- in United States
- within Corporate/Commercial Law, Government, Public Sector and Intellectual Property topic(s)
- with readers working within the Law Firm industries
Introduction
In our previous publications, we reviewed the provisions of the Tax Reforms Act, 2025, and did a deep analysis of the 4 tax laws introduced by virtue of these reforms.
These laws will take effect from 1st January, 2026, and will apply across board, to individuals, salaried employees, small business owners, digital freelancers, NGOs, non-resident companies, and multinational corporations. They are set to modernise how taxes are assessed, collected and enforced, bringing with them new rules, opportunities and responsibilities.
This Guide explains what the new tax regime means for you and helps you prepare to navigate it effectively.
For Individuals
| TAX ID/TIN Registration | |
| WHAT IT COVERS | Legal identification for tax |
| WHO PAYS | All taxable persons including individuals, small businesses, Companies, and NGOs |
| DUE DATE | Before operation of a taxable activity |
| TAX AUTHORITY | NRS/JRB under the new tax regime |
| RATE | N/A |
| PENALTY | ₦50,000.00 (First month), ₦25,000.00 (Every month after) |
| Personal Income Tax (PIT)/PAYE | ||
| WHAT IT COVERS | Income from jobs, freelance, business, rent, side gigs etc. | |
| WHO PAYS | All individuals earning income
(including salaried workers, self-employed, freelancers, sole
proprietors, executors and trustees etc.) Minimum wage earners (₦800,000.00/year or less) are exempted from PIT but must file annual tax returns |
|
| DUE DATE | PAYE returns by the employer should be
remitted by the 10th day of the month following payment
of salaries, and 31st January of each year for annual
filings Individuals file annual returns by 31st March of each year or 6 months after an financial year, for self-employed persons |
|
| TAX AUTHORITY | SIRS for states residents NRS / FIRS (for FCT, armed forces, non-residents etc.) A Tax Clearance Certificate (TCC) is issued as proof of full tax compliance |
|
| RATE | Below N800,000.00 | 0% |
| N800,001.00 to N3 Million | 15% | |
| N3,000,001.00 to N12 Million | 18% | |
| N12,000,001.00 to N25 Million | 21% | |
| N25,000,001.00 to N50 Million | 23% | |
| Above N50 Million | 25% | |
| PENALTY | For the individual | ₦100,000.00 (First month) ₦50,000.00 (Every month after) |
| For the employer/company | 10% of tax due + CBN prevailing interest rate | |
| Other consequences include:Tax evasion audits, automatic deductions from your bank account(s), seizure of property, and legal action | ||
| Withholding Tax | |
| WHAT IT COVERS | WHT applies to both individuals and entities who
receive income from specific transactions The payer (withholding agent) whether a company, government agency, or qualifying business is obligated to deduct and remit WHT to the relevant tax authority |
| WHO PAYS | Anyone who earned income on: · professional and consultancy services (e.g., legal, accounting, engineering, management) · contracts and agency/commission payments · rent (residential, commercial, leasehold) · dividends, interest, and royalties · construction services and technical agreements · surveys and supplies etcetera |
| DUE DATE | Monthly remittance – 21st day of
the month following the deduction Annual WHT reporting/filing – 31st March of each year |
| TAX AUTHORITY | FIRS/SIRS |
| RATE | Rates vary between 2 – 10% of the
income |
| PENALTY | 10% penalty of the tax due + interest at the
CBN's prevailing rate Enforcement action |
| Capital Gains Tax (CGT) | |
| WHAT IT COVERS | Capital Gains Tax (CGT) is a tax imposed on profits (gains) realised from the sale or disposal of chargeable assets such as land, buildings, shares, digital assets, like cryptocurrency, patent and intellectual property, foreign exchange gains, rights, debts and incorporeal assets |
| WHO PAYS | Individuals with chargeable gains |
| DUE DATE | At the time of filing the CGT return for the transaction |
| TAX AUTHORITY | SIRS (based on residency) |
| RATE | Taxed at PIT rate *Please note that where you earned taxable income from abroad as a Nigerian resident, and same has already been taxed abroad, you are allowed to claim relief for taxes already paid on the same income in another country |
