Sole Proprietor Tax Guide: Deductions You're Probably Missing
Running your own business in Nigeria? Here are 9 expense categories most sole proprietors forget to claim — and how to document them properly.
You're Leaving Money on the Table
If you run a sole proprietorship in Nigeria — whether it's a logistics business, a consulting firm, a shop, or a tech startup — you're probably paying more tax than you need to.
The Nigeria Tax Act 2025 allows sole proprietors to deduct legitimate business expenses from their gross income before calculating tax. But most small business owners either don't know what qualifies, or they don't keep the records needed to prove it.
Let's fix that. Here are the deductions you should be claiming, how to document them, and the percentage TaxJeje applies to each category.
How Business Deductions Work
The principle is simple: if an expense is wholly, exclusively, and necessarily incurred in the production of your business income, you can deduct it from your taxable income.
The key word is "exclusively." A laptop you use only for business? 100% deductible. A car you use for both personal and business trips? Only the business portion is deductible. TaxJeje handles this with proportional deduction percentages for each category.
The 9 Categories Most Sole Proprietors Miss
1. Business Premises Rent (100% deductible)
If you rent a separate office, shop, warehouse, or co-working space for your business, the full rent is deductible. This is different from rent relief for your personal accommodation (which is a personal tax relief, not a business deduction).
What you need: Tenancy agreement in the business name, bank transfer receipts for rent payments.
2. Vehicle Expenses (60% deductible)
Fuel, maintenance, insurance, and repairs for vehicles used in your business. TaxJeje defaults to 60% because most sole proprietors use their vehicle for both personal and business purposes.
What you need: Fuel receipts, mechanic invoices, insurance certificates. Keep a simple log of business vs. personal trips if you want to claim a higher percentage.
3. Staff Costs (100% deductible)
Salaries, wages, and PAYE contributions for your employees are fully deductible. This includes:
What you need: Payroll records, bank transfer evidence, PAYE remittance receipts from NRS.
4. Inventory & Stock (100% deductible)
If you sell physical products, the cost of goods purchased for resale is deductible. This is your cost of goods sold (COGS), not the selling price.
What you need: Purchase invoices, supplier receipts, stock records. If you use a POS system, export your purchase history.
5. Utilities (100% deductible)
Electricity, water, and generator fuel for your business premises. If you work from home, you can claim the business proportion of your utility bills.
What you need: NEPA/DisCo bills, water bills, generator fuel receipts. For home office, document the percentage of your home used exclusively for business.
6. Business Insurance (100% deductible)
Premiums for business insurance policies: professional indemnity, product liability, fire insurance, goods-in-transit, fidelity guarantee.
What you need: Insurance policy documents, premium payment receipts.
7. Repairs & Maintenance (100% deductible)
Repairs to business equipment, machinery, office space, or vehicles. This covers maintenance (keeping things working), not capital improvements (making things better than new).
What you need: Repair invoices, contractor receipts.
8. Legal Fees (100% deductible)
Fees paid to lawyers for business-related legal work: contract drafting, dispute resolution, regulatory compliance, business registration.
What you need: Legal fee invoices, engagement letters.
9. Accounting Fees (100% deductible)
Fees paid to accountants, bookkeepers, or tax preparers for business financial services.
What you need: Accounting fee invoices. Yes, your TaxJeje subscription counts if you're using it for business tax compliance.
Categories You Were Already Claiming
Beyond the 9 above, don't forget the standard categories that most people know about:
The Golden Rule: No Receipt, No Deduction
The NRS can disallow any deduction you can't prove. The Nigeria Tax Administration Act (NTAA) requires you to keep records for 6 years from the end of the relevant tax year.
For every expense you claim, you need:
TaxJeje stores all of this for you. Snap a photo of the receipt when you pay, categorize it, and we'll keep it filed for the full 6-year retention period.
How to Calculate Your Savings
Here's a quick example. Say you're a sole proprietor earning N8,000,000 gross income per year:
Without deductions, your tax on N8M would be approximately N1,289,000. With N4.7M in deductions, your taxable income drops to N3.3M, and your tax drops to approximately N375,000.
That's N914,000 saved — just by properly documenting expenses you were already paying.
Start Tracking Today
Every day you don't log an expense is a potential deduction lost. TaxJeje makes it easy:
Your future self (and your bank account) will thank you.