Under the Nigeria Tax Act 2025 (active now in 2026), the treatment of business losses has been modernized to provide more flexibility for businesses while preventing the "permanent" use of losses to avoid tax.
Here is how losses are handled for companies and individuals.
1. The "Carry-Forward" Rule
In 2026, if your business makes a loss, you can carry that loss forward to offset against future profits from the same business.
- No Time Limit: You can carry forward the loss indefinitely until it is fully utilized.
- The "Same Business" Restriction: You cannot use a loss from one line of business (e.g., your transport business) to offset the profit of another (e.g., your manufacturing business). Each business "bucket" must clear its own losses.
2. Abolition of Minimum Tax (The Big Win)
Historically, even if a company made a loss, it was often forced to pay a "Minimum Tax."
- The 2026 Rule: The Nigeria Tax Act 2025 has abolished minimum tax for companies.
- Why this matters: If your 2026 tax calculation results in a loss, your CIT liability is truly zero. This is designed to help struggling or cyclical businesses preserve cash flow during difficult years.
3. Treatment of Capital Losses
A major change in 2026 is how losses from the sale of assets (like property or stocks) are treated.
- Capital Gains Integration: Since Capital Gains Tax (CGT) is now aligned with income tax (30% for companies, up to 25% for individuals), realized capital losses are now deductible.
- Offset Rule: You can deduct a loss from the sale of an asset from a gain made on another asset. However, you generally cannot use a "capital loss" to reduce your "trading profit" (the money you make from daily operations).
4. Pre-Commencement Losses
If you are a startup that spent money for years before officially starting operations:
- Six-Year Window: Section 20(1) of the new Act allows you to deduct business expenses incurred within the six (6) years preceding the start of your business. These effectively become a "Day 1 Loss" that you can use to offset your first few years of profit.
Summary of Loss Treatment (2026)
| Type of Loss | Can you Carry Forward? | Limit |
|---|---|---|
| Trading Loss | Yes | Indefinitely (Same business only) |
| Capital Loss | Yes | Only against Capital Gains |
| Foreign Exchange Loss | Yes | Must use official CBN rates only |
| Minimum Tax | N/A | Abolished (Pay zero if in loss) |
A Warning on "Artificial Losses"
The Nigeria Tax Administration Act 2025 gives the NRS powers to ignore losses if they believe the transaction was "artificial" or specifically designed to create a tax advantage. In 2026, audits for loss-making companies are more frequent because the NRS wants to ensure the loss is genuine and not just creative accounting.