Glossary
22 terms, in plain words, with the reason each one matters to you.
Tax vocabulary is not hard, it is just unexplained. Each entry says what the term means in one line, then why you should care — because a definition you cannot act on is not much use. Every term has its own link, so /glossary#twdv goes straight to the entry.
All terms
22 terms
Apportionment
Splitting input VAT that serves the whole business — rent, audit fees, electricity — between the supplies you can reclaim VAT on and the ones you cannot.
Why it matters. If you make both taxable and exempt supplies, you cannot reclaim all your input VAT. The usual fraction is taxable turnover over total turnover. Zero-rated sales count as taxable and protect your ratio; exempt sales dilute it. Two businesses with identical costs can recover very different amounts.
Assessable profit vs total profits
Assessable profit is your profit adjusted for tax before capital allowances. Total profits is what is left after capital allowances are deducted.
Why it matters. They are different numbers and different taxes use each. Companies income tax at 30% is charged on total profits. The 4% development levy is charged on assessable profit — before allowances. Compute the levy on total profits and you will understate it, which is the single most common error in a 2026 CIT computation.
CIT calculator + small-company checker →Guide: Am I a small company? →
Capital allowance
The tax version of depreciation: relief spread over several years for money you spent on assets that last.
Why it matters. Your accounting depreciation is ignored for tax; capital allowances replace it. From 2026 they are straight-line by class — 10% for long-life assets, 20% for plant and machinery, 25% for short-life assets — with no initial allowance. And an asset on which VAT or import duty was not paid cannot be claimed at all, which makes an informal purchase more expensive than its price suggests.
Chargeable income
The income the tax bands are actually applied to, after every deduction.
Why it matters. It is not your salary and it is usually a lot lower. Gross, minus pension, NHF, NHIA, life assurance, mortgage interest and rent relief, gives chargeable income. Every rate you read about applies to this number, not to what your employer pays you — which is why quoting a band rate against your salary always overstates the tax.
CRA — Consolidated Relief Allowance
The old deduction that gave every taxpayer the higher of ₦200,000 or 1% of gross income, plus 20% of gross income, before tax was worked out.
Why it matters. It was abolished on 1 January 2026 and replaced by rent relief. The CRA went to everyone; rent relief only goes to people who pay rent. If you own your home, you lost a deduction and gained nothing. If your payslip still shows a CRA line, your payroll has not been updated.
Old vs new regime comparison →Guide: What changed on 1 January 2026 →
Development levy
A 4% levy on a company’s assessable profit, introduced on 1 January 2026.
Why it matters. It consolidates four levies that were charged separately — Tertiary Education Tax at 3%, NITDA at 1%, NASENI at 0.25% and the Police Trust Fund levy at 0.005%. Small companies and non-resident companies are exempt. Because its base is assessable profit, it is payable even when capital allowances have taken your total profits down to very little.
EDI — Economic Development Incentive
A tax credit of 5% a year for five years on qualifying capital expenditure, which replaced Pioneer Status in 2026.
Why it matters. Pioneer Status was a tax holiday — you paid nothing for a period. The EDI is a credit against tax you do owe, carried forward up to five further years if you cannot use it. That is a different shape of benefit and it suits a different kind of business. The priority-sector list and certification process are still awaiting regulation, so eligibility is indicative.
Effective rate
Your total tax divided by your total income — the rate you actually pay.
Why it matters. It is always lower than your marginal rate, usually by a wide margin, because the bands below your top one are charged at lower rates and the first ₦800,000 is charged at nothing. This is the number to quote when someone asks what you pay. The other one is the number to use when deciding whether a pay rise is worth it.
ETR — effective tax rate
For companies, total tax borne as a percentage of profit — and the basis of the 15% floor that arrived in 2026.
Why it matters. Large companies must pay tax of at least 15% of profit. Where reliefs and allowances take you below that, you owe a top-up to reach it. The turnover trigger is reported two ways: the Act text says ₦20 billion, some major firms’ summaries say ₦50 billion. We use ₦20 billion, the gazette figure, and show both.
Exempt supply
A sale that carries no VAT and on which you cannot reclaim the VAT you paid on your related costs.
Why it matters. This is the one that costs money. Exempt is not a lighter version of zero-rated — it is the opposite outcome for your cash, because the 7.5% you paid your suppliers stays gone. It is worse than being standard-rated, where at least you reclaim. Land, residential rent, petroleum products, life assurance and tuition are exempt. Oil and gas exports are exempt while other exports are zero-rated.
Final tax
A deduction at source that settles the tax on that income for good — there is nothing further to pay and nothing to claim back.
Why it matters. The opposite of a credit. If withholding on your consultancy fee is a final tax, that income is done: do not add it to your income tax computation and do not credit the deduction against your bill. People who credit it pay tax twice. Companies that credit it understate their liability and pick up penalties. Resident consultancy and professional fees are final tax, which surprises almost everyone.
