Q&A: What Nigeria’s new tax regime means for workers and businesses in Lagos

Feb 02, 2026

Abiodun Kayode-Alli and Olanrewaju Idris

On January 1, 2026, a new federal tax regime kicked in across Nigeria.

The Federal Government has argued that the laws that underpin the new tax regime – the Nigeria Tax Law, Nigeria Tax Administration Law, Nigeria Revenue Service (Establishment) Law, and Joint Revenue Board (Establishment) Law – will help to curb double taxation, expand the tax net and strengthen tax compliance.

However, the implementation of the new laws has come under public scrutiny, as civil society groups have raised concerns about discrepancies in the content of the gazetted law.

The Nigeria Labour Congress has also warned that the new laws will further impoverish low-income workers, although the nation’s tax czar, Taiwo Oyedele, has insisted the new regime actually benefits the poor and small businesses.

To understand the implications of the new tax law for workers and businesses in Lagos, Ikeja Record’s co-editor, Omon Okhuevbie, spoke to two financial experts.

Together, the experts covered . . .

The experts were interviewed separately. Their responses have been edited for clarity and brevity.

Ikeja Record: Can you introduce yourself?

Abiodun Kayode-Alli: I’m a senior manager in PwC, and I work in the tax reporting and strategy unit of PwC. So I’ve been working in PwC for over 10 years. I have over eight years of tax knowledge. I started as an auditor for two years, then the remaining eight years in PwC were in the tax unit.

Olanrewaju Idris: My name is Lanre Idris and I am a finance and tax expert. I’ve been doing that for a number of years now, close to about eight years. I started my career in an accounting and tax firm. Right now, I’m a partner in one of the accounting firms in Lagos.

I also work in a role as a managing partner at a marketing and advertising agency here in Nigeria as well. But for the relevance of this conversation, I offer services in accounting and tax.

Ikeja Record: So in simple terms, what is the biggest change in the new tax law which took effect this month, January 2026?

Abiodun Kayode-Alli: It’s difficult to say because there are a lot of changes that were already in place. I think one could say the new tax laws are going to have a significant impact on individuals compared to businesses and the government. In Nigeria, individuals are the largest group when it comes to national consumption and national income

In terms of those who will benefit, it is everyone, in all honesty. But we can now rank who benefits the most. For me, individuals benefit the most. Most individuals in Nigeria are in the low income earning bracket. Individuals are going to fall in the category of salary earners or income earners. Under the new tax law, they will enjoy a massive decrease in the tax payable.

Also, some amendments were made to remove every form of implicit VAT (Value Added Tax). This simply implies that if an individual is getting some basic items, essential items, the cost is meant to drop because this new tax model has adjusted those items in such a way that the VAT that was being paid on them before has now been taken away. These basic items include things like foodstuffs, water, education, medical services, things that are quite essential for human capital development.

Interestingly, under the old VAT law, these items, even though they would appear on the surface to not contain VAT, there was an implicit VAT that was hidden. And this was because the supplier of these items, at the point of producing these services and these goods, would have incurred VAT. But by the time they are now selling it to consumers, they can’t charge VAT.

Because they have incurred VAT, they are not going to say the VAT they incurred in producing the goods and the services but they are also not going to absorb it. It will become part of the cost of production of those goods and services they are selling to the consumer. The only thing they would do is that by the time they are selling it to the consumers, they will not put VAT. But the VAT they incurred when they were producing these things is part of the cost, the production cost, right? And they will then mark up the prices of their goods or services, for them to make some profit.

So the government has now said that all those VAT they were incurring, they can get it back from the government. So there is no need for them to include it as part of their cost of production. So, that’s another benefit that individuals would enjoy.

Olanrewaju Idris: One of the biggest changes is that, we can say the system is moving from the point where you are working with estimation and assumption to proper records and actual figures. So what I mean by that is, before now, there’s a lot of estimations and assumptions about what people earn as an income that should be taxed. But what this new tax law is looking to do is that they want to be able to work with some form of assurance, and that is driven by records that were kept in the previous year.

