are comfortably inside the turnover limit, but its asset base is not, and the exemption disappears on that basis alone. Asset-heavy businesses — haulage, manufacturing, property, equipment hire — need to watch the second test far more closely than the first.

The cliff edge, and what to do about it

Because there is no taper, the marginal cost of the first naira over a threshold is enormous. A company that ends the year at ₦100,000,001 of turnover pays the full charge on all of its profit.

That is a real planning consideration, and it is also where people get themselves into trouble. Deferring an invoice into the next financial year because the work has genuinely not been delivered is ordinary business. Backdating, splitting a single company into two to sit under a threshold, or invoicing through a related entity to disguise turnover is not, and the anti-avoidance provisions are written to catch exactly that.

If the commercial substance would be the same without the tax saving, the arrangement is usually fine. If the arrangement only makes sense because of the tax saving, get advice before you do it.

The Development Levy

Four levies were consolidated into one 4% charge on assessable profits.

For a company that was paying all four, this is administratively simpler: one base, one rate, one payment. Small companies pay none of it.

What the calculator cannot do for you

Our Nigeria Business Tax Calculator applies the headline rates to the profit figure you give it. That is enough to size a provision and to check which side of the thresholds you are on. It does not model:

• Capital allowances, which reduce taxable profit and matter enormously for asset-heavy businesses.
• Losses brought forward from earlier years.
• Withholding tax already suffered on your receipts, which is creditable against the final bill.
• Sector-specific regimes — petroleum, banking and insurance are each treated differently.

Use it to know roughly what you owe and to set money aside. Use an accountant to file.

Filing

Company returns are due within six months of your accounting year end — 30 June for a 31 December year end. VAT, if you are registered, is separate and monthly. The full set of dates is in the 2026 compliance calendar.

ereQa keeps invoices, VAT and expenses in one place so the figures the NRS wants are already there when the return is due. Start free →

This is general information, not tax advice. Thresholds and reliefs turn on facts specific to your business, and the Nigeria Revenue Service issues clarifications as the Act beds in. Confirm your position with a licensed tax adviser before you file.