Glossary

Nigerian tax terms, in plain English

PAYE, CIT, VAT, WHT and the rest, each with a worked Naira example and where it stands under the 2026 rules.

Company Income Tax (CIT)

CIT is the tax on company profits in Nigeria, administered by the Federal Inland Revenue Service. The rate depends on turnover: small companies pay 0%, medium companies 20%, and large companies 30%. It applies to registered companies, not to sole proprietors.

Consolidated Relief Allowance (CRA)

The CRA was the main personal income tax relief in Nigeria before 2026, calculated as the higher of ₦200,000 or 1% of gross income, plus 20% of gross income. Under the tax rules effective 2026 it has been replaced by rent relief.

Development Levy

The Development Levy is a 4% charge on the assessable profits of certain Nigerian companies, introduced to fund national development. Small companies that qualify for the 0% CIT rate are generally exempt from it.

Direct assessment

Direct assessment is how self-employed people in Nigeria pay Personal Income Tax: they calculate and file their own returns with their State Internal Revenue Service, rather than having an employer deduct tax at source through PAYE.

FIRS (Federal Inland Revenue Service)

FIRS is Nigeria's federal tax authority, responsible for company income tax, VAT, withholding tax and petroleum profits tax. Personal income tax for individuals is collected by State Internal Revenue Services instead, not by FIRS.

Input VAT

Input VAT is the VAT a business pays on its own purchases of goods and services. Registered businesses offset input VAT against the output VAT they collect from customers, and remit only the difference to FIRS.

Minimum wage tax exemption

Employees in Nigeria earning at or below the national minimum wage of ₦70,000 a month (₦840,000 a year) are exempt from PAYE. The exemption removes the tax burden from the lowest earners entirely.

Output VAT

Output VAT is the VAT a registered business charges its customers on taxable sales, at 7.5% in Nigeria. It is collected on behalf of FIRS, offset against input VAT paid on purchases, and the net amount is remitted monthly.

PAYE (Pay-As-You-Earn)

PAYE is the system Nigerian employers use to deduct Personal Income Tax from salaries at source and remit it monthly to the State Internal Revenue Service. It is not a separate tax: it is the collection method for PIT on employment income.

Personal Income Tax (PIT)

PIT is the tax individuals in Nigeria pay on their income, charged on progressive bands from 0% to 25%. Employees pay it through PAYE deductions; the self-employed pay it by filing directly with their State Internal Revenue Service under direct assessment.

Rent relief

Rent relief is a deduction Nigerian taxpayers can claim against income tax, worth 20% of annual rent paid, capped at ₦500,000 a year. It replaced the Consolidated Relief Allowance under the tax rules that took effect in 2026, and reduces taxable income before the bands apply.

Tax Clearance Certificate (TCC)

A TCC is an official document confirming a taxpayer has settled their tax obligations for the preceding three years. Nigerian businesses need one to bid for government contracts, obtain certain licences, apply for some visas, and complete many commercial transactions.

Tax Identification Number (TIN)

A TIN is the unique number that identifies a taxpayer in Nigeria. Individuals register with their State Internal Revenue Service; companies register with FIRS. You need one to file returns, open a business bank account, bid for government contracts, or import and export.

Value Added Tax (VAT)

VAT is a 7.5% consumption tax charged on most goods and services in Nigeria. Businesses with annual turnover above ₦25 million must register with FIRS, charge VAT on sales, and file returns monthly by the 21st of the following month.

Withholding Tax (WHT)

WHT is tax deducted at source from certain payments in Nigeria and remitted to the tax authority on the recipient's behalf. It is an advance payment of tax, not an extra tax: the recipient offsets it against their final PIT or CIT liability.