Tax season in Nigeria doesn’t have to drain your bank account. Many hardworking Nigerians are paying more tax than they should because they don’t know about the tax deductions in Nigeria that can legally reduce their tax bill.
So, let’s say you’re a freelancer working with foreign clients, running a small business in Lagos, or juggling a side hustle while doing your 9-to-5, there are many expenses you can deduct that most people never claim. The Federal Inland Revenue Service (FIRS) allows these deductions, but they don’t exactly send you text messages to remind you about them.
With the new 2024 withholding tax regulations bringing significant changes to how businesses handle tax deductions, it’s more important than ever to understand what you can legally claim.
Are you ready to stop overpaying? Let’s explore the overlooked tax deductions Nigeria that could save you thousands of naira on your 2025 tax return.
Key Changes You Need to Know About
New 2024 Withholding Tax Regulations: The game has changed significantly, really!
Before going into the deductions, here’s what every Nigerian business owner must understand about the new regulations that took effect July 1, 2024:
Small Business Relief: If your annual turnover is ₦25 million or less, you’re now exempt from withholding tax obligations on transactions up to ₦2 million per month, but only if your suppliers have valid Tax Identification Numbers (TINs). This doesn’t mean you can’t claim these expenses as deductions; you absolutely still can and should.
Documentation is Everything: The new rules require stricter record-keeping and proper receipts for all deductible expenses. Every deduction you claim must be backed by solid documentation that clearly shows the business purpose.
Tax Deductions in Nigeria:
1. Home Office Expenses (Your Living Room Can Count)
Yes, home office!
The truth is that if you work from home, you can deduct part of your rent and utilities.
You don’t need a fancy office with glass walls and executive chairs. Even if you use your dining table as your workspace or converted a corner of your bedroom into an office, you can claim this deduction.
The key requirement is that the space must be used regularly and exclusively for business activities – not just occasionally checking emails from your couch.
What you can deduct:
- Portion of your rent
- Electricity bills (yes, that NEPA bill counts)
- Internet subscription
- Generator fuel and maintenance
For example, Kemi runs her online boutique from her one-bedroom apartment in Ikeja. She uses 25% of her space for business. If her monthly rent is ₦200,000, she can deduct ₦50,000 monthly (₦600,000 yearly) as a business expense.
2. Transportation and Vehicle Expenses
Every business trip you make can reduce your tax.
Many Nigerian business owners drive everywhere for meetings, supplier visits, and client consultations but never think to track these expenses. The trick is keeping detailed records that show the business purpose of each trip.
Even if you don’t own a car, those daily Uber rides to meet clients or attend business events add up to significant deductions.
This includes:
- Fuel for business trips
- Vehicle maintenance and repairs
- Car insurance (business portion)
- Uber/Bolt rides for business meetings
- Flight tickets for business travel
Pro tip: Keep receipts and write the business purpose on each one. “Meeting with client in VI” or “picking up supplies” works perfectly.
To make it clear, if you spend ₦50,000 monthly on business transportation, that’s ₦600,000 in deductions yearly. This amount is also deductible from tax.
3. Professional Training and Development
In reality, any course or training that improves your business skills is deductible.
In today’s fast-changing business world, staying updated with new skills isn’t just smart – it’s tax-deductible. FIRS recognizes that businesses need continuous learning to remain competitive.
The course doesn’t have to be expensive or from a fancy institution; even free courses where you pay for certificates can qualify if they directly relate to your business activities.
This covers:
- Online courses (Udemy, Coursera, local training centers)
- Professional certifications
- Workshops and seminars
- Business books and materials
- Conference attendance fees
So, it’s a smart move if for example you took a ₦100,000 digital marketing course as this is completely deductible. The business books you bought on Jumia is also deductible.
Now you know!
4. Office Equipment and Supplies
Don’t be surprised. Everything you buy for your business operations counts.
Most business owners remember to deduct big purchases like computers but forget about the smaller items that accumulate over time. These everyday business expenses are just as legitimate as major equipment purchases.
For expensive items like laptops or generators, you might need to spread the deduction over several years through depreciation, but smaller items under ₦25,000 can usually be deducted immediately.
Deductible items include:
- Laptops and computers
- Printers and scanners
- Office furniture
- Stationery and supplies
- Software subscriptions
- Generator for your office
Reality check: Even small purchases add up. That ₦5,000 worth of pens and paper monthly becomes ₦60,000 in yearly deductions.
5. Communication Expenses
You can claim your phone and internet bills (business portion).
Break down your usage:
- Business calls and data
- Data subscription (for WhatsApp Business)
- Zoom or other meeting platform subscriptions
- Website and Email hosting services
Calculation tip: If you estimate 60% of your phone usage is for business, you can deduct 60% of your monthly bill.
6. Marketing and Advertising Costs
Every naira you spend promoting your business is deductible. Now that’s goldmine!
This includes:
- Facebook and Instagram ads
- Google Ads campaigns
- Flyers and banners
- Website development and maintenance
- Social media management tools
- Business cards and branded materials
Say for example: Tunde spends ₦30,000 monthly on Facebook ads for his catering business. That’s ₦360,000 in annual deductions.
