Overview
One of the most important changes introduced by the Nigeria Tax Act 2025 is a clear and practical definition of what qualifies as a Small or Medium Enterprise (SME).
This definition is not cosmetic. It determines whether your business can legally enjoy major tax reliefs — including 0% company income tax — or whether it will be treated like a large company during enforcement.
If your business qualifies as a small company, the law is now designed to protect you, not punish you — but only if you understand and follow the rules.
The Legal Definition of an SME ("Small Company")
Under the Nigeria Tax Act 2025, a business qualifies as a small company if it meets all of the following conditions within a financial year:
- Annual gross turnover of ₦50 million or less
- Total fixed assets not exceeding ₦250 million (excluding land)
- Not controlled by, or part of, a large corporate group
If your business crosses any of these thresholds, it may lose its SME protections.
What SME Status Gives You
When you qualify as a small company and remain compliant, the law provides powerful benefits designed to reduce pressure on your business:
- 0% Company Income Tax on profits
- Exemption from development levy
- Lower compliance burden compared to large companies
These benefits exist to give small businesses breathing room to grow — not to encourage informality.
Common SME Mistakes That Remove These Benefits
Many businesses technically qualify as SMEs but still lose their protections due to avoidable mistakes:
- Using personal bank accounts for business transactions
- Failing to keep basic records that prove turnover and expenses
- Assuming 0% tax means no registration or filing is required
Once your income becomes visible through banks or digital payments, lack of structure becomes a risk — even if your turnover is small.
Why This Definition Matters for Compliance
Tax authorities now rely heavily on:
- Bank transaction data
- POS and digital payment records
- CAC and tax registration databases
If your income is visible but your compliance status is unclear, enforcement risk increases — even for small businesses.
The Nigeria Tax Act 2025 rewards SMEs that stay registered, organised, and consistent. SME status is not automatic protection; it must be supported by structure and records.
At MyFinbuk, our role is to help SMEs maintain this status continuously — so nothing escalates unexpectedly.