Obgist | Nigeria News, Celebrity Scoop, International Gist and Tech News

Summary Lead

Nigeria has entered a new tax era with the most comprehensive reform of its tax system in decades. In June 2025, President Bola Ahmed Tinubu signed a set of landmark tax reform laws designed to simplify taxation, widen the tax base, and modernise how revenue is collected across the country.

The reforms matter because they directly affect how much individuals pay in personal income tax, how businesses are taxed, how VAT is applied, and how emerging sectors like digital services and cryptocurrency are regulated. Workers, small business owners, large corporations, investors, freelancers, and digital earners all fall within the scope of the new rules.

At the centre of the overhaul is the Nigeria Tax Act (NTA) 2025, a single, consolidated law that repeals and replaces long-standing statutes such as the Companies Income Tax Act (CITA), the Personal Income Tax Act (PITA), and the Value Added Tax (VAT) Act. The aim is to move away from a fragmented tax system toward a clearer, more predictable framework that supports economic growth while improving compliance.

What Is the New Tax Law in Nigeria?

The new tax law in Nigeria refers to a unified tax framework introduced under the Nigeria Tax Act (NTA) 2025 and supporting legislation. In simple terms, it restructures how taxes are imposed, administered, and collected by merging several separate tax laws into one coordinated system.

Previously, Nigeria’s tax regime relied on multiple standalone laws, often leading to overlaps, inconsistent interpretations, and disputes between taxpayers and authorities. The new framework consolidates these laws, standardises definitions and procedures, and aligns tax policy with current economic realities.

The scope of the new tax law is broad. It covers individual taxpayers, including employees and high-income earners; companies, from small businesses to large corporations; and the digital economy, including digital services and virtual assets. It also reforms tax administration, setting clearer rules for how taxes are assessed, collected, and coordinated across federal and state authorities.

Together, these changes are intended to make Nigeria’s tax system simpler, fairer, and better suited to a modern economy.

The Four Major Tax Reform Acts Signed in 2025

Nigeria’s new tax regime rests on four interconnected laws passed by the National Assembly and signed by President Bola Ahmed Tinubu in June 2025. Together, they redefine not just what is taxed, but how taxes are administered and shared across the federation.

Nigeria Tax Act (NTA) 2025

The Nigeria Tax Act (NTA) 2025 is the cornerstone of the new tax framework. It serves as the central tax law, consolidating key provisions that were previously scattered across multiple statutes.

Under the Act, rules governing income tax, value added tax (VAT), capital gains tax, and taxation of digital and virtual assets are brought under a single legal structure. By replacing legacy laws such as CITA, PITA, and the VAT Act, the NTA 2025 aims to reduce complexity, eliminate overlaps, and provide clearer guidance for taxpayers across different sectors of the economy.

Nigeria Tax Administration Act (NTAA) 2025

While the NTA 2025 defines what is taxed, the Nigeria Tax Administration Act (NTAA) 2025 focuses on how taxes are administered.

The Act standardises tax procedures across the country, setting common rules for assessment, collection, enforcement, and record-keeping. A key objective is to reduce disputes between taxpayers and authorities by clarifying processes and strengthening dispute resolution mechanisms. It also places greater emphasis on voluntary compliance, making tax administration more predictable and transparent for both individuals and businesses.

Nigeria Revenue Service (Establishment) Act

The Nigeria Revenue Service (Establishment) Act formally renames the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS).

The change goes beyond branding. It reflects an expanded mandate for the agency to collect and manage revenues on behalf of the entire federation, rather than focusing solely on federal taxes. The new identity is intended to support broader coordination within Nigeria’s revenue system and align the agency’s role with the objectives of the wider tax reforms.

Joint Revenue Board (Establishment) Act

The Joint Revenue Board (Establishment) Act creates a statutory body to improve coordination between federal and state tax authorities.

One of its primary goals is to address the long-standing problem of multiple taxation, where individuals and businesses are subjected to overlapping taxes by different levels of government. By providing a platform for cooperation, information sharing, and policy alignment, the Board is expected to promote consistency in tax administration and reduce the burden on taxpayers operating across multiple states.

Key Changes for Small Businesses and Companies

One of the most significant aspects of Nigeria’s new tax law is its impact on businesses, particularly small and medium-sized enterprises. The reforms are designed to ease the tax burden on smaller operators while streamlining obligations for larger companies.

New Definition of a Small Company

Under the Nigeria Tax Act (NTA) 2025, the definition of a small company has been expanded. A company is now classified as small if its annual gross turnover is ₦50 million or less.

This represents a major shift from the previous threshold of ₦25 million, effectively doubling the turnover limit. As a result, more businesses now qualify for tax reliefs and simplified obligations intended to support growth and sustainability.

