The Nigeria Tax Act 2025 introduced something significant for small businesses: a complete exemption from Company Income Tax. If your company qualifies as "small" under Section 56, you pay 0% CIT, 0% Capital Gains Tax, and you're exempt from the 4% Development Levy.
But qualifying isn't automatic. You need to pass three specific tests — and some companies that look small are explicitly excluded. Here's exactly how it works.
The Three Tests You Must Pass
To qualify as a small company under Section 56 NTA 2025, your company must satisfy ALL THREE conditions simultaneously:
Test 1: Gross Turnover ≤ ₦50 Million
Your company's total gross revenue from all sources must not exceed ₦50 million per annum. This is turnover, not profit. It includes:
- Revenue from sales of goods or services
- Commission income
- Rental income earned by the company
- Interest income and investment returns
- Any other income from whatever source
It does NOT include:
- Loans received
- Share capital contributions
- Grants received (in some cases)
Test 2: Total Fixed Assets ≤ ₦250 Million
The total value of your company's fixed assets (property, plant, and equipment) must not exceed ₦250 million. This covers:
- Land and buildings owned by the company
- Motor vehicles
- Machinery and equipment
- Furniture and fittings
- Computer hardware and IT infrastructure
It does NOT include:
- Inventory or stock-in-trade
- Cash and bank balances
- Trade receivables (debtors)
- Investments in shares or bonds
- Intangible assets (goodwill, patents)
The valuation is typically based on net book value (cost minus accumulated depreciation) as shown in your audited accounts.
Test 3: Not Providing Professional Services
Your company must NOT be engaged in providing professional services. The following are explicitly excluded:
- Legal services — law firms, legal consultancy
- Accounting and auditing — accounting firms, tax advisory
- Medical and healthcare — hospitals, clinics, medical consulting
- Engineering — engineering consultancy, architectural services
- Management consultancy — business consulting, advisory firms
- ICT consulting — software consultancy, IT advisory
Key point: If your company provides professional services, it doesn't matter how low your turnover is — you're automatically excluded from the small company exemption. A one-person law firm making ₦5 million per year pays the full 30% CIT rate.
What You Save by Qualifying
The benefits of small company status are substantial:
| Tax Type | Small Company | Non-Small Company |
|---|---|---|
| Company Income Tax | 0% | 30% |
| Capital Gains Tax | 0% | 10% |
| Development Levy | Exempt | 4% of assessable profits |
Example — The savings: A qualifying small company with ₦10M assessable profit saves:
CIT: 30% × ₦10M = ₦3,000,000 (saved)
Development Levy: 4% × ₦10M = ₦400,000 (saved)
Total annual savings: ₦3,400,000
You STILL Must File (Even Though You Pay ₦0)
Critical: The 0% rate is a payment exemption, not a filing exemption. Every company registered with the CAC must file an annual CIT return — including small companies. Your return will show ₦0 tax liability, but you must file it within the normal deadline (6 months after year-end). Failure to file still attracts the ₦100,000 + ₦50,000/month penalty under Section 128 NTAA 2025.
Example Scenarios
Scenario 1: Trading Company — QUALIFIES ✅
Amaka Fashion Ltd sells clothing wholesale in Lagos.
Gross turnover: ₦35,000,000 ✅ (under ₦50M)
Fixed assets (shop equipment, delivery van): ₦8,000,000 ✅ (under ₦250M)
Nature of business: Trading (not professional services) ✅
Result: Qualifies as small company. Pays 0% CIT.
Scenario 2: Law Firm — DOES NOT QUALIFY ❌
Okafor & Associates is a two-partner law firm in Abuja.
Gross turnover: ₦20,000,000 ✅ (under ₦50M)
Fixed assets (office furniture, computers): ₦4,000,000 ✅ (under ₦250M)
Nature of business: Legal services ❌ (professional services excluded)
Result: Does NOT qualify. Pays 30% CIT + 4% Development Levy.
Scenario 3: Tech Company with High Revenue — DOES NOT QUALIFY ❌
QuickPay Technologies Ltd processes mobile payments.
Gross turnover: ₦120,000,000 ❌ (exceeds ₦50M)
Fixed assets: ₦15,000,000 ✅ (under ₦250M)
Nature of business: Fintech (not professional services) ✅
Result: Fails Test 1 (turnover). Pays 30% CIT + 4% Development Levy.
Scenario 4: Manufacturing Company with Expensive Equipment — DOES NOT QUALIFY ❌
GreenPack Industries Ltd manufactures plastic containers.
Gross turnover: ₦42,000,000 ✅ (under ₦50M)
Fixed assets (factory, machinery, vehicles): ₦310,000,000 ❌ (exceeds ₦250M)
Nature of business: Manufacturing ✅
Result: Fails Test 2 (fixed assets). Pays 30% CIT + 4% Development Levy.
What Happens If You Cross the Threshold Mid-Year?
The small company determination is assessed based on the figures for the accounting year being reported. If your turnover crosses ₦50M during the year, your status for that entire year changes:
- You don't qualify for 0% CIT for that year
- The full 30% rate applies to all assessable profits for the year
- The 4% Development Levy also kicks in
There's no pro-rating. If you're at ₦48M in November and a December contract pushes you to ₦52M, you pay 30% on your entire year's assessable profits.
Planning tip: If you're approaching the ₦50M threshold, consider whether it makes business sense to defer revenue recognition or split operations. But be careful — artificial arrangements to stay under the threshold could be challenged as tax avoidance.
How to Claim Small Company Status
Small company status is not automatically applied. When filing your CIT return, you must:
- Declare your company as a small company in the return
- Provide your audited financial statements showing turnover and fixed assets
- Provide a schedule of fixed assets with values
- Confirm the nature of your business activity (that it's not professional services)
The NRS may verify your claim during assessment. If you claimed small company status but your turnover was actually ₦55M, you'll face reassessment plus penalties.
Not sure if your company qualifies?
Taxly analyses your financials and determines your small company status automatically. We handle the filing, the computation, and the NRS submission — so you never overpay or miss a deadline.
Check your status with Taxly →Bottom Line
The 0% CIT rate for small companies is one of the best tax incentives available to Nigerian businesses. But it's not a free pass — you need to genuinely qualify, you need to claim it properly, and you still need to file on time. If you pass all three tests (turnover ≤ ₦50M, fixed assets ≤ ₦250M, not professional services), take advantage of it. It's free money staying in your business.