| PENALTY | |
For Companies
| TAX ID/TIN Registration | |
| WHAT IT COVERS | Legal identification for tax |
| WHO PAYS | All taxable persons including individuals, small businesses, Companies and NGOs |
| DUE DATE | Before operation of a taxable activity |
| TAX AUTHORITY | NRS/JRB under the new tax regime |
| RATE | N/A |
| PENALTY | ₦50,000.00 (First month), ₦25,000.00 (Every month after) |
| Companies Income Tax (CIT) | ||
| WHAT IT COVERS | Profits from a business | |
| WHO PAYS | All registered companies including
foreign companies who derive income from Nigeria Small companies with turnover below ₦50 Million and assets not beyond N250 Million are exempted from CIT under the NTA |
|
| DUE DATE | Within 18 months of incorporation or 6
months after the end of the first accounting period, whichever
comes earlier Subsequently, within 6 months after the end of each financial year |
|
| TAX AUTHORITY | FIRS/NRS under the new tax regime | |
| RATE | Small companies | 0% |
| Other companies | 30% | |
| PENALTY | Penalty + interest, possible restriction from government contracts, and enforcement actions including bank account liens | |
| Development Levy | |
| WHAT IT COVERS | Replaces Tertiary Education Tax, NITDA, NASENI levies |
| WHO PAYS | All companies, excluding small companies |
| DUE DATE | With CIT |
| TAX AUTHORITY | FIRS/NRS under the new tax regime |
| RATE | 4% of assessable profit |
| PENALTY | Failure to file returns now attracts a penalty of N100,000.00 in the first month and N50,000.00 for each subsequent month |
| VAT | |
| WHAT IT COVERS | Charged on goods/services sold |
| WHO PAYS | · Companies and individuals offering taxable
goods and services · Businesses with annual revenue above ₦50 Million (organisations dealing in zero-rated goods and services are exempt) · Government agencies, ministries, and parastatals that make payments to VAT-registered businesses |
| DUE DATE | 21st of each month Even if there was no VAT transaction, businesses must file a nil VAT return |
| TAX AUTHORITY | FIRS/SIRS |
| RATE | 7.5% |
| PENALTY | Failure to charge and collect VAT or non-remittance
to FIRS/NRS on taxable goods and services – 10% penalty of
the amount of tax due, plus interest at the prevailing CBN rate in
addition to possible enforcement actions by FIRS (such as bank
account liens or restrictions on government contracts) Failure to use Electronic Fiscalisation System – ₦200,000.00 + 100% tax due + CBN interest False VAT Refund Claim – Refund + 100% of the amount claimed + interest |
| Withholding Tax | |
| WHAT IT COVERS | Advance tax on vendor payments |
| WHO PAYS | All companies paying rent, fees, contracts etc. |
| DUE DATE | 21st of following month If the transaction is between related entities, remittance is due by the end of the month following payment or when the liability is recognised, whichever comes first |
| TAX AUTHORITY | FIRS/SIRS |
| RATE | 2 – 10% depending on the transaction type and
whether the recipient is a resident or non-resident There is a 5% final WHT on fees paid by Nigerian start-ups to non-resident providers of technical, professional, or consulting services |
| PENALTY | 10% of tax + interest at CBN rate |
| Capital Gains Tax (CGT) | |
| WHAT IT COVERS | Profit from asset disposals by the Company, subject to certain exceptions under the NTA |
| WHO PAYS | Companies selling assets |
| DUE DATE | Alongside CIT |
| TAX AUTHORITY | SIRS (based on residency) |
| RATE | Now taxed at CIT rate – 30% |
| PENALTY | Penalties as with CIT |
Return
| WHAT IT COVERS | Mandatory filings that all types of registered business entities make at the Corporate Affairs Commission ("CAC") to update their records and confirm their continued existence | |
| WHO PAYS | Limited Liability Partnership (LLP) Limited Partnership (LP) |
|
| DUE DATE | Public companies | File not later than 42 days after the Annual General Meeting (AGM) each year |
| Private companies and Incorporated Trustees: | File not later than 30th June every year | |
| New companies | First annual return should be filed 18 months after incorporation, then yearly thereafter by 30th June | |
| First annual returns should be filed the second year after registration, then yearly subsequently | ||
