The Development Levy Explained

Before 2026, Nigerian companies faced a stack of separate levies: the Tertiary Education Tax (TET), the NITDA levy, the NASENI levy, and the Police Trust Fund levy, each with its own rate, base and filing requirement. The Nigeria Tax Act, 2025 (NTA) replaced these with a single Development Levy. This article explains how it works and who pays it.

How it works

The Development Levy is charged at 4% of a company's assessable profit. It applies to companies other than small companies and non-resident companies, according to published summaries of Section 56 and related provisions of the Act.

The levy consolidates and replaces:

• The Tertiary Education Tax (TET)
• The NITDA levy (under the National Information Technology Development Agency Act)
• The NASENI levy (under the National Agency for Science and Engineering Infrastructure Act)
• The Police Trust Fund levy

Rather than filing and paying under four separate regimes, an in-scope company now accounts for one levy at one rate.

Who is exempt

Small companies, as defined under Section 56 of the NTA (gross turnover within the applicable threshold and fixed assets not exceeding ₦250 million, both conditions required), are exempt from the Development Levy, alongside their exemption from Company Income Tax and Capital Gains Tax.

Non-resident companies are also outside the scope of the levy, based on published commentary on the Act.

Why this matters to taxpayers

For companies that previously paid TET alone at a lower rate, the Development Levy can represent a higher effective charge, even though it consolidates several levies into one. Businesses that budgeted for the old TET rate should review their calculations under the new levy.

At the same time, the single levy simplifies compliance: one computation and one filing obligation replace what was previously spread across several agencies and forms.

Tax implications

• The levy is based on assessable profit, so its amount moves with profitability, not turnover.
• It is charged in addition to Company Income Tax for companies outside the small company category.
• Small company status removes the levy entirely, which is one reason accurate classification under Section 56 matters.
• Because the levy replaces multiple older charges, businesses should confirm that old TET, NITDA or NASENI filing obligations have genuinely ended, rather than assuming this without checking current NRS guidance.

Step by step: how to work out your Development Levy position

1. Confirm whether you are a small company under Section 56. If yes, the levy does not apply.
2. Confirm your residency status. Non-resident companies are also outside scope.
3. Compute assessable profit for the relevant accounting period, following the basis set out in the Act.
4. Apply the 4% rate to assessable profit.
5. Cross-check against Company Income Tax computations, since both draw on similar profit figures but are separate charges.
6. File through the applicable NRS process, alongside your CIT return.
7. Retain your computation workings in case of a query.

Why engage a professional consulting firm

• Correct computation of assessable profit, which is a defined tax concept that can differ from accounting profit.
• Confirming small company status, since this single classification determines whether the levy applies at all.
• Reconciling the transition from the old TET, NITDA, NASENI and Police Trust Fund levies to the new single charge.
• Avoiding double payment of an old levy alongside the new one during any transition period.

Why every business should comply

The Development Levy, like other federal taxes, funds public programmes, and consistent payment supports a company's standing with the NRS, including its ability to obtain a tax clearance certificate. Late or incorrect filing can attract penalties and interest under the Nigeria Tax Administration Act.

Tips and points to watch

• Recompute your effective tax rate under the new regime rather than assuming the old TET-based figure still applies.
• Keep clear records of assessable profit, separate from accounting profit, to support the levy computation.
• Review your small company status annually, since this single test determines Development Levy exposure as well as CIT and CGT treatment.
• Confirm filing forms and deadlines with the NRS, since administrative procedures for the consolidated levy may differ from the old separate levies.

Relevant law

• Nigeria Tax Act, 2025, Section 56 and related provisions on the Development Levy
• Nigeria Tax Administration Act, 2025 (filing and penalties)

Frequently asked questions

What rate is the Development Levy charged at? 4% of assessable profit, based on published summaries of the Act.

Which levies does it replace? The Tertiary Education Tax, the NITDA levy, the NASENI levy and the Police Trust Fund levy.

Do small companies pay the Development Levy? No. Small companies, as defined under Section 56, are exempt.

Is the levy based on turnover or profit? It is based on assessable profit, not turnover.

Do non-resident companies pay the levy? Published commentary indicates non-resident companies are outside its scope. Confirm this for your specific circumstances.

Where you need further assistance: You may contact US & CO. (Chartered Accountant), a professional tax consulting firm in Lagos, Nigeria. 📞 WhatsApp: 08056219998 📧 Email: info@usc.com.ng 🌐 Website: https://www.usc.com.ng

Footnote: This article is for general information only. It is not complete investment, tax or legal advice. Rates and thresholds should be confirmed against the Nigeria Tax Act, 2025 and current NRS guidance. Readers should consult a qualified professional before making any investment or tax decision.