INTRODUCTION
In furtherance of improving revenue generation and making Nigeria more investor friendly, the Nigerian President, on June 26 2025, signed into law four tax bills passed by the National Assembly. These include the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act (together the "Tax Laws").
The Tax Laws aim to simplify tax collection, reduce the tax burden on compliant businesses, and reposition the country as a more attractive investment hub, while boosting revenue through a wider and fairer tax net. While the effective date of the Tax Laws is set for January 1 2026, this article highlights their key provisions and the potential implications on taxpayers, companies and investors.
THE NIGERIAN TAX ACT
The Nigerian Tax Act (the "NTA") is a unified statute consolidating exsiting laws on companies income tax, personal income tax, value-added tax, capital gains tax, and other various tax enactments. The key highlights of the NTA include:
- Relief for Small Companies
The NTA exempts small companies from payment of Companies' Income Tax, Capital Gains Tax and Development Levy. For clarity, the NTA defines a small company as a company with an annual turnover not exceeding ₦100 million and total fixed assets not exceeding ₦250 million. This relief is however, inapplicable to companies that provide professional services notwithstanding that they meet the financial thresholds. - Introduction of Development Levy The introduction of a 4% development levy on the assessable profits of all companies (except small companies and non-resident companies) is a novel introduction of the NTA. The Development Levy consolidates multiple taxes such as the Tertiary Education Tax (TET), Information Technology Levy (IT), the National Agency for Science and Engineering Infrastructure (NASENI) levy and the Police Trust Fund (PTF) levy. This helps address the often unclear and multiple levies imposed under the existing tax regimes. It also helps ease the burden of computing various levies and interfacing with multiple government agencies.
- Progressive Personal Income Tax regime The NTA redefines the income brackets for personal income tax and applicable tax rates for each bracket. Under the new regime, individuals earning ₦800,000 or less per annum are exempt from tax on their income and gains, while higher income earners will be taxed up to a maximum of 25%. Additionally, all sums not exceeding ₦50,000,000 obtained as compensation for loss of employment or injury is tax exempt.
- Taxation of Digital Assets The NTA states that profits or gains from transactions in digital or virtual assets are chargeable to tax. Although in alignment with the recognition of virtual assets under the Investment and Securities Act 2025, the taxation of virtual assets will likely pose some challenges particularly in the areas of enforcement and valuation of the digital assets for tax purposes. Furthermore, given the decentralised nature of digital transactions, in the absence of a robust digital infrastructure, the National Revenue Service (NRS) may find it challenging to track digital asset transactions given the often-anonymized nature of these digital assets.
THE NIGERIA TAX ADMINISTRATION ACT
The Nigerian Tax Administration Act (the "NTAA") outlines a uniform procedure for the consistent and efficient administration of the NTA to facilitate tax compliance by taxpayers and optimise tax revenue. Some key highlights include:
1. Mandatory Taxpayer Identification Number (TIN) Registration
The NTAA requires all taxable individuals, Ministries, Departments, and Agencies (MDAs) of the Federal, State and Local governments to register and obtain a Tax Identification Number (TIN). It also requires non-resident persons making taxable supplies to individuals in Nigeria or deriving income (excluding passive income from investments) in Nigeria, to register for tax purposes and obtain a TIN. There is an obligation imposed on persons engaged in the provision of financial services to ensure that every taxable person provides a TIN. Without a doubt, the TIN requirement is designed to adequately capture all taxable persons, including those in the informal sector and reduce tax evasion.
2. Monthly Return Requirement
The NTAA outlines the filing requirements for individuals and companies. In more specific terms, royalty payments for petroleum companies must be submitted by the 14th day of the following month, while the deadline for mining royalty and non-resident shipping/airline companies is the 21st of the following month. Petroleum license holders are required to submit annual returns for royalties paid during an accounting period, no later than five months after the period ends.
3. Digitalization of Tax Filing and Compliance
A key innovation in the NTAA is the introduction of the Electronic Fiscal System (EFS). The EFS is designed to enhance the accuracy, efficiency, and transparency of tax administration. In this regard, all taxable persons are required to maintain accurate records of all transactions processed through the EFS. The focus on digital tax filing, is one of the most impactful reforms of the NTAA. By reducing human intervention, EFS aims to minimise errors, fraud, and inefficiencies in the tax process. This feature highlights the critical importance of embracing digitalization in tax administration towards ensuring better compliance and promoting a more efficient and transparent tax system.
4. Filing of Returns for Virtual Assets Service Providers (VASPs):
In keeping with the recognition of virtual assets under Nigeria law, the NTAA mandates all taxable persons involved in services related to the exchange, custody, or management of virtual assets through Virtual Asset Service Providers (VASPs) to file their tax returns. This is without prejudice to the power of the tax authority to request additional information at any time. Any VASP who fails to comply with the provisions of the NTAA will, in addition to having their licence suspended or revoked by the Securities and Exchange Commission, be required to pay an administrative penalty of ₦10,000,000 for the first month of default and ₦1,000,000 for each subsequent month that the default persists.
5. Transaction Threshold Reporting:
The NTAA authorises banks and other financial institutions to file quarterly returns to the relevant tax authority in respect of all new customers and in the case of existing customers, all individual transactions exceeding ₦25 million and corporate transactions above ₦100 million monthly.
6. Revised VAT Sharing Formula:
Section 81 of the NTAA reviews the VAT distribution among the three tiers of government in the following order- Federal Government (10%), State Governments (55%), Local Governments (35%). However, the amount of the VAT revenue standing to the credit of states and local governments shall be distributed on the following basis: Equality – 50%; Population – 20%; Place of Consumption – 30%. This reflects a broader principle of fairness in the VAT administration.
THE NIGERIA REVENUE SERVICE (ESTABLISHMENT) ACT
The Nigeria Revenue Service (Establishment) Act (the "NRS Act") has the objective of providing a legal, institutional and regulatory framework for the administration of taxes and revenues accruable to the Federal Government. The NRS Act establishes the Nigeria Revenue Service (the "Service") to take over the functions of the Federal Inland Revenue Service ("FIRS").
The NRS Act empowers the Service to assess, collect, and account for revenue accruable to the Federal Government and related matters. Furthermore, the Service may, on request, assist any State of the Federation, the Federal Capital Territory or Local Government to collect or administer a tax which such requesting state is authorised to collect. Such request may however be subject to a fee required to defray the cost of providing such assistance.
The Service under the NRS Act is the principal tax regulator on matters related to federal taxes and all obligations performed by the FIRS have now been effectively transferred to the Service and continued by it.
JOINT REVENUE BOARD NIGERIA (ESTABLISHMENT) ACT, 2025
The Joint Revenue Board Nigeria (Establishment) Act, 2025 (the "JRB Act") is the fourth of the tax reform bills assented to by the President. The objectives of the JRB Act include:
- provision of a legal and institutional framework for the harmonisation and coordination of revenue administration in Nigeria.
- provision of a mechanism for efficient dispute resolution; and
- promotion of the rights of the taxpayers.
Conclusion
The Tax laws represent a clear effort towards achieving a fair, transparent, and growth-oriented tax system. The harmonization of Nigeria's often disparate tax landscape while embracing digital modernization is an innovative feature of the Tax Laws. The successful implementation of the Tax laws will however, largely depend on judicial clarity on potential constitutional questions, and robust infrastructure development at both federal and state levels.
It is therefore imperative for individuals and corporate entities to undertake a comprehensive review of their tax strategies, processes, and compliance frameworks to ensure readiness and resilience. If properly implemented, the tax laws could provide the much needed investor confidence, and redirect critical revenues to key sectors of the economy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
