Nigerian President Bola Ahmed Tinubu In October 2024, submitted four major tax reform bills to the National Assembly, following the work of the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele. Their mission was to cut through Nigeria’s tangled web of taxes, scrap overlapping levies, and establish a modern system that’s fair, simple, and effective.
By March 2025, the House passed the bills. In May, the Senate followed suit, approving even a hike in VAT from 7.5% to 12.5% (which was later revised after public backlash). Then, on June 26, 2025, the President signed them into law. They will officially take effect by January 1, 2026.
These are the four reform Acts:
- Nigeria Tax Act
- Tax Administration Act
- Nigeria Revenue Service (Establishment) Act
- Joint Revenue Board (Establishment) Act
So Questions like :
- What exactly is changing?
- How will these laws affect you?
Implications Of The New Tax Reforms
1. A Simpler, Fairer Tax System for Individuals and Small Businesses
For years, Nigeria’s tax framework has felt complex, especially for individuals and small business owners trying to stay compliant while keeping their heads above water. But the 2025 reforms take a bold step toward making things more equitable.
One of the changes that stands out is the income tax exemption for low-income earners. If you earn ?800,000 or less annually, you’re now exempt from personal income tax under the Pay As You Earn (PAYE) framework. That means no more deductions on such salaries and no third-party interference in what little you make.
Small businesses also get relief because the turnover threshold for the company income tax relief has been raised from ?25 million to ?50 million, allowing small companies to operate without the pressure of multiple tax obligations. These businesses are now exempt from Company Income Tax, Capital Gains Tax, and the newly introduced 4% National Development Levy. For startups and growing ventures, this translates to more room to grow before tax obligations kick in.
Even larger companies are getting some relief. The corporate tax rate, which previously stood at 30%, will be reduced to 27.5%, and further to 25% in subsequent years. While this benefits the private sector broadly, it also signals an attempt to boost competition and attract investment by creating a more business-friendly tax climate.
2. One Unified Tax Law: The Nigeria Tax Act (NTA)
For decades, Nigeria’s tax system has been a patchwork of overlapping laws, over 50 separate legislations scattered across different sectors and levels of government. From the Personal Income Tax Act (PITA) to the Companies Income Tax Act (CITA), VAT Act, Stamp Duties, Capital Gains Tax, and several others. The result was a confusing maze that often left both individuals and businesses frustrated and non-compliant.
Under the 2025 reform, all those fragmented laws are repealed and merged into a single, consolidated framework, the Nigeria Tax Act. This unified law brings clarity, consistency, and a modern approach to taxation. It means fewer contradictions, duplications, and more importantly, a system that ordinary taxpayers can understand.
3. The New Development Levy
One of the more striking features of the 2025 tax reforms is the introduction of a 4% Development Levy, applied to the profits of all Nigerian resident companies, except small businesses and non-resident firms. At first glance, it seems like just another tax, but in reality, it’s a consolidation. This Development levy replaces multiple overlapping charges, including the tertiary education tax and other sector-based contributions that businesses previously paid through different government agencies. It reduces that friction and replaces the complexity with one streamlined levy.
Notably, this new levy doesn’t apply to profits computed for hydrocarbon tax purposes, so oil and gas operations remain governed by their existing regime. But for most companies, this 4% will now form part of their annual obligations.
The allocation of this levy is interesting; instead of going into a single government account, the funds are earmarked for development-focused agencies, such as 50% for the Tertiary Education Trust Fund, 15% supports the Nigerian Education Loan Fund. The rest is split between innovation, infrastructure, cybersecurity, and defence-related bodies, like;
- Nigeria Information Technology Development Fund - 8%
- National Agency for Science and Engineering Infrastructure - 8%
- National Board for Technological Incubation- 4%
- Defence and Security Infrastructure Fund - 10% and
- National Cybersecurity Fund - 5%
4. A Higher Price Tag on Capital Gains
Previously, capital gains from selling shares, property, or other assets were taxed at a flat rate of 10%, regardless of how much profit was made. That changes.
For individuals, capital gains will be taxed based on their overall income bracket, meaning the more you earn, the higher your CGT liability. It aligns capital gains with personal income tax rates and ends the era of a fixed, one-size-fits-all treatment.
For companies, the shift is even more dramatic. CGT is now 30%, matching the previous corporate income tax rate.