7. Professional Services and Consultancy
Money paid to other professionals for business help.
Deductible services:
- Accounting and bookkeeping fees
- Legal consultation
- Business coaching
- Graphic design services
- Website maintenance
- Tax preparation fees
Even the money you pay your accountant to file your taxes is tax-deductible!
8. Business Insurance Premiums
What Counts: Insurance that protects your business operations.
Types of deductible insurance:
- Professional indemnity insurance
- Business property insurance
- Vehicle insurance (business use portion)
- Health insurance for employees
- Equipment insurance
Note: Personal life insurance doesn’t count, but business-related insurance does.
9. Bank Charges and Financial Costs
Business banking fees can be deducted.
Under the new 2024 withholding tax regulations, businesses must be more careful about how they handle financial costs and documentation. Every banking fee related to your business operations is a legitimate deduction that adds up over time.
The key is maintaining proper records that clearly show these charges were for business purposes, not personal banking activities.
This covers:
- Monthly account maintenance fees
- Transfer charges for business transactions
- POS charges when paying suppliers
- Loan interest for business loans (clearly documented as business-related)
- Credit card fees for business purchases
- Bank charges for issuing tax identification number-related documents
Important note: With the new regulations emphasizing the importance of having a valid Tax Identification Number (TIN), any banking fees related to obtaining or maintaining your TIN are fully deductible.
Tip: Use a separate bank account for business to make tracking easier and comply with the new regulations requiring clear separation of business and personal expenses.
10. Entertainment and Client Relations
The Rules: Money spent entertaining clients or business partners.
The 2024 withholding tax regulations have clarified how businesses should handle entertainment expenses, especially when dealing with suppliers and clients. These expenses remain fully deductible when properly documented with clear business purposes.
Remember, if you’re a small company with annual turnover of ₦25 million or less, you may be exempt from certain withholding obligations, but you still need to track these expenses for your own tax deductions.
Allowable entertainment expenses:
- Business lunches and dinners
- Client entertainment and hospitality
- Corporate gifts (within reasonable limits)
- Business events and parties
- Refreshments for business meetings
- Entertainment for potential business partners or suppliers
Important: Keep detailed records showing the business purpose, date, amount, and who was entertained. The new regulations require much stricter documentation for all business expenses.
Smart tip: When entertaining suppliers, ensure they have valid TINs if you’re making significant payments to them, as this affects withholding tax obligations under the new rules.
Bonus Tip: Donation Deductions
The Hidden Gem: Donations to registered charities and educational institutions.
You can deduct:
- Donations to approved NGOs
- Contributions to educational institutions
- Support for approved religious organizations
Limit: Usually capped at 10% of your total income, but check current FIRS guidelines.
Frequently Asked Questions
What expenses can I deduct as a freelancer in Nigeria?
As a freelancer, you can deduct any expense directly related to earning your income. This includes home office costs, equipment, internet bills, professional development, and transportation for business purposes.
How do I file for tax relief from FIRS?
You claim deductions when filing your annual tax returns. Keep all receipts and maintain proper records. If you’re employed, your employer handles PAYE, but you can still claim additional reliefs during annual filing.
Can I deduct rent or power expenses from my business income?
Yes, but only the portion used for business. If you use 30% of your home for business, you can deduct 30% of your rent and electricity bills.
Do I need receipts for all deductions?
Absolutely. FIRS can request proof of any deduction you claim. Keep receipts, bank statements, and records showing the business purpose of each expense.
Can I deduct expenses if my suppliers don’t have TINs?
Yes, you can still deduct legitimate business expenses even if your suppliers lack TINs. However, under the new 2024 regulations, you may face double withholding tax rates when paying suppliers without TINs. The expense remains deductible for your business, but it becomes more expensive due to higher withholding obligations.
What’s the impact of the new small business exemption?
If your business earns ₦25 million or less annually, you’re exempt from withholding tax on transactions up to ₦2 million monthly (provided suppliers have TINs). This exemption reduces your administrative burden but doesn’t affect your right to claim these expenses as deductions on your tax return.
Ready to Save on Your Taxes?
Understanding tax deductions in Nigeria isn’t just about following rules – it’s about keeping more of your hard-earned money. These deductions are completely legal under Nigerian tax law, and you’re entitled to claim them. With the new 2024 withholding tax regulations emphasizing proper documentation and TIN compliance, being organized with your expense tracking is more crucial than ever.
The key to maximizing your deductions lies in three simple practices: maintain detailed records, separate business from personal expenses, and ensure all your suppliers have valid TINs. These steps not only help you claim legitimate deductions but also keep you compliant with the latest FIRS regulations.
Remember, smart tax planning doesn’t mean avoiding taxes; it means not paying more than you legally owe. Start implementing these strategies today, and your bank account will thank you come tax season.
Take Action: Download our free “Tax Relief Checklist for Nigerian Businesses” and start tracking these deductible expenses immediately. Your wallet will thank you!
Disclaimer: Tax laws can change, and individual situations vary. Consider consulting with a qualified tax professional for advice specific to your circumstances.