Also, I know that there’s been a lot around the bank activity, whether or not people would be able to look at bank accounts and all that. It’s not exactly as we’ve seen it all over the internet. But the fact is that there’s going to be heavy reliance on facts and records, as opposed to saying that this is what it is.

You need to be able to show what it is, which is based on the records that you’ve kept in the year from 2026.

Ikeja Record: Who stands to benefit the most from these reforms and who should be paying close attention?

Abiodun Kayode-Alli: I would say all individuals should pay attention to the reforms. And the reason why I say ‘all’ is because one way or the other, you need the knowledge. And because you’re not having the knowledge, you could fall victim to the law.

Individuals are expected to keep records, to file tax returns. Now, these things of keeping records and filing tax returns, they’ve always existed, right? The only reason why they are coming up now is because everybody’s talking about a reform in the tax laws. But these things have always existed. If you think about it, in other climes, you can’t go and live in such economies, developed societies, and you won’t file your tax returns. It’s a statutory obligation.

And penalties for not doing it were fines, prison sentences, all those sorts of things, right? So everyone needs to pay attention to it, okay? Because there are penalties that exist if you don’t do something. If you’re not keeping records, if you’re not filing your returns, there are penalties.

On the other hand, you also want to know it so that someone from one authority doesn’t just come to your door and say that you are owing things. You should know that there is a particular law, right? The Joint Revenue Board Establishment Act, for example, allows you to report such instances, and someone from that office will come and defend your case for free if you don’t have the resources to hire a consultant to defend you.

In addition, there is a draft of a national fiscal policy document that also wants to use tax information to support the less privileged and the vulnerable in the event of national disasters. So take for instance, during the period of the pandemic, there were these different organizations that were set up to identify the vulnerable. Data was one problem. So the idea of getting your tax ID would be helpful when the government wants to come up with plans of giving finances, incentives, and the like. So everyone needs to be aware of the new tax laws.

Olanrewaju Idris: Okay, so I’ll answer that by also saying that whenever we talk about taxes, there are different categories of people that this would affect. It could be as an individual or as a business, right? So this new tax law affects both individuals and different businesses.

Now, for individuals, you would have heard about the fact that if you earn below N800,000 per annum, for instance, you’re exempted from paying your personal income tax, which is what people call PAYE or otherwise, right? So if you’re a low-income earner, you benefit.

Also, small businesses who are incorporated benefit from exemptions if their revenues do not exceed N100 million per annum.

However, everybody who owns a business in Nigeria, who mixes his personal transactions with their business transactions, should be careful because at this point you need to put some structure in place to determine what is your business income and what is not your business income.

Also just knowing the typical Nigerians, we have people who do certain things where somebody wants to receive money from someone or from somewhere else and they would say they want to use your bank accounts, your business account to do that. You should pay attention to that because if N100 million flows through your business bank account because you only helped someone receive the money, you need to be able to defend what transaction led to that, to defend that it’s not an income to you and if it’s not an income, there should be proper records explaining what that transaction was about.

So it will be very important to pay attention to that and maybe freelancers and consultants who just have what we call irregular income, that is your income doesn’t necessarily have a method to it. It would be good that you’re also paying attention so that there’s a trend to how you earn and you can defend what is your income or what is not your income.

Ikeja Record: For people that are freelancers or people that don’t pay tax and their company is not required to pay tax through their account or something like that, how does it work for them?

Olanrewaju Idris: What the government expects is every individual who is a taxable individual – and the definition of that is anybody who earns income through trade or provision of services – at the end of every calendar year, you should declare all your income.

What that means is this: you are a freelancer, you are a consultant, you earn income from providing advisory service to someone in January and later in March, you wrote a book and you sold the book. Later in April, maybe because you inherited a property from your dad and now you get rent on that property. What the government expects is that at the end of the year, you accumulate all the earnings from the different sources that you have.

The assumption is that you have multiple streams of income. So what the government wants you to do is sum up all of this and declare it as your income for the year. After declaring this, the tax is computed in the same way that it is computed for someone else who has a 9-5 job.

