Tax Term
What is Severance Pay?
Payment received when leaving employment, often as compensation for job loss.
Detailed Explanation
Under the Nigeria Tax Act 2025, the first ₦50,000,000 of severance pay is exempt from tax. Any amount above this threshold is taxed using the progressive income tax bands.
Example
Receiving ₦70m severance: First ₦50m is tax-free, remaining ₦20m is taxed.