WHT rate finder & calculator →Guide: WHT: final tax or credit? →
Gross emoluments
Everything your employer gives you for the job: basic salary, housing, transport, other allowances, bonuses, and benefits in kind.
Why it matters. It is the starting point of the whole PAYE calculation, and the base for several other things — though not, importantly, for your pension. Pension is 8% of basic plus housing plus transport only, not 8% of gross. Computing it on gross overstates the deduction and your take-home pay pays for the error.
IRN — Invoice Reference Number
The number the e-invoicing platform returns after it clears your invoice, which must appear on the invoice with a QR code before you issue it.
Why it matters. Under the fiscalisation rollout, B2B and B2G invoices must be pre-cleared and carry an IRN and QR code — an invoice without one has not been validly issued. B2C sales are not pre-cleared but must be reported within 24 hours. Most onboarding delays are data problems: clearance fails on invalid TINs and mis-mapped tax codes.
Marginal rate
The rate charged on your next naira of income — the band your income reaches.
Why it matters. It is not the rate you pay on everything; only the slice inside that band is charged at it. This is why a pay rise can never reduce your take-home pay, and why "I moved into the 21% band" does not mean your tax jumped to 21% of your income. Use the marginal rate to judge an extra naira; use the effective rate to describe your bill.
NRS — Nigeria Revenue Service
The federal tax authority, which replaced the FIRS under the 2025 Acts.
Why it matters. It collects the federal taxes: companies income tax, VAT, and withholding tax deducted from companies and non-residents. It is not who you file your personal income tax with — that is your state’s service. Several 2026 provisions are enacted but not yet operable because the NRS has still to issue guidance; where that affects a figure, our tools say so.
PAYE — pay as you earn
Personal income tax collected by your employer from each payslip and paid to your state’s revenue service on your behalf.
Why it matters. It is not a separate tax — it is the same personal income tax, collected monthly instead of annually. Two consequences people miss: your employer must remit it by the 10th of the following month, and being on PAYE does not automatically discharge your own filing obligation if you have income from anywhere else.
Rent relief
A deduction of 20% of the annual rent you pay, capped at ₦500,000, introduced in 2026 to replace the CRA.
Why it matters. It only helps people who pay rent. Homeowners, people living with family and anyone housed by their employer lost the CRA and got no replacement — a straightforward loss from the reform. The cap starts binding once your rent passes ₦2.5m a year, because 20% of ₦2.5m is exactly ₦500,000. Above that, more rent buys no more relief.
Rent relief calculator →Guide: What changed on 1 January 2026 →
SIRS — State Internal Revenue Service
Your state’s tax authority — LIRS in Lagos, KIRS in Kano, and so on for each state.
Why it matters. Personal income tax is a state tax. You file with the state you live in, not the state you work in and not with the NRS. Your employer remits your PAYE to your state’s service. States also set their own extensions: Lagos moved the 2026 personal filing deadline to 14 April and the FCT to 30 April, while everywhere else stayed at 31 March.
TIN and NIN
Your Tax Identification Number, and the National Identification Number that now underpins it for individuals.
Why it matters. A missing TIN is expensive in a specific way: withholding tax on a vendor without a valid TIN doubles, capped at 20%. So a 5% consultancy deduction becomes 10% and a 2% supply deduction becomes 4%. The doubling does not apply to passive income — dividends, interest, rent and royalties keep their stated rate. Collecting a vendor’s TIN before you pay is cheaper than explaining the deduction afterwards.
WHT rate finder & calculator →Guide: WHT: final tax or credit? →
TWDV — tax written-down value
What an asset is worth for tax purposes: its cost, less every capital allowance you have claimed on it so far.
Why it matters. It is the running balance that drives next year’s allowance and decides what happens when you sell. Sell above TWDV and the excess allowance is clawed back as a balancing charge; sell below it and you get a balancing allowance. Note that 1% of cost is retained notionally until disposal, so an asset never quite writes down to zero while you still hold it.
WHT — withholding tax
Tax deducted at source by the person paying you and sent to the revenue in your name.
Why it matters. It is a collection mechanism, not a tax in itself — what matters is whether it is a credit against your own bill or a final tax that settles the income for good. Rates run from 2% to 20% depending on what was paid, to whom, and whether they are resident. Failing to deduct costs 40% of what you should have deducted; deducting and failing to remit costs 10%. Not deducting is treated as four times worse than remitting late.
WHT rate finder & calculator →Guide: WHT: final tax or credit? →
Zero-rated supply
A sale you charge VAT on at 0% — and on which you can still reclaim the VAT you paid on your related costs.
Why it matters. The reclaim is the whole point, and it is what separates zero-rated from exempt. On the invoice they look identical: no VAT either way. On your costs they are opposites — zero-rated gets the 7.5% back, exempt does not. Basic food, medical products, educational books, baby products and exports other than oil and gas are zero-rated.
Definitions are explanation, not advice, and a short definition necessarily leaves things out. Read the disclaimer, and confirm your position with a qualified tax professional before acting.