You just need to declare this income and then the tax is computed on whatever it is that you’ve declared. Now the challenge is the fact that over the years, the government has relied solely on whatever people declare. So if you wake up today and you tell the government that in the year 2025, I earned N10 million, the government chooses to believe that you are honest about what you’ve declared, which is called self-assessment.

The fuss around bank statement narration that is going on around now is what the government will now require is that to prove that what you earned is only N10 million, they may request for your bank statement. They may then see that you actually earned more than N10 million. That’s where all that is, so nobody is necessarily going into your bank account to collect money.

It is in declaring your income. If the government has a reason to believe that your income declared doesn’t show interest, they can request for your bank statement and this is an example of what that means. If a person says that they earned only N10 million in the year 2025, but in that same year, the government can see through your social profile that you bought a new Mercedes-Benz in that year. In that same year, you moved into a new apartment in Ikeja GRA.

The question would be, how are you able to maintain a N7 million per annum rent, buy a new Mercedes-Benz, afford school fees for your children in the best schools in Lagos, but all you say you earned in that year is N10 million. So that leaves a gap in the story that you’re telling. So that can lead to the government saying, we do not accept your self-assessment, we would therefore like to do an investigation and then if your bank statement is requested, if it gets to that point, that’s when an audit will be done on your bank statement to say we want to know if truly what you declared as what you earned is truly what you earned in that year. So that’s it.

Ikeja Record: How will the tax deduction work under the new system? Will your tax be deducted monthly or is there any change in how this is applied?

Abiodun Kayode-Alli: The tax authorities cannot restrain or seize your property – including money in your bank account – unless they have issued you an assessment and that assessment has been deemed to be final and conclusive.

How does it work? So this is the way it works. There is something called self-assessment. Every individual and company has the opportunity to file tax returns after a period. For individuals, it’s mostly 90 days after the start of the new year, the first of March. For companies, it is 60 days after December or year end.

You will go and tell the tax authorities, these are my income, these are my expenses, these are my profits and this is the tax I’m to pay and this is the evidence of payment. If you don’t or even after you’ve done that, the tax authorities will then do an audit to vouch that, okay, what you’ve declared, is it true? Do you understand? They have to check, is it true? Otherwise, if they don’t check and they just take what you say, everybody will be saying they don’t have profits.

Do you understand? So the tax authorities have to vouch for it. If after they’ve done their research and they’ve seen that something is wrong, they are saying that you keep getting N1 billion, N1 billion, and you’re saying your turnover is just N10,000, then they would write to you, tell you to give them documents.

If you don’t provide those documents, they will do their research and they will come up with a figure and they will send it to you and you have 30 days to respond. If you respond before those 30 days, you will be having back and forth. If you respond with evidence to show their assessment is wrong, they will keep adjusting, adjusting until you both reach a conclusion.

If you don’t reach a conclusion, after the back and forth, they will tell you that, okay, they are going to refuse to amend the assessment any further, meaning they are not changing their mind. You have the opportunity to take it to a tax appeal tribunal. If after the tax appeal tribunal, you get a verdict, a judgment, that you don’t like, you have the opportunity to take it to the Federal Court.

If you don’t like it at the Federal Court, you have the opportunity to take it to the Court of Appeal. If you don’t like it at the Court of Appeal, you have the opportunity to take it to the Supreme Court, which is Supreme. If the Supreme Court then says you are liable for that amount, then that amount is final and conclusive. Alternatively, if during any stage of the court proceedings a judgment has been issued against you, and you don’t object within 30 days, it is final and conclusive.

It is only at that point that section 61 of the new tax law can kick in. So do you see the process that it needs to go through? The tax authorities cannot just take your money from a bank account, because if they do that, you can sue the bank. And there have been a lot of instances like that, where individuals have sued the bank. You sue the bank, and the bank’s image and reputation would be tarnished, right? So it doesn’t work like that, where they just deduct.

