Why a professional firm can't be a small company
Why a small Nigerian consultancy, law practice or other professional firm still pays 30% company income tax and files VAT returns every month.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
Two companies have the same modest turnover. One sells building materials; the other is a two-partner engineering consultancy. Under Nigeria's new tax laws, the first may pay no company income tax at all and skip monthly VAT returns. The second pays income tax at the full rate, pays the Development Levy, and files a VAT return every month. Same size, very different bills.
The reason is a single exclusion that appears in both of the new Acts: a business providing professional services cannot be a small company or a small business, however small it is. This article explains the exclusion, what it means for income tax, the Development Levy and VAT, the turnover dispute that does not save professionals, and how Achekam treats the uncertain figures meanwhile.
The small-company test and the exclusion
Under the Nigeria Tax Act, 2025, company income tax on total profits is levied at 0% for a small company and at 30 per cent for any other company. The Act took effect on 1 January 2026.
Section 202 of the gazetted copy of that Act defines a small company by two limits, gross turnover and total fixed assets not exceeding N250,000,000, and then adds the sentence that matters here: any business providing professional services shall not be classified as a small company.
The NRS says the same in plain words. Its FAQ describes a small business as one with annual turnover of ₦100 million or less and total fixed assets below ₦250 million, excluding professional service providers. The NRS sets out its small-company definition and tax rates on its frequently asked questions page.
So for a consultancy, a law practice, an accounting practice or an architect, the size limits never come into play. The exclusion decides the matter first.
Income tax at 30% and the Development Levy
Because a professional firm is "any other company", it pays company income tax at 30% on its total profits. PwC describes the 30% rate as applying to large companies, which it defines by turnover above NGN 100 million or fixed assets above NGN 250 million, but that shorthand does not capture the professional-services exclusion: a small professional firm pays 30% too.
The NRS also says a Development Levy of 4% is imposed on the assessable profits of all companies chargeable to tax under Chapters Two and Three of the Nigeria Tax Act, excluding small companies and non-resident companies. A resident professional firm, never being a small company, is inside the levy as well.
Both rates are as stated at the time of writing; confirm them with your adviser before you plan the year.
Monthly VAT returns still apply
The Nigeria Tax Administration Act, 2025, section 22, says a taxable person must submit a VAT return to the NRS on or before the 21st day of the following month, with or without a notice and whether or not any economic activity took place. The monthly filing duty does not apply to a small business.
The same Act, in section 147, defines a small business by turnover and fixed assets and, again, excludes any business providing professional services. So the relief from monthly VAT filing does not reach professional firms either. A consultancy with a quiet month still files a return for it.
The turnover figure nobody agrees on
There is a live dispute about the small-company turnover limit. The gazetted copy of the Nigeria Tax Act hosted by LIRS says N50,000,000. Another official copy of the Act, and the NRS FAQ, say ₦100 million. Until that is settled, businesses near the limit cannot be sure which side of it they fall.
For professional firms, the dispute is beside the point. Whichever figure is right, the exclusion applies. Do not let a conversation about N50 million versus N100 million persuade a partner that the firm might qualify.
How Achekam treats the uncertain figures
Achekam does not use three contested Nigerian figures, the small-company turnover limit among them, until one platform administrator chooses a candidate with a reason and a different administrator approves it. Until then, a business's size class shows as UNDETERMINED, with what each candidate would give.
For a professional firm, read that screen with the exclusion in mind: neither candidate makes you small. Record your professional-services status and the advice behind it in your tax file.
On VAT, a Nigerian or Kenyan business picks a tax code on each invoice line, standard, zero-rated, exempt, out of scope or reverse charge, and only standard lines carry VAT, at the approved rate for its country, once the country pack is activated. While the Nigerian VAT rate rule awaits platform approval, Achekam refuses to charge standard-rate VAT on a Nigerian workspace's invoice and tells the user to choose a tax code without VAT or wait.
Be careful with that choice. For a professional firm whose services are standard-rated, marking a line exempt or zero-rated just to get the invoice out would misstate the VAT on it. Ask your adviser how to invoice in the meantime rather than picking a code that is not true.
A checklist for consultants, lawyers and other professionals
- Treat the firm as outside the small-company and small-business definitions, whatever its size.
- Budget company income tax at 30% of total profits, plus the Development Levy.
- File a VAT return by the 21st of every month, including quiet months.
- Ignore the turnover dispute when deciding your own status.
- Keep a note of the professional-services basis and your adviser's view in the tax file.
- Never choose a no-VAT tax code just to avoid a refusal on a standard-rated service.
Businesses that do fall within the limits should read the small business VAT exemption and the small company annual tax return; for a professional firm, both explain reliefs you will not get.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
