On June 26, 2025, President Bola Ahmed Tinubu signed four transformative tax reform bills into law, marking a significant overhaul of Nigeria’s fiscal landscape. These bills, the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act, and Joint Revenue Board (Establishment) Act, aim to modernize the country’s tax system, streamline revenue collection, and foster economic growth.
Crafted after what it termed extensive consultations led by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele, these reforms address long-standing issues such as fragmented tax laws, inefficiencies in administration, and disproportionate tax burdens on low-income earners and small businesses. The new laws consolidate over 50 overlapping taxes, introduce digital-first administration, and create a more equitable framework to boost Nigeria’s tax-to-GDP ratio from 10 per cent to 18 per cent by 2026, aligning with global and regional standards.
By reducing compliance burdens, exempting essential goods from VAT, and enhancing transparency, the reforms are poised to support businesses, protect vulnerable households, and drive sustainable development, provided implementation is effective and stakeholder trust is maintained.
Below are what we consider 12 important takeaways from Nigeria’s new tax laws, based on their provisions and anticipated impacts:
1. Consolidated Tax Framework: The Nigeria Tax Act unifies fragmented tax laws into a single, simplified code, eliminating over 50 small, overlapping taxes to reduce complexity and ease compliance for businesses and individuals.
2. VAT Exemptions for Essentials: Essential goods and services, including food, healthcare, education, public transportation, residential rent, and renewable energy, are now zero-rated for VAT, reducing costs for low-income households.
3. Small Business Tax Relief: Businesses with annual turnovers of ₦50 million or less (previously ₦25 million) are exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT), and the new Development Levy, with simplified filing requirements.
4. Reduced Corporate Tax Rates: Corporate Income Tax rates will decrease from 30 per cent to 27.5 per cent in 2025 and 25 per cent in 2026, enhancing competitiveness for large businesses.
5. VAT Revenue Redistribution: VAT proceeds are now allocated with 30 per cent based on consumption, 50 per cent equally among states, and 20 per cent based on population, aiming to incentivize states and curb tax evasion.
6. Rent Relief for Low-Income Earners: Individuals earning up to ₦1 million annually benefit from a ₦200,000 rent relief (or 20 per cent of rent paid, whichever is lower), reducing taxable income to ₦800,000, effectively exempting them from income tax.
7. Increased CGT Exemption Threshold: Compensation or damages up to ₦50 million (previously ₦10 million) for personal or professional wrongs are exempt from Capital Gains Tax, with only amounts above this taxed at the CIT rate (27.5 per cent in 2025, 25 per cent in 2026).
8. Development Levy Introduced: A 4 per cent levy on assessable profits (declining to 2 per cent by 2030) is imposed on companies (except small and non-resident ones), consolidating existing levies like the Tertiary Education Tax and funding education initiatives.
9. Digital-First Tax Administration: The Nigeria Tax Administration Act introduces a modern, technology-driven system with e-invoicing, VAT fiscalization, and a user-friendly digital interface to enhance efficiency and reduce corruption.
10. Creation of Nigeria Revenue Service (NRS): The Nigeria Revenue Service Act replaces the Federal Inland Revenue Service with the NRS, a more autonomous agency tasked with collecting both tax and non-tax revenues, improving efficiency and transparency.
11. Joint Revenue Board and Tax Ombudsman: The Joint Revenue Board Act establishes a collaborative platform with federal and state representatives and introduces a Tax Ombudsman and Tax Appeal Tribunal to resolve disputes and protect taxpayers.
12. Tax on Digital Assets and Services: A 5 per cent excise duty applies to digital platform transaction fees, and a 10 per cent duty on virtual asset provider services, aligning Nigeria with global trends in taxing the digital economy.
These reforms aim to create a more equitable, efficient, and business-friendly tax system, but their success hinges on transparent implementation and public awareness. Businesses and individuals are encouraged to conduct impact analyses and upskill staff to adapt to the new regime, effective January 1, 2026.