Olanrewaju Idris: As of today, if you are a full-time employee with any organization, what is expected is that your employer deducts PAYE (Pay As You Earn) and they remit that PAYE to the government on your behalf.

So you have a tax ID, your employer removes the PAYE, pays it to the state government using your tax ID. The government receives the money and knows that the money belongs to this particular employee.

But if you’re a freelancer or a consultant, you don’t have anyone doing that for you. What the government expects, even for the employees, is that every single individual at the end of the year, you have three months in the new year, which is between January and March of the new year, to declare your income. It is called self-assessment. You don’t necessarily need to go to a physical tax office.

In Lagos state, there’s something called e-tax, electronic tax. And that’s a Lagos state government platform where you sign up on, you log in, and right there you declare your income. So when you log into that platform, you sign in and you log into the platform, you declare what you earned as your income and any other deductions that you want to claim; you can put all those things there.

It is automated to a very large extent, especially in Lagos. Once you put in all of that and you submit it, you get a response from the tax office whether what you’ve declared is accepted or if it is not accepted. So if you’re a full-time employee, your employer does the bulk of the work, but the government expects you to declare that at the end of the year, to say I’m a full-time employee, this is how much I earned, this is how much was deducted from me, and the government will find that information in their system.

But if you’re a freelancer, what the government wants you to do as well is declare what you earned through the e-tax system in Lagos, and then your tax will be computed and you pay the necessary tax.

Ikeja Record: For workers earning below 800,000 a year, how will the ‘no tax’ provision work in practice for them?

Abiodun Kayode-Alli: Okay, so in actual sense, you can even enjoy tax-free benefits, even if you are earning like N1 million, N1.2 million per year.

So here’s the way it works: I’ll tell you from the perspective of workers, and I’ll tell you from the perspective of business owners.

From the perspective of workers, your employer will agree to a gross salary with you. From that gross salary, there are some statutory contributions you make, like your pension. You can even make a contribution for life assurance for yourself, for your spouse. There’s a possibility you might even have a mortgage and you are paying interest.

All these monies, all these contributions you make and the interest you pay on your mortgage, you are allowed to take a deduction from your salary. You are allowed to take a deduction from your salary. Even after taking that deduction from your salary, you are allowed to also take a rent relief.

A rent relief has been given as the lower of N500,000 Naira or 20% of your annual rent, the annual rent you pay. So once you pay your rent, you give that evidence of payment to your employer, so they would factor it and prorate your benefit. So all these deductions, they will prorate it, okay, on a monthly basis.

So once they are done with all these deductions, whatever you have left as an individual, your first N800,000 is not taxed. That means if what is left of your gross annual pay is N800,000, right, that N800,000, it is taxed at 0%, no tax at all.. So if you won’t pay tax on it, the full 800,000 Naira is given to you as salary. If you earn more than that, right, slightly more, the idea is that for individuals who are earning an income within the range of 20 million and below annually, the tax that you pay on a monthly basis will drop, and the salary you go home with will increase.

So everyone who is in paid employment, all you just need to do is just wait till the end of this month (January 2026) and see what you pay, and see what you take home, right, compared to what you were collecting before. You will see the change there.

Now, if you are not in paid employment, if you are in business, all the money you’ve generated in the year, take out all the expenses that you incurred in generating that income. So, expenses like salaries, or buying raw materials or even things like table, chair and laptop. There is something called capital allowance.vThe idea is that you are allowed to take a deduction for those expenses over the lifetime of those assets you bought.

So after you’ve taken that deduction from your revenue, if you contribute to a pension scheme, take a deduction. If you contribute to life insurance, take a deduction. What you have left is what you would then take through that band. Your first N800,000 of what you have left, no tax, okay? That is if you are doing your own business, and you are registered as a sole proprietor as an enterprise. So that’s it.

Olanrewaju Idris: So the first thing with tax administration is: the fact that you are exempted from paying tax oftentimes doesn’t mean that you are exempted from filing your returns.

