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The short answer
Income of a body engaged in religious activities of a public character is exempt from income tax under section 163(1)(a)(iii) of the Nigeria Tax Act 2025, but only where it is not derived from a trade or business the body carries on. Profit from a bookshop, guest house or hall hire can be taxable, and a church or mosque that pays salaries must still deduct PAYE from staff pay.
Nigerians often hear that churches and mosques "do not pay tax". That is partly true. The law exempts the religious income of a religious body, not every naira that passes through its accounts, and it does not excuse the body from duties it has as an employer or as a payer of suppliers. This guide sets out where the line sits under the Nigeria Tax Act 2025, which took effect on 1 January 2026.
What the 2025 Act exempts
Section 163(1)(a) of the Nigeria Tax Act 2025 lists persons whose profits are exempt from income tax under Chapter Two of the Act. Item (iii) covers a person "engaged in educational, religious or charitable activities of a public character where the profits or gains are not derived from a trade or business carried on by such person". Three conditions sit inside that sentence:
- Religious activities. The body's purpose must be religious (or educational or charitable).
- Of a public character. The activity serves the public or a congregation open to the public, rather than a private family or closed circle.
- Not from a trade or business. The exempt income is what comes from the religious work itself, such as offerings, tithes, zakat and donations.
The same idea appears in the capital gains rules. Section 55(1) of the Act takes property held for "a religious or charitable institution of a public character" outside the gains charge, unless the gain comes from an asset acquired in connection with a trade or business.
When a church or mosque income becomes taxable
The exemption stops at trade or business. Many religious bodies run activities that look like ordinary commerce. The Act does not list them one by one, so each has to be judged against the trade-or-business test. Common examples to review:
| Activity | Likely position | Why |
|---|---|---|
| Sunday offerings, tithes, zakat, freewill donations | Exempt | Income from religious activity, not trade |
| Bookshop selling books, CDs and souvenirs to the public | Review: likely taxable profit | Buying and selling for profit is a trade |
| Event hall or auditorium hired out for weddings | Review: likely taxable | Letting space for a fee to outsiders is commercial |
| Guest house, bakery, water factory, transport company | Taxable | A business carried on, even if profits fund ministry |
| School run by the mission charging fees | Seek advice | Educational activity is listed, but whether fees amount to a trade depends on the facts |
Profits from a business remain taxable even when every kobo is spent on ministry. Many large ministries run their businesses through separate companies, which are then taxed like any other company: 30% under section 56(b) of the Act, or 0% if the company qualifies as a small company under section 56(a). That company also files its own return every year (section 11(1) of the Nigeria Tax Administration Act 2025 requires every company to file whether or not tax is payable).
PAYE on pastors, imams and staff
A church or mosque that pays salaries is an employer. Section 51(6) of the Nigeria Tax Administration Act 2025 says an employer deducts income tax from any emolument it pays. That covers the senior pastor's stipend, the administrator, cleaners, drivers and musicians on salary. The exemption in section 163 is for the body, not its employees.
Two reliefs matter for lower-paid staff. Section 163(1)(t) exempts employment income where the person earns the national minimum wage or less, which DLA Piper's August 2026 guide puts at ₦70,000 a month. And under the 2025 bands, the first ₦800,000 of taxable income is taxed at 0%. Our guide to the 2026 PAYE bands shows the rest.
What the employer must do
- Register as an employer with the State Internal Revenue Service where staff live and work.
- Deduct PAYE each month and pay it to the state. PwC (May 2026) still gives the 10th of the following month; the 2025 Act runs late-remittance penalties after the 21st. Pay by the 10th to be safe and confirm with your state IRS.
- File the annual return of all emoluments by 31 January for the previous year (section 14(1) of the Administration Act).
- Keep payroll records for at least six years (section 31).
Housing, cars and other benefits in kind given to clergy are part of what the employer reports: section 14(2) of the Administration Act lists benefits in kind among emoluments, and DLA Piper notes that bonuses are taxable. Failing to deduct carries a penalty of 40% of the amount not deducted under section 105 of the Administration Act.
Tax ID, WHT and other duties
Religious bodies registered with the Corporate Affairs Commission as incorporated trustees get a Tax ID generated from their CAC details, according to Premium Times' explainer on the Administration Act. Banks must ask taxable persons for a Tax ID, so expect the question when opening or updating accounts.
When a church or mosque pays a contractor, a consultant or a landlord, withholding tax may apply. PwC's summary of the 2024 withholding regulations says every payer other than individuals must deduct; rates include 10% on rent and 5% on professional fees for residents. Check the current rules with the Nigeria Revenue Service (NRS) before you pay, and give the supplier a receipt for the tax deducted. Our explainer on withholding tax on invoices covers the paperwork.
What to check first
- List every income stream for the year and mark which are religious and which are trading.
- Move clear businesses into a separate company or at least separate accounts, so profits can be computed.
- Confirm every salaried worker is on PAYE, including the clergy.
- Keep books for six years; exempt bodies still have to keep records under section 31.
- Take professional advice on schools, clinics and hall hire; this guide is information, not advice.
Where Pryme fits
A ministry that runs a bookshop or guest house can keep that trading money in a separate Pryme Business Account using multiple accounts, which makes the trade-or-business line easier to show. Staff salaries can go out through payroll, and the Compliance agent prepares reminders for PAYE and annual return dates for a person to approve.
Questions people ask
Do churches pay tax in Nigeria?
Not on offerings, tithes and donations. Section 163(1)(a)(iii) of the Nigeria Tax Act 2025 exempts income from religious activities of a public character, but not profit from a trade or business the church carries on.
Do pastors pay tax on their salary?
Yes. The exemption is for the religious body, not its workers. The church must deduct PAYE from salaries and remit it to the state IRS.
Is a church bookshop taxed?
Profit from buying and selling to the public is likely to be trade or business income, which falls outside the exemption. Take advice on your facts.
Does a mosque need a Tax ID?
If it is registered as incorporated trustees, a Tax ID is generated from CAC details, and banks will ask for it. Employers also need to register with the state IRS for PAYE.
Sources
- Nigeria Tax Act 2025, section 163 (Income tax exemption), LawGlobal Hub text, 25 Dec 2025 · accessed Oct 2026
- Nigeria Tax Act 2025 (assented 26 Jun 2025), sections 8, 20, 21, 55, 56 and 59 · accessed Oct 2026
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability in Nigeria (28 Aug 2026) · accessed Oct 2026
- PwC Nigeria: Highlights of the Deduction of Tax at Source (Withholding) Regulations 2024 · accessed Oct 2026
- Premium Times via AllAfrica: Explainer on Tax ID registration under the NTAA 2025 (12 Nov 2025) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.