Tax Reform Bill
The Tax Reform Bill was first introduced to the National Assembly on 3rd October 2024 and signed into law as The Nigeria Tax Reform Act 2025 on 26th June 2025, by the The President, Bola Ahmed Tinubu. The Act is effective from 1 January 2026 and comprises of the Nigeria Tax Act (NTA), The Nigeria Tax Administration Act (NTAA), The Nigeria Revenue Service Act (NRSA) and the Joint Revenue Board Act (JRBA), collectively referred to as “the Acts” hereafter.
The Nigeria Tax Reform Act 2025
The Act repeals some existing laws, boosts revenue generation, simplifies tax administration and reduces nuisance taxes (being taxes which are costly to administer, disproportionately burdens small and medium sized businesses, results in low revenue) in order to promote economic growth.
A major focus of the Nigeria Tax Reform Act is the unified framework achieved by consolidating existing tax laws which further results in simplifying the tax system and making it more accessible for taxpayers.
Tax Reforms in Nigeria
The Nigeria Tax Act (NTA)
- Company Income Tax – According to section 56 of the Act, Small companies are now exempt from Company Income Tax (CIT), small companies being companies earning gross turnover of NGN100 million or less (previously NGN25 million) per annum with total fixed assets not exceeding NGN250 million. The Act has maintained the standard CIT rate of 30% for companies with a gross turnover greater than NGN100 million.
- Personal Income Tax – The tax band for computing Personal Income tax (PIT) has been reviewed, with a more progressive administration in place. The applicable tax rates for individuals earning NGN800,000 or below per annum on their income and gains is 0% while higher income earners will now be taxed at a higher rate of up to 25%. The tax exemption threshold for compensation for loss of employment or injury has been increased to NGN50million from NGN10 million. See below the new tax band and rates:
| Income Tax Band | Rate |
| First N800,000 | 0% |
| Next N2,200,000 | 15% |
| Next N9,000,000 | 18% |
| Next N13,000,000 | 21% |
| Next N25,000,000 | 23% |
| Above N50,000,000 | 25% |
- Rent Relief – The NTA replaces the Consolidated Relief Allowance (CRA) which was previously 20% of gross income + the higher of 1% of gross income or NGN200,000 with rent relief of 20% of annual rent paid, subject to a maximum of NGN500,000 whichever is lower. In order to claim this relief, the individual is required to accurately declare the actual amount of rent paid in addition to other relevant information prescribed by the relevant tax authority.
- Effective Tax Rate (15% ETR) – According to Section 57 of the Act and in line with the OECD’s global tax reform, a minimum effective tax rate rule (Global Minimum Tax) now applies. Effective tax rate is defined by the Act as total ‘covered taxes’ paid divided by net profits (with a small adjustment allowing 5% of depreciation and personnel cost to be excluded). If the foreign subsidiary of a Nigerian company does not pay up to 15% minimum effective tax ratein its country, a top-up tax must be paid by the Nigerian parent to bring the effective rate up to 15%. The Act further extends this concept to domestic companies. Where a large company or any constituent of a multinational group having a turnover of ≥ NGN20 billion has a total tax paid of <15% of its accounting profit for a year, it is required to recompute and pay additional tax to make up the effective rate to 15%. The CIT for most Nigerian companies being 30%, exceeds 15% hence, the domestic top-up would not be applicable, unless in the case of a company having significant tax holidays or incentives which reduces its tax rate. This rule thus effectively abolishes certain tax holidays for large companies. The minimum 15% ETR rule invalidates the benefits of multinational companies shifting profits to jurisdictions that have tax rates below 15%, thereby ensuring a floor tax liability. Nigerian companies are therefore required to compute these new obligations by taking into consideration their taxes paid globally.
- Value Added Tax – The NTA has retained the VAT rate of 7.5%, however, the scope and application of the Act has been substantially revised. Taxable supplies of goods and services connected to Nigeria are chargeable. Input VAT on all purchases, services and fixed assets are now recoverable in line with global practices. Businesses providing services which were previously unable to claim input VAT can now do so through VAT filing, provided that the input VAT is directly related to their supplies that are also subject to VAT. This would result in lower VAT payable.
- Zero-Rated Items – The list of zero-rated items has been extended to include essential goods and services which include basic food items, tuition fees, educational books and materials, medical equipment and services, medical and pharmaceutical products, electricity generation and transmission services, exports (excluding oil and gas exports), electric vehicles etc. The effect of this on businesses is the ability to recover their VAT costs, which was previously not possible by law.
- Capital gains Tax – The NTA increases capital gains realized by companies (from the sale of investments or assets) to 30% (previously 10%), thus aligning the Companies Income Tax rate with the with the CGT. This ultimately means that capital gains are no longer taxed separately at 10%, rather they are now included in taxable profits. Capital Gains for individuals will be taxed at the applicable rate of income tax in line with the progressive tax band of the individual.
- Capital Gains Tax on Sale of Shares – the tax exemption threshold for the sale of shares in Nigerian companies has been increased to NGN150million (from NGN100 million) in any 12 consecutive months, provided that the gains do not exceed NGN10 million. The gains will also not be taxable if the proceeds from disposal are reinvested in shares of Nigerian companies within the same assessment year, as well as if the shares are transferred between approved parties in a regulated securities lending transaction.
