Nigeria Passes Landmark Tax Reform: What Your Business Needs to Know

Date of Assent: June 26, 2025

Effective Date: Expected January 1, 2026 

On June 26, President Bola Tinubu signed four major tax reform bills into law, marking the most sweeping overhaul of Nigeria’s tax landscape in recent history  . These reforms aim to simplify tax administration, broaden the tax base, empower digital enforcement, and generate revenue for national development—all without increasing VAT on essentials.

The Four Pillars of Reform

1. Nigeria Tax Act (NTA)

   – Consolidates multiple tax laws into a single code, eliminating over 50 minor levies and “nuisance taxes” to reduce overlap and compliance burden  .

2. Tax Administration Act

   – Introduces consistent collection rules across federal, state, and local governments, with mandatory Tax ID registration, e‑invoicing, and VAT fiscalisation  .

3. Nigeria Revenue Service Act

   – Replaces the Federal Inland Revenue Service with a new Nigeria Revenue Service (NRS)—an independent, performance-driven agency aimed at improving efficiency  .

4. Joint Revenue Board Act

   – Creates a unified governance structure, including a Tax Ombudsman and Tax Appeal Tribunal to resolve disputes and enforce compliance fairly  .

Key Highlights You Should Know

1. 

VAT Adjustments & Digital Enforcement

• VAT remains at 7.5%, with essential items (food, education, healthcare, domestic rent, exports) zero-rated—a measure to buffer vulnerable households  .

• New input VAT rules allow businesses to recover VAT on purchases of goods and services, including fixed assets  .

• Mandatory e‑invoicing and real-time fiscalisation aim to curb evasion and improve transparency  .

2. 

Corporate Tax & Development Levy

• Small companies (turnover < ₦100M) are exempt from Company Income Tax (CIT), CGT, and the new Development Levy  .

• Larger companies: CIT gradually reduces from 30% → 27.5% in 2025, then 25% in 2026  .

• A 4% Development Levy replaces previous levies (e.g., tertiary education fund, PTF, NASENI)  .

• Multinational entities or firms with turnover > ₦50 bn are subject to a minimum effective tax rate of 15%, with top-up tax as needed  .

3. 

Capital Gains & Digital Assets

• CGT on corporate gains rises from 10% to 30%; individuals taxed per progressive income bands  .

• Realised capital gains from indirect share transfers (e.g., via offshore holding companies) now taxable in Nigeria  .

• Digital asset transactions (cryptocurrency, NFTs, etc.) are now explicitly taxable as capital gains or income, with exchanges required to be licensed by the NRS  .

4. 

Personal Income Tax (PIT)

• Tax-exempt threshold raised: Income ≤ ₦800,000 is exempt; ₦800,001–₦1M benefits from reduced rates  .

• Top marginal rate capped at 25%.

• Lump-sum compensation or injury awards up to ₦50M are now tax‑exempt  .

5. 

Expanded Withholding Tax (WHT) & Registration

• WHT broadened to include sectors like entertainment, sports, telecoms, lottery, etc., to enhance revenue capture  .

• Stronger enforcement of Tax IDs (TIN)—no stamp duty or invoicing without registration; late registration attracts double WHT penalties ().

6. 

Improved Dispute Resolution

• Introduction of the Tax Ombudsman and a Tax Appeal Tribunal to provide structured, independent mechanisms to resolve taxpayer grievances  .

Who Benefits—and What to Watch

Group	Key Benefits
Low-income individuals	Retain more income; essentials become cheaper via zero-rated VAT.
SMEs	Tax relief (turnover < ₦100M), fewer compliance hurdles, simpler filing.
Large & multinational firms	Lower CIT, input VAT recovery—but newly subject to Dev. Levy and minimum ETR.
Digital & gig‑economy workers	Clarity on income and digital asset taxation—though compliance required.

Recommended Next Steps

1. Update systems and processes for e-invoicing, TIN collection, input VAT offsetting, and compliance filings including PIT and WHT.

2. Review corporate structure and transactions in light of CGT changes, Development Levy, and CFC provisions.

3. Train staff and sensitize leadership—ensure teams and clients are informed ahead of the January 2026 effective date.

4. Monitor implementation—especially registration enforcement, fiscalization rollout, and rollout of NRS portal.

Final Thoughts

Nigeria’s tax reforms are a bold bid to modernize fiscal policy, simplify compliance, and unlock revenue for public investments—without directly burdening vulnerable citizens. For businesses, the changes bring both opportunities (like lower CIT, SME exemptions, and digital clarity) and new obligations (e‑invoicing, TINs, input VAT, and digital asset taxation). Careful planning and early adoption will be key to thriving under this new framework.

Need help navigating these reforms?

Our tax advisory team is ready to assist with compliance strategies, system overhauls, and dispute resolution as Nigeria transitions to these new laws.