What Companies Should Know When Carrying Forward Tax Losses Under the Nigeria Tax Act 2025

Under the Nigeria Tax Act 2025
For many Nigerian businesses, the ability to carry forward tax losses is one of the most valuable - and most misunderstood — reliefs in the tax system. It allows a company that made a loss in one year to offset that loss against profits in future years, easing its tax burden as the business recovers. The Nigeria Tax Act (NTA) 2025, which consolidates and replaces the previous Companies Income Tax Act and related legislation, retains this relief but refines several of the rules around it.
Here is what finance teams, business owners, and boards need to understand.
Losses Can Still Be Carried Forward Indefinitely - But Not Automatically
Under the NTA 2025, a company's unrelieved tax losses can generally be carried forward without a fixed time limit, to be set off against future assessable profits. This is good news for startups, capital-intensive
businesses, and companies going through a difficult trading period, since losses from early or hard years are not simply lost after a set number of years.
However, "indefinite" does not mean "automatic." Loss relief must still be properly computed, documented, and claimed in the company's annual tax returns. A company that fails to declare and carry forward its losses correctly in the year they arise may find it difficult to justify the claim years later,
especially where audited accounts, capital allowance schedules, and prior returns are not well preserved.
Practical takeaway: Maintain running loss schedule as part of your annual tax file — not just your accounting file - showing the year a loss arose, the amount, and how much has been utilised each
subsequent year.
Losses Are Ring-Fenced by Line of Business
One of the more important nuances companies often overlook is that losses made in one line of business cannot be relieved against profits from a different line of business. If your
company operates multiple distinct trades — for example, a manufacturing operation and a separate consultancy arm — a loss in one cannot simply be netted off against the profit of the other for tax purposes. Each trade's losses are tracked and relieved against its own future profits.
This has a specific twist for digital and virtual assets: losses arising from the disposal or other transactions in digital or virtual assets can only be set off against profits from that same
asset class, not against ordinary trading income.
Practical takeaway: If your company runs more than one distinct business line, or holds digital assets, keep segmented profit-and-loss records for tax purposes so losses are matched correctly to the activity that generated them.
Group Restructuring Now Offers More Flexibility Companies undergoing mergers, group reorganizations, or restructuring will find the
NTA 2025 more accommodating than the old regime.
Tax-neutral group reorganizations can now be structured so that unutilized
capital allowances continue to be available to the continuing entity, and in some cases unabsorbed losses can also be carried forward into the restructured entity. The previous requirement that companies remain part of the same group for 365 days before a tax-neutral reorganization has also been removed, reducing a common obstacle to timely restructuring.
That said, the relevant tax authority must be informed of the transaction in advance. This is not a self-executing relief - it depends on proper notification and structuring.
Practical takeaway: If a merger, acquisition, or internal restructuring is being planned, involve tax advisers early so the transaction can be structured to preserve loss and capital allowance carry-forwards, and ensure the tax authority is notified as required.
Small Companies May Not Need to Worry About This at All The NTA 2025 raised the small company exemption thresholds significantly: companies with annual turnover of #100 million and below and total fixed assets not exceeding N250 million are now exempt from Companies Income Tax, Capital Gains Tax, Value Added Tax and the new Development Levy - provided they are not professional service firms. For businesses that qualify, questions of loss carry-forward may be less pressing in the near term, since there is no CIT liability to offset losses against. This exemption status should still be monitored, however, since growth beyond the thresholds brings the company back into the full tax net, at which point historical losses and their treatment become relevant again. Practical takeaway: Track your turnover and fixed asset base against the small company thresholds each year, and don't assume exempt status is permanent. Documentation and Governance Matter More Than Ever
With the National Revenue Service now consolidating tax administration and enforcement, and audits increasingly scrutinizing the basis for historical claims, companies should expect closer examination of loss carry-
forward claims, particularly where losses have been accumulated over
several years or where related-party transactions are involved. Boards and
finance leads should treat the loss position as a standing agenda item in financial reporting, not a one-off calculation.
Practical takeaway: Include the accumulated tax loss position and its ageing in periodic board financial reports, alongside liquidity and related-party disclosures, so it is monitored with the same rigour as other financial risks.
The Nigeria Tax Act 2025 preserves the core benefit companies have relied on for years - the ability to carry forward tax losses to future profitable years — but it sharpens the rules around ring-fencing by line of business, offers new flexibility for group restructuring, and operates within a tighter administrative environment. Companies that keep clean, segmented loss
records, understand how restructuring rules apply to them, and monitor their exemption status stand to get the full benefit of this relief, while those that treat it as an afterthought risk losing value they are otherwise entitled to.