In both cases, the message is clear: capital gains are no longer on the sidelines. Whether you're selling shares or flipping real estate, the taxman will be paying closer attention.
5. Revised VAT Distribution Formula
Under the Nigeria Revenue Service Act, the distribution formula for Value Added Tax (VAT) revenue has been revised to reflect a more balanced allocation across the three tiers of government.
Going forward, VAT will be distributed as follows:
- 10% to the Federal Government
- 55% to State Governments
- 35% to Local Governments
This adjustment is intended to strengthen fiscal decentralization and ensure that subnational governments have greater access to funds needed for service delivery and local development. It also aligns with broader efforts to promote transparency and equity in revenue sharing.
6. Repeal of the Federal Inland Revenue Service
As part of the structural changes introduced by the 2025 tax reform, the Federal Inland Revenue Service (FIRS) is officially discontinued. In its place, the Nigeria Revenue Service (NRS) is established through the enactment of the Nigeria Revenue Service Act. The NRS is designed to function as a more autonomous and performance-driven institution. Its leadership appointments are now tied to clearly defined performance metrics, with provisions for greater transparency and accountability. This marks a shift toward a more results-oriented tax administration framework.
The new Act sets out the functions, powers, and internal structure of the NRS, offering a comprehensive legal framework for its operations. The agency is expected to operate with a higher degree of professionalism and independence, while also remaining subject to structured oversight mechanisms. The goal is to improve efficiency in tax administration, foster voluntary compliance, and restore public confidence in Nigeria’s tax system.
7. The Tax Appeal Tribunal and the Tax Ombudsman
Beyond structural reforms, the new tax laws introduce key accountability mechanisms to protect taxpayer rights and improve trust in the system. The Tax Appeal Tribunal, now formally established under the Joint Revenue Board (Establishment) Act, serves as the primary body for adjudicating tax disputes. It exercises jurisdiction over matters arising from the implementation of both federal and state tax laws. In addition, the reforms established the office of the Tax Ombudsman, a new institution tasked with receiving and investigating complaints relating to the conduct of tax authorities. The Ombudsman’s role includes addressing issues around tax assessments, levies, enforcement actions, and safeguarding taxpayers’ rights. This office offers a non-adversarial channel for resolving grievances and ensuring fairness in the administration of tax laws.
8. Digital Service Taxation
Before the 2025 reforms, Nigeria’s ability to tax foreign digital service providers was limited and largely ambiguous. Although there were attempts, particularly through the Finance Acts of recent years, to introduce Significant Economic Presence (SEP) thresholds, enforcement remained weak, and many global tech giants continued to earn revenue from Nigerian users without remitting any local taxes. The new framework changes that.
Under the revised law, non-resident digital companies like Netflix, Google, and Meta are now required to pay tax on income derived from Nigerian-based consumers, even if they have no physical presence in the country. This includes revenues from digital advertising, subscription services, data monetization, and other online transactions. This reform aligns Nigeria with international efforts, such as the OECD's digital tax framework, to ensure that digital businesses contribute fairly to the economies from which they derive value. It also reflects a growing recognition that economic presence is no longer solely tied to physical infrastructure, but also to user engagement, data, and market access.
9. Voluntary Disclosure and Amnesty Provisions
Recognizing the challenges many individuals and businesses face in navigating Nigeria’s historically complex tax system, the new regime introduces voluntary disclosure and amnesty provisions to encourage compliance without fear of immediate reprisal.
Under this framework, taxpayers who voluntarily disclose past non-compliance, whether due to underreporting, late filings, or omissions, may be eligible for reduced penalties, interest waivers, or other forms of administrative relief. While the specific conditions for relief are to be outlined by the relevant tax authorities, the policy direction is clear: the government is prioritizing transparency and collaboration over punitive enforcement.
This measure serves as an incentive, giving taxpayers a chance to correct their records and avoid prolonged disputes or audits. It also signals a broader shift in tone, one that encourages a more cooperative relationship between tax authorities and taxpayers.
Conclusion:The 2025 tax reforms are not just new rules—they represent a big change in how Nigerians view taxes. For a long time, the tax system has felt confusing, strict, and disconnected from people’s daily lives. These new laws aim to fix that by making taxes clearer, fairer, and more supportive of Nigeria’s growth. For individuals and businesses, the most important thing is to stay informed and prepared. The changes may look difficult at first, but the main goal is to make taxes easier to understand and follow for everyone.