So what it means to file tax returns is to first declare your earnings, that’s what it means when we say you file your returns. After filing your returns, the next step is to pay the tax if there are taxes to be paid. So in this case where the government says that you earn less than N800,000 a year and there is no tax for you to be paid, but you should still file the returns.

What this means is: if you’re a freelancer, a consultant, still go on to that platform I mentioned earlier and file to say what I earned in the entire year 2026, for instance, is N650,000 a year. Once you do that, whoever is reviewing the returns that you filed, or even if it’s a robot, if it’s an AI agent, the agent would have been taught to say any income below N800,000 should not be taxed. In that case, once you’ve filed it, then there is nothing to be done again.

But if you’re a full-time employee, before now, what your employer would do is they would deduct PAYE on that income of yours. So what the employer should do now is not deduct any PAYE if you earn less than N800,000 per year. So they shouldn’t deduct at all.

All the employer needs to do is have your records still sent to the relevant tax authority, notifying them that this person is exempted from paying the tax.

Ikeja Record: For people earning between 150,000 and 300,000 monthly, which is about 1.7 million in a year, what deduction records or compliance issues will matter most under the new system for them?

Olanrewaju Idris: For such people, there are two things. Again, if you are a consultant or a freelancer, there are some allowable deductions. So you’re a consultant or a freelancer, but if you make payments to things like your life insurance scheme, even your rent payments, you are able to use this to claim allowable deductions before your tax is paid. So what this means is if as a freelancer, I want to declare that in the year what I earned is N10 million.

But in that same year, I made contributions to my life insurance and any other allowable deduction. I need to keep record of those so that in filing my returns, I would also find that although I earned N10 million, these are also allowable deductions that I have incurred in that year so that you reduce my income by that amount before you then calculate the tax on my earnings. So it’s very important that if anyone is in consulting or freelancing, you should keep records of all of your allowable deductions if you incur any of such expenses.

Now, if you are also in full-time employment, it’s the same thing. So your employer also deducts pension from your earnings and any deductions that are made on your earnings will be important that you are also keeping track of such deductions so that it is useful in the tax you have to pay eventually. Now, what’s also important to notice is because some changes have been made to the way the tax is equally being computed.

If before you were earning N150,000 as of last year, the amount of tax that you were paying last year will be reduced in this new tax regime just because now the government has given some additional provision to say for whatever you are earning, the first N800,000 would not be taxable. So it means that there are chances that the tax that you are paying this year would be lower than what you were paying in the previous year.

Ikeja Record: Do bank transfer narrations and transaction description matter more under this new tax regime? If yes, how?

Abiodun Kayode-Alli: They do matter, but in the scheme of things, I would say their evidentiary weight is within the range of 20 to 30 percent. Those who are accountants, or those who have undergone audit courses will tell you that the most reliable form of evidence is from third-parties, that is evidence you get from someone who doesn’t know you. So, for example, getting a receipt from Mr. Wole and Son Enterprise in Computer Village is more satisfactory than your bank transfer in terms of your expenses.

So, if you probably sold something to someone, it would be better for you to show an invoice or some kind of evidence to show that, okay, this person acknowledged the purchase of this item. Those things are more credible than just relying on bank statements, because the thing is that the narration of the bank statement is totally within your control, and you can manipulate it in such a way that it suits you. So, the best evidence that would always be acceptable is the third-party evidence.

And I’ll give you another example. If the bank narration were to be used, if there were any form of bank narration that would be very credible, it would be maybe the bank is the one charging you or debiting you. So, if my bank should charge me withholding tax, for instance, or VAT, or stamp duty, definitely that one is credible. It’s a charge from them. I don’t need any other evidence. They charge me, okay.

But if I’m the one who is paying an expense and I am calling it gifts to my neighbor or gifts to my cousin, that’s not very convincing.

Olanrewaju Idris: Yes, I would say that they matter. As a matter of fact, and if you remember at the start of this conversation, that most of these things, they’ve been in existence even before now. So it matters a lot.

