Nigeria's minimum effective tax rate
Which Nigerian companies face the 15% minimum effective tax rate, how profit for the test is measured, and why Achekam may show size as undetermined.
By Achekam · · 4 min read · For Accountants & audit firms in Nigeria
For years, a well-advised Nigerian company could bring its tax charge well below the headline rate through incentives, allowances and reliefs. The Nigeria Tax Act 2025 puts a floor under that for the largest companies. If the effective rate falls below a minimum, the company pays more.
For a firm advising such clients, the minimum effective tax rate changes the conversation about incentives and planning. It also brings a practical problem: one of the figures that decides who is in scope is disputed. This article covers who is affected, how the test is measured, why Achekam may show a client's size as undetermined, and how to advise in the meantime.
Who is in scope
Section 57 of the Nigeria Tax Act 2025 sets a minimum effective tax rate of 15% for two groups of companies:
- companies that are part of multinational groups;
- companies with turnover above a threshold.
The rule applies alongside the ordinary rates. From 1 January 2026, a small company pays 0% company income tax and every other company pays 30%. A company paying at 30% on its full profit is well above the floor. The test bites where incentives, exemptions or reliefs have brought the effective rate down.
PwC's summary of Nigerian taxes on corporate income sets out the company income tax rates under the Nigeria Tax Act 2025, the 4% development levy and the 15% minimum effective tax rate for large and multinational groups.
How profit for the test is measured
The effective rate is measured against a defined profit, not simply the accounting profit. For the test, profit is net profit before tax, less 5% of depreciation and personnel cost.
That definition has practical consequences:
- The starting point is the financial statements. Net profit before tax comes from the accounts, so the quality and timing of the accounts drive the test.
- Depreciation and personnel cost reduce the measure. Companies with large asset bases or workforces have a lower profit for the test than their accounts profit.
- The computation needs its own working paper. It sits beside the ordinary company income tax computation and should be reviewed with the same care.
Read the section itself before applying it to a client with unusual items. The details of what counts as depreciation and personnel cost matter.
The contested turnover threshold
The second group, companies above a turnover threshold, is where the difficulty lies. Two official texts of Nigeria's 2025 tax Acts exist: the version gazetted by FIRS, now the Nigeria Revenue Service, and the National Assembly's own copy of January 2026. Some figures differ between them, and the minimum effective tax rate turnover threshold is one of the contested figures. The NRS says it applies the gazetted laws, and re-gazetting has been ordered.
For a client whose turnover sits between the two candidate figures, whether the test applies at all depends on which text prevails. The question of what a firm should do with two texts is covered in when Nigeria's two tax texts disagree.
Undetermined until administrators choose
Achekam does not guess. It does not use the three contested Nigerian figures, the small-company turnover, the minimum effective tax rate turnover threshold and the PAYE remittance day, until one platform administrator chooses a candidate with a reason and a different administrator approves it. Until then, the size class shows as undetermined, with what each candidate would give.
That "undetermined" label is useful information. It tells you the client sits in the band where the texts disagree, and it shows the outcome under each candidate, which is precisely what the partner needs to decide and document a position.
Two broader conditions apply. Every Nigerian tax figure in Achekam's rule book was seeded "under review", and Achekam computes nothing from a figure until a platform administrator approves it. And once its rules are approved, Achekam's Revenue Service Centre computes company income tax with the Development Levy and the minimum effective tax rate check, alongside VAT, withholding tax, capital gains and stamp duty. Achekam holds no Nigerian tax rule for periods before 1 January 2026, so the check is not available for earlier periods.
Advising clients meanwhile
Until the texts are reconciled, advice to a client near the threshold should be explicit about the uncertainty:
| Client position | Suggested approach |
|---|---|
| Part of a multinational group | In scope on that ground alone; compute the test |
| Turnover clearly above both candidate thresholds | In scope; compute the test |
| Turnover clearly below both | Out of scope on turnover; record the conclusion |
| Turnover between the candidates | Compute both outcomes, decide a position with the client, record the reasons |
For clients in the last group, put the position in writing: which text the firm relied on, why, and what changes if the other text prevails. Show the client the effect of each outcome on the tax due. A client who chose a position knowing the risk is in a very different place from one who was never told.
Incentive planning needs the same care. An incentive that reduces the effective rate below the floor may produce less benefit than expected for an in-scope company, so model the minimum effective tax rate test before advising a client to rely on one. The rates and the levy that sit around the test are covered in Nigerian company income tax from 2026.
Before the next return
List your Nigerian clients that belong to multinational groups or have large turnovers. For each, record whether the test applies, on what basis, and who in the firm decided, and keep that note with the tax working papers for the year.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