| Limited Liability Partnership (LLP) | Within 60 days of closure of the
financial year |
|
| Limited Partnership (LP) | ||
| AUTHORITY | The Corporate Affairs Commission (CAC) | |
| RATE | CAC Statutory rates | |
| PENALTY | Fines vary by entity type, but usually
between ₦5,000.00 to ₦25,000.00 or more Penalties accumulate the longer the delay continues Risk of the entity being struck off from the CAC's companies' register |
|
Contributions, Incentives and Funds
| Nigeria Social Insurance Trust Fund (NSITF) | |
| WHAT IT COVERS | Employee injury compensation fund |
| WHO PAYS | All employers in the public and private sector |
| DUE DATE | Monthly |
| AUTHORITY | NSITF |
| RATE | 1% of Payroll |
| PENALTY | 5 – 10% of unpaid contributions per month |
| National Pension Commission (PENCOM) | |
| WHAT IT COVERS | Employee pension contribution |
| WHO PAYS | All employers with 3 or more staff members |
| DUE DATE | Not more than 7 days after payment of salary |
| AUTHORITY | PENCOM |
| RATE | 8 – 10% of employee's salary |
| PENALTY | Minimum of 2% of outstanding contributions per
month Licensing and contract bans |
| Industrial Training Fund (ITF) | |
| WHAT IT COVERS | Training Fund contributions |
| WHO PAYS | Companies with more than 5 staff or ₦50m+ turnover |
| DUE DATE | Submit training report and returns on an annual basis |
| AUTHORITY | ITF |
| RATE | 1% of annual payroll |
| PENALTY | Disqualification from training refunds, sanctions |
| Minimum Effective Tax (METR) of 15% | |
| WHAT IT COVERS | Minimum tax imposed on large companies to ensure they pay a fair share of tax, regardless of incentives or exemptions |
| WHO PAYS | Nigerian Companies making ₦50 Billion or more annually, or global multinationals earning over €750 million (including companies in free zones if they are part of a multinational group) |
| DUE DATE | Payable on an annual basis, typically within 6 months after the company's financial year end |
| TAX AUTHORITY | FIRS/NRS |
| RATE | 15% |
| PENALTY | Interest and additional assessments by the tax
authority Risk of revocation of exemptions or withdrawal of incentives, especially for free zone companies |
| Economic Development Incentive (EDI) | |
| WHAT IT COVERS | New tax incentive introduced in the NTA 2025 to
encourage investment in priority sectors of the Nigerian
economy It replaces the Pioneer Status Incentive (PSI) regime. It is a tax credit (not tax holiday) for eligible businesses |
| WHO PAYS | · Companies incorporated in Nigeria · Companies exempted from incorporation (e.g., foreign entities with legal exemption) · Promoters of companies yet to be incorporated, planning to invest in Nigeria · Entities that invest in a priority sector listed under regulations issued by the Minister of Finance · Entities that incur a qualifying capital expenditure that meet or exceeds the threshold in the Tenth Schedule of the NTA 2025 |
| CREDIT PERIOD | 5% annual tax credit, applied each year for 5 years |
| TAX AUTHORITY | FIRS/NRS |
| FEE | 0.1% of annual qualifying expenditure, capped at N5,000,000.00 |
| PENALTY | Revocation of incentive Disqualification from future incentive schemes Fines, interest, prosecution etc |
| Annual Incentives Return | |
| WHAT IT COVERS | An Annual Incentives Return is filed in addition to a taxpayer's regular tax filings. This return discloses both tax-exempt and taxable income |
| WHO PAYS | All companies and individuals benefitting from tax incentives or exemption, waiver, or relief granted under Nigerian tax laws |
| DUE DATE | Not later than 30th June of the year following the relevant financial year |
| TAX AUTHORITY | FIRS/NRS |
| RATE | 15% |
| PENALTY | Companies – ₦1,000,000.00 or 1% of the
value of the incentive claimed, whichever is higher Individuals – ₦100,000.00 in addition to other administrative sanctions prescribed under the NTA |
For Non-Resident Companies and Virtual Asset Service Providers (VASPs)
*the below applies in addition to the other tax requirements above
| Companies Income Tax (CIT) | |
| WHAT IT COVERS | This is tax paid on profits from business. For Non-resident companies and VASPS, it applies a "minimum tax" or "deemed profit margin" when taxes are not ascertainable |
