NRS for SMEs: 5 New Tax Incentives You Shouldn’t Miss

As the Nigeria Revenue Service (NRS) begins full implementation of the 2025 Tax Reform Acts for the 2026 tax year, Small and Medium Enterprises (SMEs) have gained several powerful incentives designed to reduce tax burdens and promote reinvestment.

If you are a business owner, here are the top 5 incentives you should be leveraging in 2026:

1. Expanded Small Business Tax Exemption

The definition of a “Small Company” has been significantly expanded. Under the new law, businesses with an annual turnover of ₦100 million or less and total fixed assets not exceeding ₦250 million are now exempt from:

• Company Income Tax (CIT) (previously 30%)
• Capital Gains Tax (CGT)
• The New 4% Development Levy (which replaced the Education Tax).

2. Full Exemption from Capital Gains Tax

For qualifying small companies, the profit you make from selling business assets (like old machinery or vehicles) to buy newer ones is now fully exempt from Capital Gains Tax. This protection allows you to restructure your assets without losing 30% of your gains to the taxman.

3. Withholding Tax (WHT) Relief

Cash flow is the lifeblood of an SME. The 2026 reforms provide a notable relief: qualifying small businesses are now exempt from suffering WHT deductions on their invoices, provided the transaction value in a calendar month is below ₦2 million and you possess a valid 13-digit NRS Tax ID. This means more money stays in your bank account immediately.

4. 5% Economic Development Tax Credit (EDTC)

Replacing the old “Pioneer Status,” the new Economic Development Incentive (EDI) scheme allows businesses investing in qualifying equipment or infrastructure to claim a 5% annual tax credit for up to 5 years. Unlike a simple deduction, this is a credit that directly reduces the actual tax you owe.

5. Seamless Input VAT Recovery

While the VAT rate remains at 7.5%, the 2026 reforms have revolutionized how you get your money back. SMEs can now recover Input VAT paid on services and capital equipment more easily through the new digital filing system. This lowers your effective cost of doing business by allowing you to “offset” the VAT you paid against the VAT you collected.

These incentives are specifically targeted to make compliance lighter and accelerate growth. However, they are not “automatic”—you must maintain accurate records and a valid Tax ID to qualify. If you’re a startup or a growing enterprise, leveraging these benefits can significantly improve your sustainability.