ADVERTISEMENT

ADVERTISEMENT

…say low income earners will be on PAYE tax

By Gloria Ikibah 

Tax Consultant and Past District Governor of Rotary International, Ayo Oyedokun, has called on Nigerians to fully comply with the incoming tax law set to take effect in January 2026, emphasising that no law will be applied retroactively.

Oyedokun made the remarks during the weekly fellowship of the Rotary Club of Abuja City, District 9127, which took place on Monday, 13 October 2025. He was delivering a presentation on The New Tax Bills as part of the Rotary International focus areas “Economic and Community Development for the month of October.

Oyedokun said: “I always said that we should always be compliant with whatever authorities that we have. And so to say, the first thing you should need to understand is that no law is done retroactively.

“You know, in the sense that from January 2026, when that tax law starts, anything that has happened in 2025 does not affect that law. So that means you still comply in the way the law was in 2025 to file your returns in January 2026. But from January 2026 going forward, that is when, you know, that law now applies.”

He stressed that the new tax law has both benefits and drawbacks, depending on income brackets and business categories. “That law is two-sided. It favours a lot of people and also it’s disadvantaged to some people as well,” he said.

Highlighting key provisions of the tax regime,  Oyedokun noted that low-income earners will benefit from exemptions, while artisans and other self-employed individuals would still be assessed. 

“First and foremost, if you are a worker that earns salary, your pay tax has helped a lot of relief, especially for the lower payer. In the sense that if your salary is less than the minimum wage, which is N70,000, you will not pay as you earn tax. That means it will be tax-free. In the sense that every year you can obtain a tax-free certificate without paying any tax.

“For those that are not working, they will be assessed based on their profession. Maybe you are an artisan, you are a bricklayer, you must pay tax no matter what. But your tax will not be determined based on your occupation. So it might not, if I say go and pay 1,500, you can say go and pay 10,000 Naira per annum, which is still fair enough,” he explained.

Oyedokun also addressed the tax implications for business owners and companies. “If you have what we call an ‘Enterprise’. An enterprise is when you are not a limited liability company. As an enterprise, you are still subject to still pay tax. In the sense that you now file and say, oh, this year my business did this amount. As long as your business exceeds that N800,000 per annum, you pay tax. If the business does not now exceed 800,000, then you don’t pay tax, even as a business owner,” he said.

For limited liability companies, there is an increase in the turnover threshold for company income tax. 

“For those that have limited liability companies, they’ve helped us a little more. In time pass as of now, if your business turnover is not more than N25 million, you don’t pay company income tax. Now they have increased it to N50 million,” he stated.

He explained that companies below the threshold will also be exempted from Tertiary Education Tax, while VAT exemptions will apply to certain sectors. 

“Pharmaceuticals, food items, agri-products, that are all on the list in that direction. Education is covered. School proprietors, owners, they don’t pay VAT. Because it’s exempted,” he said.

Oyedokun clarified taxation on loans and investments. “If you go and obtain loan from online business, N10,000, N20,000, N40,000, you will be subject to stamp duty on that transaction, but not taxed on it. And stamp duties, the highest you pay is 1%,” he explained.

He further noted, “Some people buy stocks. You ask yourself, if I trade on these stock markets, I make a gain. As long as it is not above N50 million gain, you will be tax exempted. 

“So there’s a lot of exemptions that are coming. So it’s like we are saying that we now have to tax the rich class more than the low earners.”

Oyedokun emphasised that by 2026, tax identification will become mandatory for financial activities. “However, we will not escape tax because from January 2026, everybody must have a tax number. You must have it because you cannot open a bank account if you don’t have tax. Then you see all these old pay, money points and everything. You will soon see them starting to say, provide your NIN, provide your DIN, provide your tax number for you to continue operating that because the law would also accept the request for it,” he said.

He explained that the new system aims to simplify tax collection and prevent revenue leakages. “So all these that you pay to personal accounts, they are going to eliminate all those things so that everything falls in because it will now be administered by one body and will now distribute it to all of you, the local government, the state government in that direction,” he said.

The past District Governor also highlighted measures to improve compliance among business owners.

He said : “If you are a business owner that has been refusing to pay tax, you might not have to pay. In the sense that if you have a supermarket, your POS system, there will be what we call fiscalization. There’s a software that they will put that will automatically be linked to your tax number because everybody must have a tax. So it will be linked to your tax number. So there’s no way you can say that I did not make this money, I did not sell this one. So it will automatically show,” he said.

He added that hospitality and retail businesses could benefit from VAT offsets. “As some business owners, hospitality business, restaurant business, supermarket business, you have the opportunity of input and output VATs. In the sense that you buy some products, you pay VATs there. When you sell it, you collect VATs so you can net it off. So that you don’t double pay tax in that direction,” he explained.

He also reassured Nigerians in the diaspora. “People want to send their money to their account. Some people are staying abroad and the payment of their salary is double-sided in Nigeria. As long as they are paying tax there, they don’t pay tax on that money every day,” he said.

Oyedokun concluded by encouraging business owners, employees and entrepreneurs to understand their obligations under the new law, even as he noted that NGOs would remain exempt from most taxes. 

“It’s a long thing and it’s not something that we can ignore because there are so many aspects that we can talk about, but these are the ones I feel might interest us as small business owners, as salary earners, as entrepreneurs in that direction.

“And as you all know, NGOs don’t pay tax. Apart from withholding tax in your hand, if the employees start to pay for paying tax in that direction,” he added.