Ngozi runs a small cleaning company in Enugu with three staff members. Every quarter, she calls her accountant to find out how much tax she owes. The accountant sends a figure. She pays it. She has no idea what the figure is based on, whether it is correct, or whether she is paying more than necessary.
This is not an unusual situation. Many Nigerian business owners treat taxes like a black box — you put money in and something comes out. The accountant controls the box.
This post is about opening the box.
You do not need to become a tax expert. But you do need to understand, at a basic level, what taxes your business is responsible for, how they are calculated, and when they are due. That knowledge alone will save you money and protect you from being overcharged — by NRS or anyone else.
What it is: A 7.5% tax on the sale of most goods and services. You charge it to your customers and pass it on to NRS.
Important: VAT is not your money. When you add 7.5% to an invoice, that 7.5% belongs to NRS. You are collecting it on their behalf.
Who registers: You must register for VAT unless you are exempt. You are exempt only if you are a small business (turnover of ₦100 million or less, fixed assets of ₦250 million or less, and no professional services). A qualifying business can opt in by written notice.
How it works: You collect VAT from your customers (output VAT). You also pay VAT on your business purchases (input VAT). You remit the difference to NRS.
If you collected ₦75,000 in VAT from customers this month and paid ₦20,000 in VAT on supplies, you owe NRS ₦55,000.
When to file: Monthly, by the 21st of the following month.
Form: VAT Form 002, filed on the NRS Self-Service portal or via an accredited tax service.
What it is: A tax deducted at source when certain payments are made. Your clients deduct WHT from what they pay you, and pay it to the tax authority on your behalf.
Common WHT rates in Nigeria (resident, with a TIN; First Schedule of the Withholding Regulations 2024):
Without a TIN the rate on fees and services doubles.
What this means in practice: If a company pays you, an individual consultant, ₦500,000 (before VAT) for consulting services, they will deduct ₦25,000 (5%) and pay you ₦475,000 plus the VAT. They pay the ₦25,000 to the tax authority in your name and must give you a WHT receipt.
The critical point: That WHT receipt is valuable. When you file your annual income tax return, you can offset the WHT already deducted against your income tax. Keep every receipt.
You do not remit WHT unless you are making qualifying payments to other businesses.
What it is: Income tax deducted from your employees' salaries every month. If you have employees, you are legally required to deduct PAYE and remit it to the State Internal Revenue Service where each employee lives (not to NRS).
When to remit: By the 10th of the following month.
How it is calculated: From 1 January 2026, under the Nigeria Tax Act 2025, PAYE is based on each employee's annual chargeable income: gross pay minus allowed deductions (the employee's 8% pension, NHF, health insurance, life insurance premiums, and rent relief of 20% of their rent, capped at ₦500,000). The old Consolidated Relief Allowance no longer exists.
The tax rates are progressive:
Employees on the national minimum wage or less pay no PAYE. Lucrive's Tax Compliance Centre estimates your monthly PAYE on these bands.
What it is: Tax on the profit of a registered company (limited liability company). It applies only to incorporated businesses — not sole proprietors or partnerships.
Rates:
Note: The old 20% band for mid-sized companies was abolished from 1 January 2026. If you read an older guide quoting 20%, that rate no longer applies.
When it is filed: Generally within six months after your company's financial year-end. Small companies file too, even at 0%.
Important: If you operate as a sole proprietor (not incorporated), you pay Personal Income Tax (PIT) on your business profit, not CIT. PIT is filed annually with your State Internal Revenue Service, not NRS directly.
Here is an honest breakdown of what a MSME owner can handle independently:
The knowledge layer — understanding what you owe and whether the number looks right — is 100% something every business owner should have. You should never be in a position where you blindly pay a number you cannot check.
Ngozi's cleaning company billed ₦800,000 last month. She has three staff earning ₦120,000, ₦90,000, and ₦75,000 per month. She paid ₦80,000 for cleaning supplies (and paid 7.5% VAT on that purchase).
VAT: At about ₦9.6 million a year, with modest fixed assets and a cleaning business (not a professional service), Ngozi's company passes all three small-business tests, so she does not have to charge VAT at all. If she has opted in, or once she outgrows the test, the month looks like this:
PAYE (simplified annual estimate for Staff 1 earning ₦120,000/month = ₦1,440,000/year):
If that employee also pays rent, 20% of it comes off too, and the tax falls further.
This is not complicated maths. Lucrive does it for you — but more importantly, you now understand what it is calculating.
Key rule: Once you understand your tax obligations, you are in a position to catch mistakes — whether made by your accountant or by NRS.
This post is not anti-accountant. There are situations where professional help pays for itself:
For these situations, a qualified tax professional earns their fee many times over.
For the average Nigerian MSME billing under ₦50 million a year with straightforward operations? The calculation layer is manageable. The filing layer is increasingly manageable with tools like Lucrive. What you absolutely need is the knowledge.
These are your key dates:
Late filing of a return costs ₦100,000 for the first month and ₦50,000 for each month after that, even when no tax is due.
Lucrive's Tax Compliance Centre shows all your upcoming deadlines in one place — and shows you how much VAT you have collected in the current period so you are never caught off guard on the 21st.
You do not need to master every aspect of Nigerian tax law before your next filing. Start here:
Many business owners who do this exercise for the first time are surprised — sometimes by underpayment (a problem), and occasionally by overpayment (also a problem, but a recoverable one).
Knowledge is the start. The numbers follow.
Use Lucrive's free tax calculator at lucrive.io →
Sources & further reading
People and businesses in our examples are illustrative, not real Lucrive customers. Figures are worked examples: confirm your own position with a qualified tax adviser.