Tax Exemptions for Small Companies

The new law introduces broad tax exemptions for companies that fall within the small company category.

Small companies are now subject to 0% Company Income Tax (CIT), meaning they are fully exempt from corporate income tax. They are also exempt from paying the Development Levy, which applies to larger companies under the new framework.

In addition, while small companies may still have VAT obligations depending on their activities, the law simplifies VAT compliance requirements, reducing administrative and reporting burdens that previously affected small operators.

Unified Development Levy Explained

A major structural change under the new tax law is the introduction of a Unified Development Levy.

The Act scraps several earmarked taxes that previously applied to companies, including the Tertiary Education Tax, NASENI Levy, Police Trust Fund Levy, and Information Technology (IT) Levy. These multiple charges are replaced with a single levy of 4% on assessable profits, applicable mainly to large companies.

The law also sets out a phased reduction plan. The Development Levy is scheduled to drop to 3% between 2027 and 2029, and further reduce to 2% from 2030, signalling a long-term intention to lower the overall corporate tax burden.

Corporate Income Tax Rates Under the New Law

The reform maintains a differentiated approach to corporate income tax.

Small companies continue to enjoy a 0% CIT rate.

Medium and large companies are taxed at the standard 30% CIT rate.

Although large companies may still face a higher effective tax burden due to the Development Levy, the consolidation of multiple taxes into a unified system simplifies filing and compliance. This is expected to reduce complexity and improve certainty for companies planning their tax obligations.

Personal Income Tax (PIT) Reforms You Should Know

The new tax law introduces far-reaching changes to Personal Income Tax (PIT), reshaping how individuals are taxed and adjusting the balance between low-income protection and higher-income contributions.

New Tax-Free Income Threshold

To shield low-income earners from additional financial pressure, the Nigeria Tax Act (NTA) 2025 introduces a higher tax-free income threshold. Individuals earning ₦800,000 or less per year are now fully exempt from personal income tax.

This change effectively places minimum wage earners outside the PIT net, ensuring that the lowest-income workers are not taxed under the new regime. It marks a deliberate policy shift toward protecting vulnerable earners while broadening compliance at higher income levels.

New Tax Bands for High-Income Earners

The law also introduces a more progressive tax structure for high-income individuals. A new top marginal tax rate of 25% has been added, up from the previous 24%.

This higher rate generally applies to individuals earning above ₦50 million annually, placing a greater share of the tax burden on top earners. The adjustment is modest in percentage terms but signals a clearer intent to align personal taxation with income capacity.

Worldwide Income Rule

Another notable reform is the explicit taxation of worldwide income for Nigerian residents.

Under the new framework, residents are required to pay tax on income earned both within and outside Nigeria. This provision is aimed at closing offshore income loopholes, particularly for individuals with significant foreign earnings who previously fell outside clear regulatory coverage.

Improved Compensation Relief

The new tax law also improves relief for workers affected by job losses. The tax-exempt portion of compensation for loss of employment has been increased from ₦10 million to ₦50 million.

For retrenched workers, this change provides substantially greater financial protection, ensuring that severance and redundancy payments are not quickly eroded by tax obligations during periods of transition.

Value Added Tax (VAT) Changes Under the New Law

The new tax law also addresses long-standing concerns around Value Added Tax (VAT), balancing revenue needs with cost-of-living pressures and business competitiveness.

VAT Rate Retained at 7.5%

Contrary to earlier public speculation, the new tax law retains the VAT rate at 7.5%.

In the months leading up to the reforms, there were widespread expectations that VAT could be increased to as much as 10%. The decision to maintain the existing rate provides clarity for consumers and businesses and avoids adding further pressure to prices at a time of elevated living costs.

Expanded VAT Exemptions

The law expands the list of VAT-exempt and zero-rated goods and services, with a focus on essential items.

More food products, medical supplies, and educational materials now fall under VAT exemptions, a move intended to cushion households from rising expenses. By widening these exemptions, the reforms seek to align VAT policy with broader social and economic realities affecting Nigerian consumers.

Full Input VAT Credit

A major change for businesses is the introduction of full input VAT credit on a wider range of expenses.

Under the new framework, companies can now claim input VAT on services and capital assets, not just goods. This removes a key restriction under the old regime and is expected to lower business costs, improve cash flow, and make VAT less of a direct expense for compliant businesses.

Withholding Tax (WHT) Reforms Explained

The new tax framework also formalises key changes to Withholding Tax (WHT), building on reforms introduced through the Deduction of Tax at Source Regulations that took effect in 2024. These measures are aimed at easing cash flow pressures and reducing administrative bottlenecks, particularly for smaller businesses.

Small Business WHT Exemption

Under the new rules, small companies with an annual turnover of ₦50 million or less are exempt from deducting withholding tax from payments made to their suppliers.