Because if you ever get to the point where you have a tax dispute, or where the government for any reason wants to investigate, you know, your tax returns, that’s where the narrations would matter. So a good example is: if you declared your earnings for a year to be N10 million, and then I look at your bank statement, and I can see N20 million that came into your bank account in that same year. If the narration says that, if this narration tells me that it looks like that’s earnings to you, then the government would assume that you are under declaring tax.

But even in that narration, it is clear that the N20 million is a loan to you, or that the N20 million is, you know, again, whatever it is, a gift. So I mean, in this case, I can’t think of anything. But the reason why it’s important for the narration would be if you ever need to justify the earnings, the money into your bank statement, or into your bank account, it would be good that that description helps to tell that this is an income to me, and this is not an income.

So if you’re moving money from one of your accounts to another of your accounts now, it makes sense. That’s not necessarily an income. We are in Nigeria, where people still do this Ajo or savings.

Money can come into your bank account that is not necessarily an income. If you’ve been saving N100,000 monthly, for instance, and at the end of the year, the person is paying you back, you know, that’s not necessarily an income, because it is just your savings that you’re not receiving back. But it would be good that in the case of a dispute, the narration is there to say refund for savings or savings refund, or you know, any of those narrations.

It would be really good that people start to record bank narrations, especially those who are in business; because if you operate a business bank account, the government would assume oftentimes that inflows into your bank statement are payment for services or goods. But we understand that sometimes you could get money into your business bank accounts that is not a payment for service. It could be an investor giving you money.

So in that case, you want to be able to differentiate what is an investment into your business and what is an income into your business. You want to be able to differentiate what is a loan that someone is giving you for the business, right? Or even if it’s a refund that you’re getting for something. In that case, it is not a business income; but it would be good that the narration just shows the true state of the business that you’re doing.

Ikeja Record: Many small business owners are concerned about the new levies, like who is truly exempt under the N100 million turnover threshold, and what common misunderstandings should business owners avoid?

Abiodun Kayode-Alli: So, if you have a company and the company is an entity that is registered with the CAC as a limited liability company you enjoy that exemption benefit.

So if the gross turnover or gross revenue of Mr. Wole and Sons Limited is N100 million or below, and the fixed assets that they use to run their business is not more than N250 million, Mr. Wole and Sons Limited would not pay the 30 percent income tax. They won’t pay development levy. They won’t pay capital gains tax. Interestingly, even if they get a supply and there is VAT, they won’t pay VAT as a company. So many benefits. And that’s the reason why they – the tax authorities – are trying to get small businesses to incorporate and become companies, so they can enjoy these benefits.

Olanrewaju Idris: So first thing is, the fact that you have over N100 million in your account doesn’t mean that you have even exceeded the threshold because the threshold is a turnover threshold.

What that means is, essentially, your revenue. So you could have N200 million passing through your bank account. And it’s possible that you’re still under the N100 million threshold as long as your own revenue is less than N100 million.

That is when you qualify for the benefits, which is that you would pay your Company Income Tax (CIT) at zero percent. So essentially, you are exempt from it. So anybody who is able to prove that their business turnover or revenue for the year is less than N100 million will benefit from all the different incentives that come with being categorized as a small business in that case.

What needs to be done, however, is you need to be able to prove with your records that you earn less than N100 million in revenue. So it’s not just word of mouth. So you need invoices; your business should have invoices to be able to prove that I’m earning less than N100 million; you should have a corporate bank account, of course, that can prove that yes, you are earning less than N100 million.

Also, common misunderstandings that I think people have is the fact that, you know, the money in my bank account is what amounts to my turnover. That’s not true. So the money in your bank account is not equal to your turnover. Like I said earlier, you can have N150 million in your account, but it doesn’t mean that the entire N150 million is your turnover. That just depends on the nature of your business. You can be in business such that your clients give you money to execute a project for them. And all you earn from that is a management fee or an agency fee. In that case, the entire sum that your client has given to you is not necessarily your turnover. What your turnover is would be the management fee or the agency fee that you earn on that transaction. So in this case, it’s very important that businesses have very good record keeping to be able to separate what is their business turnover and what is not their business turnover.