| WHO PAYS | Non-resident companies and VASPs when profits are not ascertainable |
| DUE DATE | Payable on an annual basis, typically within 6 months after the company's financial year end |
| TAX AUTHORITY | FIRS/NRS |
| RATE | Minimum of 4% of gross revenue earned from Nigeria (where profit is ascertainable, the normal CIT rates will apply) |
| PENALTY | Late filing penalties, interest on unpaid tax, and sanctions |
| Monthly Reporting | |
| WHAT IT COVERS | This is a report on all transactions, including the type of service, transaction date, value, and parties involved. |
| WHO FILES | Virtual Asset Service Providers (VASPs) including crypto exchanges, wallet providers, and digital token platforms. |
| DUE DATE | Monthly basis |
| TAX AUTHORITY | NRS (and possibly SEC for licensing oversight) |
| RATE | N/A |
| PENALTY | Failure to comply attracts a ₦10 Million fine
in the first month, ₦1 Million for each subsequent
month Possible license revocation by the Securities and Exchange Commission (SEC) |
For NGOs & Not-for-Profits
| S/N | Obligation | What It Covers | Due Date | Authority | Penalties |
| 1. | TIN Registration | Legal identification for tax | Before operation of taxable activity | NRS/JRB | ₦50,000.00 (First month), ₦25,000.00 (Every month after) |
| 2. | CIT Filing | Annual returns, even if exempt | Within 18 months of incorporation or 6 months after the end of the first accounting period, whichever comes earlier Subsequently, within 6 months after the end of each financial year |
FIRS/NRS | ₦100,000.00 (First month), ₦50,000.00 (Every month after) |
| 3. | WHT & VAT on Vendor Transactions | Deduct WHT, account for VAT on commercial/vendor expenses in the transaction's currency, Humanitarian and charitable goods are zero-rated/VAT exempt | 21st of the following Month | FIRS/NRS | 10% penalty + interest at CBN prevailing rate |
Best Practices For Tax Compliance
To stay compliant under the new tax regime, businesses and individuals must be proactive and organised. Here are key practices:
i. Keep Proper Records: Maintain accurate financial and tax records for a minimum of six years, as required for audits and tax reviews.
ii. Timely Filing & Payment: File all tax returns (e.g., VAT, CIT, PAYE) and remit taxes promptly to avoid penalties and interest.
iii. Use Electronic Tax Platforms: Register and file all statutory returns through the official e-tax portals introduced by the Nigeria Revenue Service and other relevant authorities.
iv. Hire Accredited Tax Agents: Only accredited tax practitioners should handle your tax filings. Returns submitted by unaccredited persons are deemed not filed and subject to sanctions.
v. Ensure Audited Accounts: Ensure your financial statements are audited and signed by ICAN-licensed auditors, as required under the law.
vi. Automate Payroll and Taxes: Use accounting or payroll software for PAYE, pensions, VAT, and withholding tax to improve accuracy and reduce risk.
vii. Update Accounting Systems: Reconfigure your accounting software and ERP systems to reflect new tax rates, input VAT rules, e-invoicing, and information-sharing obligations.
viii. Maintain a Tax Compliance Calendar: Track monthly, quarterly, and annual deadlines to ensure timely action on all filing and payment obligations.
ix. Reframe Your Tax Strategy: Align your tax strategy with your overall business goals. The tax function must now serve as a value protector, not just a compliance tool.
x. Develop a Live Risk Register: Set up a real-time tax risk register to identify, monitor, and manage evolving tax risks across your operations.
xi. Revise Compliance Processes: Review and update internal controls and workflows to reflect new legal requirements, including VAT fiscalisation, digital reporting, and documentation protocols.
xii. Strengthen Communication: Establish internal and external communication strategies to ensure staff, partners, and regulators are aware of new obligations and your response framework.
xiii. Consult Professionals: Engage tax and legal advisors for guidance on sector-specific issues, compliance audits, restructuring, and dispute resolution.
xiv. Stay Informed: Monitor updates from tax authorities, policy notices, and fiscal regulations to remain compliant in the rapidly changing tax environment.
