Taxes for a Nigerian startup in 2026: VAT, CIT, withholding

If you've just registered your startup with CAC or you're planning to, you need to know what taxes you'll actually pay. Most founders in Lagos, Kano, and beyond get this wrong—they either overpay because they're unsure, or they underpay and face penalties from the Federal Inland Revenue Service (FIRS). The three taxes that matter most are Corporate Income Tax (CIT), Value Added Tax (VAT), and withholding tax. This article walks you through each one, tells you when you're liable, what the rates are in 2026, and how to structure your compliance without hiring an accountant you don't need yet.

By the end, you'll know: your actual CIT rate based on your revenue, whether VAT applies to your business model, how withholding tax works when you pay contractors or receive payments, and the registration thresholds that trigger each obligation. We've also flagged the common traps—like thinking you're too small to file, or confusing VAT with profit tax.

What taxes does a Nigerian startup actually owe.

Let's start with the baseline. When you incorporate a company with CAC, you're creating a legal entity separate from yourself. That entity is liable for tax on its profits. You, as the founder, are also liable for personal income tax on salary you draw—but that's separate from company tax. The three main obligations are:

Corporate Income Tax (CIT): Tax on the company's profit. Rates vary by company size and sector.

Value Added Tax (VAT): A consumption tax collected on the sale of goods and services. The standard rate is 7.5% as of 2024, and there's no indication of a change in 2026. If you're VAT-registered, you charge it on sales and claim it back on business purchases.

Withholding Tax (WHT): Tax deducted at source on certain payments—salaries, contractor fees, rent, commissions. The payer deducts it and remits it to FIRS on behalf of the payee.

There are also state-level taxes (payroll tax, business permits, land use charges), but those vary by geography. We'll focus on the federal taxes that apply everywhere.

Corporate Income Tax (CIT) rates and thresholds in 2026.

CIT is where most confusion lives. The rate depends on your company size and structure.

Small companies (turnover up to N25 million per annum): 0% CIT. This is a relief—the government exempts small businesses from CIT entirely. In practice, this covers most pre-revenue startups and early-stage bootstrapped companies. The catch: you still have to file a nil return if you make no profit.

Medium companies (turnover N25 million to N100 million): 20% CIT on profit. This applies to the bulk of funded startups and growing bootstrapped businesses.

Large companies (turnover above N100 million): 30% CIT on profit. This is the standard rate that applies to most established businesses.

Pioneer companies: If you're in a priority sector (technology, renewable energy, manufacturing, etc.) and you've obtained pioneer status from the Nigerian Investment Promotion Commission (NIPC), you may get a tax holiday—typically 3–5 years with 0% CIT. This is rare for early-stage startups but worth exploring if you're in deep tech or climate tech.

One critical point: the threshold is based on turnover (total revenue), not profit. So if you're a SaaS startup with N50 million in annual recurring revenue but you're still unprofitable, you fall into the 20% bracket. You don't pay CIT on losses, but you do file.

When you register your startup with CAC, you'll be assigned a Tax Identification Number (TIN). That TIN is what FIRS uses to track you. Within 90 days of incorporation, you need to register with FIRS as well. Most founders skip this step and regret it later when they apply for a bank loan or try to claim input VAT.

How to calculate and file CIT.

CIT is filed annually. Here's the process:

1. Calculate profit: Revenue minus all allowable business expenses (salaries, rent, software subscriptions, equipment, travel for business, etc.). Some expenses are not deductible—fines, penalties, personal expenses, and certain entertainment costs.

2. Apply the rate: Multiply profit by your applicable CIT rate (0%, 20%, or 30%).

3. File by the deadline: Returns are due within 90 days after the end of your financial year. Most Nigerian companies use a calendar year (January–December), so the deadline is 31 March. If you use a different financial year, adjust accordingly.

4. Pay the tax: If you owe CIT, you pay it to FIRS. You can pay online via Remita or at any FIRS office.

5. Keep records: Hold onto invoices, receipts, bank statements, and payroll records for at least 6 years. FIRS audits are rare for small startups, but they happen.

One nuance: if you've paid withholding tax during the year (e.g., on contractor payments), you can claim it as a credit against your CIT liability. So if you owe N500,000 in CIT but you've already had N200,000 withheld, you pay the difference—N300,000.

VAT registration and compliance.

