Finance Minister Unveils Presumptive Tax Rules for MSMEs

The Federal Government has issued new presumptive tax regulations designed to simplify compliance for millions of micro, small, and medium enterprises (MSMEs). Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced the framework on Wednesday, framing it as a “structured pathway” for informal businesses to enter the formal economy. The rules replace complex accounting requirements with a turnover-band assessment, protecting small traders and artisans from discretionary or “nuisance” tax enforcement.

The regulations form a critical part of the Nigeria Tax Act 2025, which came into full effect on 1 January. Edun emphasised that the framework does not increase tax rates but instead focuses on expanding the tax base. By adopting a presumptive model, the government allows businesses with inadequate financial records to pay a fixed amount based on their estimated turnover. This “inclusion strategy” is intended to make MSMEs eligible for formal credit, insurance, and government growth incentives previously out of their reach.

Key Pillars of the New Framework

• Turnover-Band Assessment: Replaces the need for rigorous bookkeeping with simple, national benchmarks based on business size and sector.

• CIT Exemption: Small companies (turnover below ₦100 million) remain exempt from Companies Income Tax, Capital Gains Tax, and the newly unified Development Levy.

• Elimination of Discretion: National rules aim to end arbitrary tax assessments by local and state enforcement officers.

• Harmonisation: Aligns federal and state tax administrations through the Joint Revenue Board to reduce double taxation.

The minister noted that workers and informal traders earning ₦800,000 or less annually are now entirely exempt from personal income tax. This “tax-free threshold” is a central component of the administration’s fiscal strategy to protect the most vulnerable while formalising the “backbone” of the economy. For the government, the shift toward a diversified and structured revenue base is essential to reducing Nigeria’s historical dependency on oil.

Execution of these reforms is also a signal to international credit rating agencies and investors. By modernising the tax administration, the government intends to demonstrate a more predictable and transparent business environment. Edun argued that a stronger, more formalised MSME sector would ultimately enhance the state’s capacity to fund critical infrastructure and social investment programmes without burdening the poor.

While the new rules offer simplicity, they also require a shift toward digital accountability. Small businesses are increasingly being encouraged to register for a Unified Taxpayer Identification Number (Tax ID), which is becoming a prerequisite for operating business bank accounts and accessing digital payment platforms. The era of “analogue” tax evasion is effectively closing as the Nigeria Revenue Service (NRS) integrates banking data with tax filings.