This turnover-based exemption significantly reduces the compliance burden on small businesses, which previously had to manage complex WHT deductions and remittances despite limited administrative capacity.

Reduced WHT Rates for Low-Margin Sectors

The reforms also lower WHT rates for low-margin sectors, including areas such as construction, catering, and similar service-based industries.

These sectors often operate on thin margins, and the reduction in WHT rates is intended to prevent excessive tax deductions that tie down working capital. By easing these deductions, the law helps businesses maintain liquidity and meet day-to-day operational costs.

No WHT on Reimbursements

To address persistent disputes, the law clearly states that withholding tax should not be deducted from reimbursable expenses.

Out-of-pocket expenses incurred on behalf of a client and later refunded are now explicitly excluded from WHT, provided they are properly documented. This clarification reduces ambiguity and limits unnecessary tax deductions on non-income payments.

Digital Assets, Crypto, and the New Tax Law

For the first time, Nigeria’s tax laws clearly bring the digital economy within the formal tax net, reflecting the growing role of technology-driven income streams.

Crypto and Virtual Assets Taxation

Under the Nigeria Tax Act (NTA) 2025, gains arising from the disposal of digital and virtual assets are now subject to Capital Gains Tax.

This applies to a broad range of assets, including cryptocurrencies, non-fungible tokens (NFTs), and other virtual assets. The provision provides legal certainty around the tax treatment of crypto-related transactions that previously operated in a grey area.

Taxation of Digital Services and Remote Work

The new law also strengthens the taxation of digital services and remote operations.

Non-resident companies that provide digital services to Nigerian users, such as streaming platforms, software providers, and online marketplaces are now taxed on profits attributable to Nigeria under the Significant Economic Presence rule. This ensures that companies earning income from the Nigerian market contribute to the country’s tax base, even without a physical presence.

What the New Tax Law Means for Nigerians

The impact of Nigeria’s new tax law varies across different segments of the economy, with distinct implications for workers, businesses, and participants in the digital space.

• Workers

For employees, the higher tax-free income threshold provides direct relief to low-income earners, while changes to tax bands mean higher-income individuals contribute more. Clearer rules around worldwide income also affect professionals with foreign earnings, increasing the need for accurate tax planning and disclosure.

• Small business owners

Small businesses benefit the most from the reforms. Expanded turnover thresholds, full exemption from company income tax, relief from development levies, and simplified withholding tax obligations reduce both tax costs and administrative stress. These changes are aimed at helping small enterprises grow and formalise without being overburdened.

• Large corporations

For larger companies, the reforms do not necessarily lower headline tax rates, but they do simplify compliance. The replacement of multiple levies with a unified development levy and clearer VAT credit rules provide greater certainty and reduce fragmented filings, making long-term planning more predictable.

• Digital creators and crypto investors

Individuals earning from digital platforms or virtual assets now operate under clearer tax rules. While this brings new tax obligations, particularly for capital gains on digital assets, it also provides certainty in an area that previously lacked formal regulation.

Key Agencies Driving Nigeria’s Tax Reforms

The current tax overhaul is the result of coordinated policy efforts led by specialised government bodies.

At the centre of the process is the Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC), established to review Nigeria’s fiscal framework and recommend reforms that support economic growth and revenue sustainability.

The committee is chaired by Taiwo Oyedele, whose role has been central in shaping the direction of the reforms. Under his leadership, the committee focused on simplifying tax laws, reducing inefficiencies, and aligning Nigeria’s tax system with international best practices while considering local economic realities.

The policy direction behind the reforms reflects a shift toward fairness, clarity, and efficiency, with an emphasis on protecting low-income earners, supporting businesses, and expanding the tax base without increasing rates indiscriminately.

Sources and Further Reading

For readers seeking deeper technical insight or official references, the following resources provide authoritative guidance:

Nigeria Tax Act (NTA) 2025 – The primary legislation governing the new tax framework.

Deduction of Tax at Source (Withholding) Regulations 2024 – The regulation guiding current withholding tax rules.

Professional analyses and tax alerts from EY, Deloitte, and PwC, which offer detailed breakdowns and practical interpretations of the reforms.

Conclusion / Takeaway

Nigeria’s new tax law represents a structural shift in how taxation is designed and administered, not merely an adjustment of tax rates. By consolidating multiple laws, redefining tax obligations, and formally integrating areas such as the digital economy, the reforms change the foundation of the country’s tax system.

For individuals and businesses alike, the emphasis now moves beyond how much tax is paid to how compliance is managed. Understanding eligibility, exemptions, filing requirements, and reporting obligations is increasingly important, making early planning and informed decision-making essential.

As with any major reform, implementation and interpretation will continue to evolve through regulations, administrative guidance, and practical application. Staying informed and seeking professional advice where necessary will be key for Nigerians navigating the new tax landscape.