Introduction
On 9th September 2025, the Federal Government of Nigeria published the official gazetted versions of the Nigeria Tax Act, 2025 (the "NTA"), the Nigeria Tax Administration Act, 2025 (the "NTAA"), the Nigeria Revenue Service (Establishment) Act, 2025 (the "NRSA") and the Joint Revenue Service (Establishment) Act, 2025 (the "JRSA") (together, the "Tax Reform Acts"). The NRSA and the JRSA came into effect on 26th June, 2025, to enable the bodies created by the statutes to start putting structures in place for implementation, while the NTA and NTAA will come into effect on 1st January, 2026, to give taxpayers sufficient time to adjust their processes for compliance with the laws. Our series one on our highlights of provisions of the Tax Reform Acts can be accessed here.
While some of the previous incentives and benefits have been removed, the NTA introduce general and sector-specific incentives. Tax incentives remain an integral component of the Federal Government's fiscal strategy aimed at catalysing specific economic activities or sectors by leveraging on a reduced tax obligation for a period of time in qualified instances. We have discussed some of the incentives provided in the NTA below.
1. General Incentives - Income Tax Exemptions
The NTA retains and incorporates (as applicable) some of the income tax exemptions under the repealed Companies Income Tax Act 2004 (as amended), the Personal Income Tax Act 2004 (as amended), the Diplomatic Immunities Act, 2004, the Pension Reform Act, 2014 (as amended), and the Startup Act, 2022. Some exemptions introduced or retained under the NTA include:
a. Reintroduction of the tax exemption for educational institutions, which was deleted by the Finance Act, 2021. The NTA exempts from tax profits accruing to or gains from the disposal of assets of any person engaged in educational activities of a public character, where the profits or gains are not derived from a trade or business carried on by such person. The definition of "public character" is retained (in respect of an organisation or institution) as one (a) that is registered in accordance with relevant law in Nigeria; and (b) does not distribute or share its profit in any manner to members or promoters.
b. the NTA, small companies remain exempt from income tax, but the annual turnover threshold for a small company has been increased from N25 million to N50 million or less with fixed assets not exceeding N250 million. Any business providing professional services shall, however, not be classified as a small company. It appears the intention of the Federal Government of Nigeria was to increase the threshold to N100 million, given the news reports from the Presidential Committee on Fiscal Policy and Tax Reforms, but this has not been reflected in the gazetted NTA released by the government. The N100 million threshold is, however, reflected in the definition of a small company in the NTAA. This discrepancy , therefore needs to be resolved by the Federal Government of Nigeria.
c. Redundancy lump sum payment and other compensation of a capital nature for loss of employment, where such payment does not exceed N50 million. The excess amount above N50 million will be taxed. The threshold under the repealed Capital Gains Tax Act 2004 (as amended) was N10 million.
d. Gains from the disposal of land immediately adjoining an individual's dwelling house up to a maximum of one acre. Gain from the disposal of land used for commercial purposes is, however, not exempted.
e. Dividend, interest, rent or royalty derived from outside Nigeria and brought into Nigeria through approved channels. Fees and commission earned abroad will now be taxed, which was not the case under the repealed Companies Income Tax Act 2004 (as amended), and the Personal Income Tax Act, 2004.
f. The profits of any Nigerian company (other than companies engaged in the upstream, midstream or downstream petroleum operations) in respect of goods or services exported from Nigeria, if the proceeds of such exports are repatriated through official channels.
g. Proceeds from the disposal of shares in an aggregate amount less than NGN150 million and the chargeable gain not exceeding NGN10 million in any 12 consecutive months will be exempt from tax. Notwithstanding the threshold, no tax will apply if the proceeds are reinvested within the same year of assessment in the acquisition of shares in the same or other Nigerian companies, provided that tax shall accrue proportionately on the portion of the proceeds which are not reinvested. Shares transferred between an approved borrower and a lender in a regulated securities lending transaction are not a disposal for tax purposes, so no taxes will apply.
h. Disposal of an individual's personal chattels where the total amount or value of the consideration does not exceed N5 million or 3 times the annual minimum wage, whichever is higher.
2. Sector-specific Incentives
2.1 The Capital Markets
a. Income earned from bonds issued by the Federal Government or State Government in Nigeria is exempt for both individuals and corporations. After the expiration of the Companies Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011, in January 2022, income on state government and corporate bonds became subject to income tax for corporate entities. The NTA now provides that both corporates and individuals can enjoy income tax exemption on state government bonds.
b. Dividends distributed by collective investment schemes ("CIS") authorised by the Securities and Exchange Commission ("SEC") are now clearly exempted from tax. This is a significant development for the capital markets to encourage investments in CIS generally, not just through unit trusts.
c. Dividend or rental income received by a real estate investment company on behalf of its shareholders, where not less than 75% of the dividend or rental income is distributed within 12 months after the end of the financial year in which the dividend or rental income was earned. This does not exempt a (i) shareholder from tax on the dividend or rental income received from a real estate investment company; (ii) real estate investment company from tax on management fee, profits or any other income earned for and on its own account: and (iii) real estate investment company from tax on dividend or rental income if it does not meet the conditions stipulated in the above provision.
d. Compensating payments, which qualify as dividends, received by a lender from its approved agent or a borrower in a regulated securities lending transaction and compensating payments, which qualify as dividends or interest, received by an approved agent from a borrower or lender on behalf of a lender or borrower in a regulated securities lending transaction.
e. Instruments in relation to the following are exempted from stamp duties: (a) shares, stocks or securities transferred by a lender to its approved agent or a borrower in furtherance of a regulated securities lending transaction; (b) shares, stocks or securities returned to a lender or its approved agent by a borrower in pursuant of a regulated securities lending transaction; and (c) all documents relating to the transfer of stocks and shares.
2.2 The Agricultural Sector
Income generated by companies engaged in agricultural businesses, including crop production, livestock, aquaculture, forestry, dairy and such other businesses as described in the Thirteenth Schedule, is exempted from tax for the first 5 years upon commencement of business. A company is deemed to commence business at the earlier of when it begins to market or first advertises its products or services for sale, executes its first trading contract after complying with incorporation or regulatory processes, issues or receives its first invoice, etc.
2.3 The Mining Sector
The NTA deletes sections 28 and 33 of the Nigeria Minerals and Mining Act, 2007, which provide for tax relief periods and royalty payments respectively for companies engaged in mining operations. Under the NTA, a company engaged in mining operations (i.e., any trade or business, other than petroleum operations, involving the exploitation or extraction of mineral resources situated in the territory of the Federal Republic of Nigeria) retains the same incentives. The tax relief period is, however, no longer automatic. A company engaged in mining operations will be subject to income tax unless it applies for (and obtains) the Economic Development Incentive ("EDI") under the new EDI regime. The EDI replaces the Pioneer Status Incentives ('PSI") regime, which used to grant tax holidays to qualifying companies, tax-free dividends to shareholders of pioneer companies and deferred claim of capital allowances and tax losses.
Under the EDI regime, a company in the priority sector which applies for and is granted the EDI only enjoys an annual 5% Economic Development Tax Credit ("EDTC") against tax payable on its income for the duration of the incentive. Specifically, section 177 of the NTA provides that an EDTC of 5% of each priority company's eligible Qualifying Capital Expenditure ("QCE") shall apply per annum within 5 years from the production date.
The EDI is granted for an initial period of 5 years and may be extended for another 5 years and no more if the priority company reinvests 100% of its profits during the incentive period for expansion of the same product or products
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