Taxation in Nigeria: The new Tax Lawa & Reforms

Change is coming, and it’s coming really fast. 

From January 2026, a sweeping set of tax reforms will take effect in Nigeria. It will reshape how companies and individuals calculate and pay their taxes.

THE TAX REFORMS

On June 26, 2025, Nigeria’s President signed the Nigeria Tax Act, taking effect on 1 January 2026 and marking a significant overhaul of Nigeria’s tax framework aimed at streamlining compliance and broadening the tax base. They include: 

• Nigeria Tax Act (NTA) 2025

• Nigeria Tax Administration Act (NTAA) 2025

• Nigeria Revenue Service Establishment Act (NRSEA) 2025

• Joint Revenue Board Establishment Act (JRBEA) 2025

They form the new framework for the guidelines of taxation. Some of its key reforms include :

• An expanded definition of a Nigerian Company:

This provides that a Nigerian company is not only a company incorporated locally in Nigeria, but any entity whose central or effective place of management or control is in Nigeria will now be treated as a Nigerian company for tax purposes.

• Capital Gains Tax 

Capital Gains Tax has also been harmonised with Companies Income Tax at a new rate of 30% for companies, up from 10%. And it covers where Nigerian assets are sold through offshore accounts.

• Development Levy

A new Development Levy of 4% has been introduced on Company’s profit. This levy replaces  a range of previous sectoral charges, including the Tertiary Education Tax, Information Technology Levy, NASENI levy and the Police Trust Fund levy. Small companies and non-resident companies are exempt. 

• Revision of the definition of a Small Company

Companies with 50 million Nigerian Naira (NGN50m) or less in turnover and NGN250m or less in fixed assets, excluding professional service . Small companies are taxed at 0%, and others taxed at 30%.

• Personal Income Tax

The Act introduces a progressive personal income tax regime, with tax rates ranging from 0% to 25%, Individuals earning ₦800,000 or less annually are fully exempt from tax. A key reform includes a 20% rent deduction, capped at ₦500,000, to ease the cost of housing for employees and low-income earners.

• Minimum Effective Taxation

Big companies that make more than ₦20 billion in yearly income must pay a minimum tax of 15%.

If they pay less than this, the government can charge a “top-up” tax to meet the minimum. This measure mirrors aspects of the OECD’s global minimum tax. This means each company will be taxed separately, not just by country.

• Value Added Tax Reforms

The VAT rate of 7.5% remains unchanged. The reform focuses on broadening the base and the scope or mechanism of the tax. 

Input VAT may now be recovered on services and fixed assets, provided they relate to taxable supplies. This means, if you sell goods and services in Nigeria, VAT  will apply. So whether you run a small business, a big company or an online business, you will pay VAT. VAT will be shared under a revised formula: 10% to the Federal Government, 55% to States, and 35% to Local Governments, with allocations among sub-national governments determined by equality, population, and place of consumption.

• Non-Residents and the Digital Economy

The Acts expand the taxation of non-resident companies (NRCs). The concept of Significant Economic Presence (SEP) is retained but streamlined to focus on digital activities directed at Nigerian customers. 

So in other words, if a company abroad sells to Nigeria, (whether goods, services, or digital services like streaming, software, or online ads),  they will be taxed for the profit they make on sales to Nigerian customers. Even if part of a contract (like Engineering, Procurement, and Construction projects) is carried out abroad, all profits linked to Nigeria are taxable here.

Foreign shipping and airline companies must now file monthly returns, and if their local profits can’t be calculated, they’ll be taxed based on their global profit margins.

• Administrative and Institutional Reforms

- The Nigeria Revenue Service (Establishment) Act (NRSEA) replaces the Federal Inland Revenue Service Act and establishes the Nigeria Revenue Service (NRS).: 

The NRS is empowered to administer all federally enacted taxes and may assist states, local governments, and even foreign governments under treaty arrangements. Its funding has been increased to 4% of revenues collected.

- The Nigeria Tax Administration Act (NTAA) consolidates filing obligations and expands compliance requirements. 

Petroleum royalties, mineral royalties, and certain airline and shipping returns must now be filed monthly. Banks and other financial institutions must report high-value transactions; ₦25 million or more for individuals and ₦100 million or more for companies directly to the tax authorities.

- The Joint Revenue Board (Establishment) Act (JRBEA) introduces the Joint Revenue Board to harmonise tax administration across all tiers of government and creates the Office of the Tax Ombud to handle taxpayer complaints. This is expected to improve coordination and taxpayer protection.

• Free Zones and Incentives

Free Zone entities retain tax exemptions on activities directed at export markets. However, where more than 25% of sales are to Nigerians, (Customs Territory), they will now be taxed proportionally. From 1 January 2028, all local sales in Customs Territory will be fully taxable, unless the President grants a limited extension.

The reforms also replace The old Pioneer Tax Holiday (a period of total tax exemption for new businesses in priority sectors) has been scrapped.  In its place there is now the Economic Development Tax Incentive (EDTI) Instead of not paying tax at all, companies get tax credits equal to the tax payable on profits from approved activities.  Unused credits may be carried forward for a further five years. Priority sectors include renewable energy, pharmaceuticals, agro-processing, mining, and technology development.

WHY IT MATTERS

These reforms are not just numbers on paper, they affect everyone. For businesses,  compliance will be stricter, loopholes are closing, and reporting obligations are heavier. For individuals, especially employees and low-income earners, the new personal income tax rules offer some relief with exemptions and rent deductions.

Foreign companies selling into Nigeria, can no longer ignore Nigerian tax laws. And for investors, the shift from tax holidays to tax credits means the government is rewarding long-term value creation, not just quick setups.

In short, this new tax framework reshapes how money flows between citizens, companies, and government. Getting ahead of these changes  by updating tax strategies and systems is no longer optional. It’s necessary.