VAT is simpler in concept but requires more frequent filing. The standard rate is 7.5%, and it applies to most goods and services sold in Nigeria.

Who must register for VAT: Any business with turnover above N25 million in the last 12 months. If you're below that threshold, VAT registration is optional but often worthwhile if you're selling to other registered businesses (they can reclaim the VAT you charge them, so you're not adding cost).

What's VAT-exempt: Financial services (bank fees, insurance premiums), healthcare, education, and some agricultural products. If your startup is a fintech, you may be VAT-exempt on certain services. Check with your accountant.

How it works: You charge 7.5% VAT on your sales. You also pay VAT when you buy goods and services for the business. At the end of each month (or quarter, depending on your registration category), you file a VAT return showing:

• Output VAT: VAT you charged customers.
• Input VAT: VAT you paid on business purchases.
• Net VAT: Output minus input. This is what you owe FIRS.

If input VAT exceeds output VAT (e.g., you bought a lot of equipment early on), you can claim a refund, though FIRS is slow to process these.

Filing frequency: Most startups file monthly. Large businesses may file quarterly. You file via the FIRS online portal and pay any balance due.

The mistake many founders make: they don't register for VAT because they think they're too small, then they can't reclaim VAT on business expenses, which inflates their costs. If you're selling B2B (to other businesses), register early.

Withholding Tax (WHT) explained.

Withholding tax is the tax deducted from payments before they reach the payee. The payer is responsible for withholding it and remitting it to FIRS.

Common WHT scenarios:

1. Salaries: 10% WHT on employee salaries above a certain threshold (the threshold is set by the state and varies). In Lagos, for instance, the threshold is roughly N100,000 per month. Your payroll software (if you use Payroll.ng, Bamboo HR, or similar) handles this automatically.

2. Contractor payments: 5–10% WHT depending on the type of service. If you pay a freelancer or agency N1 million for design work, you withhold 5% (N50,000) and remit it to FIRS, paying the contractor N950,000. The contractor can claim this WHT as a credit against their personal income tax.

3. Rent: 10% WHT on rent paid to individuals (not companies). If you lease an office and pay N500,000 monthly to an individual landlord, you withhold N50,000.

4. Commissions and royalties: 5–10% WHT depending on the arrangement.

5. Interest and dividends: 10% WHT if you're a shareholder receiving dividends.

Your responsibility: You must register as a WHT agent with FIRS, file a WHT return monthly (or quarterly), and remit the tax. The deadline is typically the 21st of the following month. If you miss it, FIRS charges penalties.

Why it matters for founders: When you pay yourself a salary (which you should do if you're a founder-employee), WHT is deducted. You'll see this on your payslip. It's not an additional tax—it's a prepayment of your personal income tax.

When considering how much to pay yourself, factor in WHT. If you want to take home N500,000 monthly, you need to pay yourself roughly N556,000 gross to account for the 10% WHT.

State taxes and local levies.

Beyond federal taxes, you'll encounter state-level obligations. These vary widely and are often opaque.

Payroll tax: Lagos charges 0.5–0.75% of payroll to the state government. This is in addition to federal withholding tax. Other states have different rates or don't charge it at all. Kano, for instance, has a 1% payroll tax. You pay this monthly.

Business permits and registration: Most states require a business registration fee (usually N5,000–N20,000 annually) and may charge a renewal fee. This is often bundled into your CAC registration, but you should verify.

Land use charge: Lagos charges a land use charge on real estate. If you rent office space, the landlord typically pays it, but if you own property, you're liable. The rate is 0.6% of the property's assessed value.

Tenement rates: Some states charge a tenement rate on rented commercial property. Again, this varies by state and is often paid by the landlord.

The safest approach: ask your landlord or accountant what's required in your state. Don't assume Lagos rates apply everywhere.

Compliance calendar for 2026.

Here's a quick reference for key dates:

Common mistakes and how to avoid them.

Mistake 1: Not registering with FIRS. You register with CAC, but then you don't register with FIRS. FIRS won't know you exist, and you won't get a TIN. This bites you when you try to open a corporate bank account or claim VAT input. Fix: register with FIRS within 90 days of CAC incorporation. It's free and takes 15 minutes online.

Mistake 2: Mixing personal and company finances. You use your company account to pay personal bills. FIRS sees this and disallows the expense. Worse, it raises questions about whether the company is a real entity. Fix: open a separate business account (Kuda, Moniepoint, Flutterwave, or any major bank offer this) and use it only for business.