Ikeja Record: What mistakes do you think business owners commonly make that could unintentionally increase their tax burden under the new system?

Olanrewaju Idris: So number one, I would say is mixing personal and business funds together. And that’s going to be very harmful to a lot of people. Number two would be businesses not having any form of record keeping.

And the reason is that your business could get to the point where it is audited by the tax authority. And being tax audited is not evidence of a crime. Any business can be audited by the Lagos State Internal Revenue Service or even the Federal Inland Revenue Service. So if you do not have any form of records, then that would be a mistake on your part. Because at that point, you need to be able to justify, to explain and give reasons for some of the transactions that they find in your bank account.

Also, it’s important to note that for everybody running a business in Nigeria, there are timelines to when you should declare your taxes, which is file your returns. There are timelines to when you should then pay the taxes. So if you ignore those timelines, what you are doing unknowingly is that you are accumulating interest and penalties.

So, we’ve seen scenarios where people are paying more just because they have incurred interest and penalties on the tax that they should have paid when it was due. And because they didn’t know, or they didn’t think it was important, then they moved it.

Ikeja Record: For small business owners, what does the capital gains tax exemption really mean? And at what point does the tax start to apply?

Olanrewaju Idris: Okay, so there’s a threshold now as well for capital gains, which is that for small business owners, the first is capital gains; it comes from selling certain assets of the business that you have. So what the government has now done is for small business owners, there are some assets that you sell that the government is saying it’s okay for you to go ahead with that, and we are not going to charge a capital gains tax on it, right?

However, in a case where a small business is selling its assets frequently, it can be argued that it’s no longer a sale of assets, it can be argued that that is now the business that you are into, when the asset you are selling is now actually business income to you.

So if I’m going to give you a practical example: what that would mean is, if I say my business has 50 cars as assets and every month I’m selling one car; that’s no longer an asset of my business that I’m selling off. That now looks like I am actually in the business of selling cars, right? So that’s no longer disposal of assets; that looks like I am trading in this thing that I’m saying I’m selling off.

But essentially, what the capital gains tax exemption really does is exempt small businesses from selling off, from being charged taxes on the sale of their assets to a certain threshold as well.

Ikeja Record: Are there penalties for people who don’t file taxes or get a tax ID?

Olanrewaju Idris: So, first everybody who is a taxable individual needs a tax ID. Whether you are, you work as a full-time employee or as a freelancer, everybody, as long as they’re a taxable individual, you need a tax ID, right? Where we are also heading to, where the government is heading to is that everybody, even if you are a full-time employee, you should still have your ID and file your returns at the end of the year. And there’s the practical example.

Yes, you’re a full-time employee, you earn a salary, but it’s also possible that you receive rental income, correct? What this means is although I’m a full-time employee, before my employer pays me, they remove the PAYE and they pay to the government. So yes, I have paid the tax on that income I earn from my job; but I also have another income, which is a rental income. How do I declare this to the government? The way I do that is at the end of the year, I also, just like the freelancer or the consultant, go to that government platform; I declare my income from salaries to say I earned XYZ amounts on my salary and it has been paid by my employer. And I also declare that I earned XYZ amounts from rental income because I have a property in Lagos.

Ikeja Record: Can you be penalized for not having a tax ID?

Olanrewaju Idris: If you are taxable and you do not register to get a tax ID. Yes, you can be penalized for that because it means that you are not paying taxes even when you should be paying taxes.

Ikeja Record: If you had to give Ikeja residents and business owners one practical piece of advice for them as the tax law starts this year, what would it be?

Olanrewaju Idris: That would be to say, first, if you’re running a business, please separate your personal money from your business money. That’s very, very important. Then if you’re an individual who maybe you’re a full-time employee somewhere, what I would also say in that case is just start some form of simple bookkeeping to keep track of other sources of income that you may have so that you are able to accurately declare that and pay the taxes that are due on them. Because even as a full-time employee, it’s possible that every now and then someone consults you and you earn some extra money from other things. ✚

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