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The short answer
Presumptive tax is tax charged on an estimate rather than on proven profit. Section 38 of the Nigeria Tax Administration Act 2025 lets a tax authority assess a resident business on "such fair and reasonable percentage of the gross income" as it determines where profit is nil, lower than expected or cannot be ascertained, and section 15 lets state tax offices issue simplified return guidelines for low-income earners and the informal sector.
What "presumptive tax" means
Most income tax is charged on profit: what you sold, minus what it cost you to sell it. That works only if there are records. For millions of Nigerian traders, artisans, transporters and kiosk owners, there are no books, so a tax office cannot compute profit in the normal way. Presumptive tax fills the gap: the authority presumes a level of income from what it can see, such as turnover, the type of trade, the size of the shop or the market, and taxes that.
The phrase itself is not used as a heading in the Nigeria Tax Administration Act 2025 (NTAA), which took effect on 1 January 2026. The Act instead gives tax authorities several tools that produce the same result.
The legal tools in the 2025 Act
Deemed profit: section 38
Section 38(1) says that where a business "produces either no assessable profit or an assessable profit which is less than expected from that business, or the true amount of the assessable profit cannot be readily ascertained", the authority may, for a resident, "assess and charge that taxable person on such fair and reasonable percentage of the gross income from the trade or business as the relevant tax authority may determine". This is the core presumptive power.
Best-of-judgement assessments: sections 34 and 35
Where no return is filed and the authority believes tax is due, s.35 lets it determine the amount "to the best of its judgement". Where a return is filed but rejected, s.34(4)(c) allows the same. These are not percentage formulas; they are estimates based on whatever information the authority has.
Simplified returns: section 15
Section 15 lets a relevant tax authority "issue guidelines for the filing of a simplified income tax return by low-income earners or persons operating in the informal sector". This is the route by which state internal revenue services can set up flat or simplified schemes for market traders and small operators.
Who applies it: the states
Individuals, sole traders and business names pay personal income tax to the state where they live, so presumptive and simplified schemes for informal traders are run by state internal revenue services. States use different methods: some agree a flat annual amount by trade category or shop size with market associations, some collect at market level, some issue assessment notices based on an officer's visit. We could not find a published schedule of presumptive amounts for any state, and amounts change; ask your state IRS or your market association for the current scheme in writing.
Worked example: estimate vs records
- Trader's gross sales seen in bank and POS statements
- ₦12,000,000
- Assumed deemed-profit percentage
- 30%
- Deemed profit
- ₦3,600,000
- Tax at NTA bands: 0% on ₦800,000, 15% on ₦2,200,000, 18% on ₦600,000
- ₦0 + ₦330,000 + ₦108,000 = ₦438,000
- Same trader with records showing ₦2,000,000 real profit
- ₦0 on ₦800,000 + 15% of ₦1,200,000 = ₦180,000
The bands are those of the Nigeria Tax Act 2025 as summarised by DLA Piper Africa. The point of the example is the gap: without records, the trader cannot show that the estimate is too high.
Can you challenge a presumptive assessment?
Yes. A deemed-profit or best-of-judgement assessment is still an assessment, and the objection rules apply. You must object in writing within 30 days of service, setting out the items in dispute with their values, the correction you want and the tax you admit (NTAA s.41(2)). The authority has 90 days to respond, or the objection is upheld (s.41(6)). If you still disagree, the Tax Appeal Tribunal hears appeals within 30 days of the decision under the Joint Revenue Board Act 2025. In practice, an objection without records is weak. See how to object to a tax assessment.
How to move from presumed to real profit
- Get a Tax ID: for individuals, the NIN serves as one (NTAA s.4 requires registration).
- Use one business account for all sales, so turnover and costs are visible in a single statement.
- Keep a daily sales and expenses book, even in an exercise book or a phone note.
- Keep supplier receipts, rent receipts and levy receipts.
- File an annual return with the state IRS by its deadline, with a simple statement of accounts attested by you (NTAA s.13 allows this for trade income).
- Keep everything for six years after the year of assessment (s.31).
Once you file with a statement of accounts, the authority's starting point is your own figures rather than a presumption, although it can still query them. See also how long to keep tax records and tax for business name owners.
Where Pryme fits
A Pryme Business Account gives a trader a statement that separates business takings from personal money, and verifiable statements through VerifyDoc.ai can support an objection. This article is information, not tax advice.
Questions people ask
What is presumptive tax in Nigeria?
Tax charged on an estimated income rather than proven profit. NTAA 2025 s.38 lets a tax authority assess a fair and reasonable percentage of gross income where true profit cannot be ascertained.
Who pays presumptive tax?
Mainly informal traders and small businesses without reliable records, assessed by the state IRS where they live.
How much is presumptive tax for market traders?
It depends on the state scheme and the percentage or flat amount the authority sets. No national figure exists; ask your state IRS in writing.
Can I object to a presumptive tax assessment?
Yes, in writing within 30 days of service, with the figures you dispute and the tax you admit, under NTAA s.41.
Sources
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- Joint Revenue Board of Nigeria (Establishment) Act 2025 · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability (28 Aug 2026) · 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.