The agricultural sector in Nigeria has long been a critical driver of economic growth, food security, and employment. With the recent Nigeria Tax Act (NTA) 2025, agribusinesses now enjoy several tax benefits, exemptions, and incentives designed to promote growth and investment. Understanding these implications is essential for smallholders, startups, and larger-scale agribusiness operators.
The Small Business Exemption
First, it is important to note that companies with turnover less than ₦100 million and fixed assets less than ₦250 million are generally exempt from Corporate Income Tax (CIT) and Development Levy. This provision benefits many smallholder and SME agricultural firms, allowing them to reinvest earnings into operations rather than tax obligations.
Here are some of the Tax exemptions and implications on the Agro-sector
1. 5-Year Tax Exemption (Tax Holiday)
The Section 163(1)(o) of the NTA 2025 explicitly exempts income generated by qualifying agricultural businesses from corporate income tax.
The Thirteenth Schedule of the NTA 2025 provides the specific list of agricultural activities that qualify for the exemption, including:
- Crop production
- Livestock farming
- Aquaculture
- Forestry
- Dairy farming
- Cocoa processing
- Manufacturing of animal feeds
This 5-year exemption begins from the date the business commences operations such as when it executes its first trading contract, issues its first invoice, or begins marketing its products.
Now why this matter is because the tax holiday helps agribusinesses offset the long gestation periods of their projects, improve cash flow, and attract investment, especially for start-ups or expanding farms.
2. Economic Development Incentive (EDI)
The previous Pioneer Status Incentive (PSI) has been replaced by the Economic Development Incentive (EDI) for most priority sectors. While qualifying agricultural businesses retain their direct 5-year tax holiday, they can also benefit from additional tax credits under the EDI:
- 5% annual tax credit on qualifying capital expenditures, up to 5 years, for eligible investments in mechanization, processing facilities, and other priority sector assets.
This simply implies that agricultural businesses that invest in capital assets can reduce tax liabilities even after the 5-year tax holiday, encouraging modernization and increased productivity.
3. Value Added Tax (VAT) Exemption
The NTA 2025 also addresses VAT implications for the agricultural sector. Key provisions include:
- Basic food items, agricultural inputs, and essential medical products are zero-rated or exempt from VAT, reducing the cost of production.
- VAT on capital expenditures such as machinery and storage equipment can generally be recovered, even if the output product is zero-rated.
The effect is that this reduces the effective production cost and serves as a significant advantage for farms, agro-processors, value chain actors, and startup agribusinesses.
4. Capital Gains Tax (CGT) Implications
The new tax law introduces notable changes to the Capital Gains Tax (CGT) regime, increasing the general rate from 10% to 30%.
The key points include:
- CGT does not apply to small businesses with annual turnover below ₦100 million.
- For larger agribusinesses and startups, specific exemptions encourage investment:
- Venture capital, private equity funds, accelerators, or incubators investing in agribusiness startups are exempt from CGT on gains.
- Angel investors benefit from CGT exemption if they hold investments for more than 24 months.
- For individuals, gains from asset disposals are now taxed at applicable Personal Income Tax (PIT) rates, instead of a separate flat CGT rate.
These measures in turn encourage long-term investment in agribusinesses, which is critical given the long development cycles inherent in the sector.
Compliance Requirements
While these benefits are significant, enjoying them is not automatic. Agribusinesses must ensure proper compliance:
- Register the business as an agribusiness and document the commencement date to qualify for the 5-year tax exemption.
- Maintain detailed VAT records to recover input VAT on capital investments.
- Keep accurate records of qualifying capital expenditures to claim EDI tax credits.
In Conclusion, the Nigeria Tax Act 2025 offers a supportive framework for agricultural growth and investment. From tax holidays and VAT exemptions to capital gains incentives, these reforms aim to reduce the financial burden on farmers and agribusinesses, improve cash flow, and attract domestic and foreign investment.
By understanding and complying with these provisions, agricultural operators from smallholders to large-scale agribusinesses can maximize benefits, grow their operations, and contribute to national food security.
References
- Nigeria Tax Act 2025
- Ade Adefeko, “The Role of Nigeria’s 2025 Tax Act in Agribusiness Expansion,” Western Post.
- Transforming Nigeria’s Agribusiness Landscape,” TheCable.
- “A Discourse of the Key Provisions of the Nigerian Tax Reform Acts, 2025,” Mondaq.
- FG Tax Exemptions & Reliefs (Guardian / Vanguard / Daily Circular summaries).
- EY / Global Tax News on NTA 2025 highlights.
- Baker Tilly Nigeria – Tax reform analysis.