The new legislation comprises the Nigeria Tax Act, the Nigeria Tax Administration Act, the National Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act.
Nigeria’s President Bola Tinubu has signed four major tax reform bills into law on 26 June 2025.
These new legislations are:
- The Nigeria Tax Act 2025: Combines tax rules, cuts over 50 overlapping taxes, and simplifies business operations.
- The Nigeria Tax Administration Act 2025: Standardises tax collection across federal, state, and local levels.
- The Nigeria Revenue Service (Establishment) Act 2025: Replaces the Federal Inland Revenue Service (FIRS) with the independent Nigeria Revenue Service (NRS).
- The Joint Revenue Board (Establishment) Act 2025: Enhances government coordination, adds a Tax Ombudsman, and establishes a Tax Appeal Tribunal.
The new bills aim to eliminate redundancies, boost investor confidence, enhance transparency, and improve tax coordination across all government levels.
Additionally, the newly enacted legislation raises personal income tax thresholds, exempting more low-income earners from taxation, and reduces levies for micro, small, and medium-sized enterprises, especially in key sectors. It offers tax incentives for businesses investing in job creation, vocational training, and rural development, while simplifying tax filing and payment processes for individuals and small businesses.
The summary of the tax provisions are:
Top-up tax
A top-up tax based on the Pillar 2 framework is introduced for companies with a turnover exceeding NGN 50 billion or part of multinational groups with a turnover of at least EUR 750 million, ensuring a minimum effective tax rate (ETR) of 15%.
Minimum tax for non-resident companies
A minimum tax is introduced for non-resident companies with a taxable presence in Nigeria, based on a percentage of their EBIT or 4% of income generated in Nigeria.
Controlled foreign company (CFC) rules
Controlled Foreign Company (CFC) rules are introduced to tax undistributed profits of foreign subsidiaries controlled by Nigerian companies if such profits could have been distributed without harming the business.
Development levy
A new Development Levy of 4% on assessable profits replaces the Tertiary Education Tax (TET), IT Levy, NASENI Levy, and Police Trust Fund (PTF) Levy, excluding small companies.
Small company exemption threshold
The exemption threshold for small companies is increased to an annual gross turnover of NGN 50 million and total fixed assets not exceeding NGN 250 million, exempting them from corporate income tax, capital gains tax, and the Development Levy.
Capital gains tax (CGT) rate
- The capital gains tax (CGT) rate is increased from 10% to 30%.
- New rules impose CGT on indirect transfers of shares in Nigerian companies, including through offshore intermediary holding companies, with treaty exemptions.
- The CGT exemption threshold for the disposal of shares in Nigerian companies is increased to NGN 150 million in any 12 consecutive months, provided gains do not exceed NGN 10 million.
Input VAT recovery rules
Input VAT recovery rules are expanded to allow claims on all purchases, including services and fixed assets, if directly related to VAT-taxable supplies.
VAT zero-rated supplies
The list of VAT zero-rated supplies is expanded to include essential goods and services such as basic food items, educational supplies, medical/pharmaceutical products, electricity, medical equipment/services, tuition fees, and exports (excluding oil and gas).
Permanent establishments (PEs) expense rules
New expense rules for permanent establishments (PEs) allow deductions only for expenses incurred in producing profits attributable to the PE in Nigeria, excluding royalties and similar payments.
General expense deductibility rules
- General rules for expense deductibility have been amended, requiring expenses to be “wholly and exclusively incurred in the production of income.”
- Foreign currency expenses are deductible only at the Central Bank of Nigeria’s official exchange rate.
- Expenses without VAT or duty payment are non-deductible.
Capital allowance rules
Capital Allowance rules are revised, eliminating initial allowances and introducing proration if non-taxable income constitutes 10% or more of the company’s total revenue.
R&D deductions
The deduction for research and development is reduced from 10% of total profits to 5% of total turnover for a year.
Merger rules
Specific rules allow the transfer of unutilized capital allowances, unabsorbed losses, and withholding tax credits from merging entities to the surviving entity in mergers.
Free trade zone entities
Free Trade Zone entities retain full tax exemptions for exports and inputs for exported goods/services. But free trade zones will face proportional taxation if over 25% of sales are to the customs territory, with full taxation starting 1 January 2028, for any sales.
Tax holiday incentive
The pioneer tax holiday incentive is substituted by the Economic Development Incentive (EDI), which offers a 5% annual tax credit for 5 years on qualifying capital expenditures. Unused credits or expenses are carried forward for up to 5 years.
Tax administration changes
- The Federal Inland Revenue Service (FIRS) is renamed the Nigeria Revenue Service (NRS).
- State Internal Revenue Services (SIRS) are made autonomous.
New institutions
A Joint Revenue Board, Tax Appeal Tribunal, and Office of the Tax Ombudsman are established to coordinate and resolve tax disputes.
Personal income tax rates/brackets
New personal income tax brackets and rates are introduced, starting with 0% for the first NGN 800,000 and progressively increasing to 25% for income above NGN 50,000,000. The complete thresholds are:
- First NGN 800,000: 0%
- Next NGN 2,200,000: 15%
- Next NGN 9,000,000: 18%
- Next NGN 13,000,000: 21%
- Next NGN 25,000,000: 23%
- Above NGN 50,000,000: 25%
The President announced that the newly introduced laws are set to take effect on 1 January 2026.