- Development Levy – The NTA introduces a Development Levy of 4% of assessable profits. This levy is applicable to all companies chargeable under the Act, except small companies and non-resident companies. Essentially, large resident companies (companies with turnover >NGN100,000) will pay 4% levy on their profits in addition to CIT. The Levy consolidates and replaces several previous specific taxes including IT levy and 2.5% education tax etc. The levy is intended for funding technology and education infrastructure such that, 50% of the fund goes to the Tertiary Education Trust Fund, and the balance apportioned to agencies like the Defense & Security Fund and the National Information Technology Development Fund. This impacts the effective tax rate of resident companies, ultimately increasing it to 34% from 30%.
- Digital Economy and Significant Economic Presence (SEP) – The Act introduces new reporting obligations for resident companies in their transactions with non-resident digital service providers. The adoption of “significant economic presence” for taxing non-residents means that payments made to foreign companies by Nigerian companies for technical or digital services must be subject to witholding tax, as such payments represents taxable Nigerian-source income for the foreign provider. Nigerian companies thus become withholding agents for a broad range of payments such as cloud services, licensing fees etc. paid to offshore entities. This indirectly increases the burden of compliance for Nigerian companies.
- Digital Assets – The Act states that awards, winnings, grants, honoraria, gains or profits from transactions in virtual or digital assets are chargeable to tax, while losses from digital assets would solely be deducted from profits from digital assets. The correct valuation of digital assets as well as tracking and enforcing reporting requirements would pose some challenge for tax authorities due to the peculiar nature of the assets and the manner in which they are held. The efforts of the tax authorities coupled with strategic International coordination would be required to tackle these challenges.
- Controlled Foreign Company (CFC) Rule – The Act introduces the CFC rule to counter profit shifting by Nigerian companies to low-tax jurisdictions. In accordance with Section 6(2) where a foreign subsidiary of Nigerian company does not distribute its profits at the end of the year where such profits could have been distributed without adversely affecting the subsidiary, the profits would be deemed distributed and the Nigerian company would be taxed on their share of profits from the subsidiary. Hence Nigerian parent companies are to include a proportional share of profits from their controlled foreign entities (or overseas subsidiaries) in their taxable income. By this rule, the deferral advantage often enjoyed by companies as a result of tax planning is eliminated.
- Dividend and Profit Distribution Rules – The NTA refines rules around dividends. In addition to actual dividends declared by Nigerian companies, ‘Nigerian dividends’ are defined to include any amounts of profits treated as distributed under the provisions of any law in Nigeria. This is closely linked to the CFC rule and an anti-avoidance rule. Where a Nigerian company which is controlled by ≤ five (5) individuals fail to distribute its profits by the end of a period (where these profits could have been distributed with no adverse effect to the business), the tax authority may direct that those profits be treated as distributed to the shareholders and such deemed dividends would be taxed in the hands of the shareholders. This makes it difficult for personal taxes to be deferred indefinitely by high-net-worth individuals through retaining earnings in their companies. On the other hand, the Act provides relief for corporate shareholders. Where dividends from a Nigerian company is paid to another Nigerian company from its Profits after tax, such dividends are exempt from further tax, for the avoidance of double taxation or in the case of a franked investment income. However, where a company pays out dividends in a year in excess of its taxable profits (or where it made no taxable profit), the Act imposes tax on such dividend as if it were the profits of the company. This is referred to as a case of ‘substitution of dividend for total profit’ and is a carryover of Nigeria’s Excess Dividend Tax rule, designed to prevent companies from distributing untaxed income.
Nigeria Tax Administration Act (NTAA)
- Technology – Inclusive in the Tax Reform is an emphasis on technology by including a VAT fiscalisation system, e-invoicing and collection monitoring. It also introduced a National Single Window Portal for integrating tax with trade and custom processes.
- Tax Planning – The NTAA requires that companies proactively and voluntarily bring to the notice of tax authorities any tax scheme or transactions which can result in a tax advantage. Tax advantage broadly refers to any situation where a person or any entity benefits from a favorable tax outcome such as reducing or avoiding tax charges or assessments, obtaining new or increased tax reliefs, avoiding obligations to deduct for tax etc
- Penalties and Interests – The Tax Reform introduces new penalties and updates existing penalties and interests for late filing, non-payment and other offences including increase in penalty for failure to file returns to N100,000 in the first month and NGN50,000 for every month the failure continues. A new penalty of NGN5million for awarding contracts to individuals or entities that are not registered for tax, penalties for failure to grant access for deployment of technology, inducing a tax officer etc.
The Nigeria Revenue Service Act (NRSA)
- This Act repeals the FIRS Act 2007 and establishes the Nigeria Revenue Service (NRS) essentially renaming and upgrading FIRS to reflect an expanded mandate charged with assessing, collecting and accounting for revenue due to the federation.
Joint Revenue Board Act (JRBA)
- Tax Ombuds Office – The Act introduces the Tax Ombuds office as an independent office for tax payers to lodge complaints regarding administrative delays or unfairness. The office ultimately liaises with the tax authorities on behalf of taxpayers.