Mistake 3: Not keeping records. You file your VAT return from memory or a spreadsheet that's now lost. FIRS asks for backup, and you can't produce it. Fix: use accounting software (Wave, Zoho, or even a simple spreadsheet) and back up everything. Keep original receipts for 6 years.

Mistake 4: Ignoring WHT obligations. You pay a contractor N2 million and don't withhold tax. FIRS later catches this and fines you. Fix: always withhold WHT on contractor payments and file the return on time.

Mistake 5: Assuming you're too small to comply. You're pre-revenue, so you think taxes don't apply. Then you raise funding or get a customer, and you scramble to file years of nil returns. Fix: file even if you owe nothing. It's easier to file a nil return than to explain missing years later.

Choosing the right business structure for tax efficiency.

When you incorporate, you can choose between a private company limited by shares (the standard), a limited liability company (LLC), or a partnership. For tax purposes, they're treated similarly in Nigeria—all are subject to CIT. However, the structure affects how you take money out and how personal liability works.

If you're considering whether to incorporate in Nigeria or Delaware, read Delaware C-Corp vs Nigerian LLC. The short version: if you're raising VC funding from US investors, a Delaware C-Corp is standard. If you're bootstrapped or raising from African investors, a Nigerian CAC-registered company is simpler and cheaper. Tax-wise, a Delaware C-Corp is taxed on US-source income and profits distributed to Nigerian shareholders; a Nigerian company is taxed on worldwide income but may qualify for local tax incentives.

Working with an accountant vs. DIY.

At what point do you hire an accountant. If your startup is:

• Pre-revenue or nil profit: You can file your own nil returns. It's a form and a signature. No accountant needed.
• Under N10 million revenue, simple structure: You can use accounting software and file yourself. Many founders do this successfully.
• N10–50 million revenue or complex structure: An accountant is worth it. They'll cost N100,000–N300,000 per year but will catch deductions you miss and keep you compliant. Look for someone familiar with startups.
• Above N50 million or raising funds: Definitely hire an accountant. Investors will ask for audited financials, and you'll need a professional.

In Lagos and Yaba (where many startups cluster), there are dozens of startup-friendly accountants. Ask other founders for referrals. Avoid accountants who promise to "minimize your taxes"—legitimate tax planning is fine, but tax evasion is a crime.

FAQ

Q: Do I have to file taxes if I haven't made any revenue yet. A: If you're registered with FIRS, yes—you file a nil return showing zero profit. It's simple and protects you if FIRS audits later. If you're not registered with FIRS yet, register first, then file.

Q: What happens if I miss a VAT or withholding tax filing deadline. A: FIRS charges a penalty (typically 10% of the tax owed, plus interest). If you're repeatedly late, they may revoke your VAT registration or pursue you for non-compliance. File late if you must, but file.

Q: Can I claim home office rent as a business expense for CIT purposes. A: Yes, if you have a dedicated office space in your home and you use it exclusively for business. You can claim a portion of rent, utilities, and internet. Keep records and be reasonable—FIRS will disallow obviously inflated claims.

Q: Do I pay CIT on money I receive as a loan or investment from my co-founder. A: No. CIT is on profit, not capital. If a co-founder loans you N5 million or invests equity, that's not income and not subject to CIT. However, if they later forgive the loan, that may be treated as income.

Q: What's the difference between CIT and personal income tax. A: CIT is tax on the company's profit. Personal income tax is tax on your salary and other personal income. If you draw a salary, you pay personal income tax on it (via WHT). The company also pays CIT on its profit. You're not double-taxed on the same money—CIT is on profit after salaries are deducted.

What to do next.

If you haven't registered with CAC yet, start there. Read Registering a Nigerian startup with CAC in 2026: full walkthrough for the step-by-step process. Once you're incorporated, register with FIRS immediately—it's free and takes 15 minutes.

Next, open a separate business bank account and set up basic accounting (Wave or Zoho are free and simple). Track revenue and expenses from day one, even if you're pre-revenue. It's much easier to stay compliant than to catch up later.

Finally, if you're planning to take a salary, understand how much you should pay yourself and the tax implications. See Founder payroll in Naija: how much to pay yourself, when for guidance on structuring this correctly.