Glossary
Acts / Laws
- JRBA (Joint Revenue Board (Establishment) Act, 2025) – Law establishing the JRB to replace the JTB.
- NRSA (Nigeria Revenue Service (Establishment) Act, 2025) – Law establishing and governing the NRS.
- NTA (Nigeria Tax Act, 2025) – Consolidates multiple old tax laws (CIT, PIT, VAT, Stamp Duties, etc.) into one Act.
- NTAA (Nigeria Tax Administration Act, 2025) – New law on tax processes, registration, filing, and enforcement.
Institutions / Agencies
- JRB (Joint Revenue Board) – New body replacing the (JTB) Joint Tax Board, with stronger dispute resolution and coordination roles.
- NASENI (National Agency for Science and Engineering Infrastructure) – Beneficiary of Development Levy funding.
- NELFund (Nigerian Education Loan Fund) – Beneficiary of Development Levy funding.
- NIMC (National Identity Management Commission) – Partner in harmonising taxpayer identity systems.
- NITDA (National Information Technology Development Agency) – Beneficiary of Development Levy funding.
- NRS (Nigeria Revenue Service) – Restructured agency replacing FIRS as Nigeria's central revenue authority.
- OTO (Office of the Tax Ombud) – Independent body to handle taxpayer complaints and rights.
- RMAFC (Revenue Mobilisation Allocation and Fiscal Commission) – Enhanced role in monitoring tax collection/distribution.
- SIRS (State Internal Revenue Services) – State-level tax bodies now with enhanced coordination via JRB.
- TAT (Tax Appeal Tribunal) – Strengthened dispute resolution body under JRBA.
- Technical Committee of the NRS Board – Expert advisory sub-committee on administration, incentives, and tax policy.
- TETFund (Tertiary Education Trust Fund) – Beneficiary of Development Levy funding.
Digital Systems / Compliance Tools
- Advance Rulings Regime – System allowing taxpayers to obtain clarification on tax transactions.
- Dual PAYE Reporting – Rule requiring both employer and employee to file annual PAYE returns.
- EFS (Electronic Fiscalisation System) – Real-time invoicing and monitoring platform for VAT and sales.
- Simplified Returns – Streamlined compliance filing introduced for SMEs and low-income taxpayers.
- Third-Party Recovery – Mechanism allowing NRS to recover tax debts directly from taxpayers' banks, customers, or agents.
Funds / Levies / Incentives
- Annual Incentive Returns – Mandatory filing by companies enjoying tax incentives, to enable monitoring and compliance.
- Development Levy (4%) – Flat levy on company profits (excluding small companies and non-residents), replacing multiple sectoral levies.
- EDTI (Economic Development Tax Incentive) – New incentive regime replacing the Pioneer Status Incentive, available to priority sectors.
- Priority Companies – Entities designated under EDTI for economic development incentives.
- Refund Accounts – Dedicated accounts for prompt taxpayer refunds at federal and state levels.
Taxpayer Reliefs / Deductions
- CRA (Consolidated Relief Allowance) – Repealed PIT relief, replaced by Rent Relief Allowance.
- Rent Relief Allowance – New PIT relief replacing CRA, allowing deduction of up to 20% of annual rent (maximum ₦500,000.00).
Conclusion
Effective from 1st January, 2026, these tax reforms mark a shift toward a fairer, more digital, and efficient tax system. They support small businesses, provide relief to individuals, and bring more sectors into formal compliance. By registering your business, keeping proper records, and filing your returns on time, you stay ahead and avoid penalties. Non-compliance can lead to stiff penalties, daily fines, reputational damage, and disqualification from public contracts. It can also affect your ability to raise capital or stay in business. The time to prepare is now.
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.
