Overview And Key Provisions Of The Nigerian Tax Reform Acts

Introduction

The Nigerian tax system consists of a fragmented and complicated set of tax laws that fall short in terms of administrative efficiency and effectiveness, making it difficult to achieve the country's fiscal policy objectives. In light of this, President Bola Tinubu, in 2023, setup the Fiscal Policy and Tax Reforms Committee, headed by Mr. Taiwo Oyedele, to tackle the pressing challenges of the existing tax regime in Nigeria.

The objective of the reform is to tackle the issues of overlapping taxes and the complexities within the existing tax structure. It also seeks to unify various tax-related legal frameworks, broaden the national tax base, improve compliance, and create sustainable revenue sources to support the country's development goals.

Notably, on June 26, 2025, President Bola Tinubu formally signed four comprehensive tax reform bills into law at the Presidential Villa in Abuja. These key acts include:

• Nigeria Tax Act
• Nigeria Tax Administration Act
• Nigeria Revenue Service (Establishment) Act
• Joint Revenue Board (Establishment) Act

These laws which is to take effect as of January 1, 2026, aim to harmonize Nigeria's fragmented tax system, streamline administration, bolster transparency, promote ease of doing business, and stimulate both domestic and foreign investment

In this article we will discuss about some of the key and innovative provisions of these laws and how they impact individuals and businesses in Nigeria

Below is a summary breakdown of the tax legislations which have received the presidential accent as of June 26, 2025 and their primary purpose:

1. Nigeria Tax Act, 2024: To provide a unified fiscal legislation regulating taxation in Nigeria;
2. Nigeria Tax Administration Act, 2024: To establish a clear and concise legal framework for fair, consistent, and efficient administration of all tax legislations in Nigeria;
3. Nigeria Revenue Service (Establishment) Act, 2024: To repeal the hitherto existing Federal Inland Revenue Service and establishes the Nigeria Revenue Service as the principal regulatory body for accessing, collecting and accounting for federal taxes in Nigeria; and
4. Joint Revenue Board of Nigeria (Establishment) Act: To establish the Joint Revenue Board, the Tax Appeal Tribunal and the Office of the Tax Ombudsmand for harmonization, coordination and dispute settlement in revenue administration.

Overview of the Key Provisions of the Nigeria Tax Administration Act, 2024

The objective of the Nigerian Tax Administration Act (NTAA) is to provide uniform procedures for a consistent and efficient administration of tax laws in order to facilitate tax compliance by taxpayers and optimise tax revenue (Section 1, NTAA, 2024). The NTAA establishes a framework for assessing, collecting, and administering revenue across the Federation—including the Federal, State, and Local Governments. It also outlines the roles and responsibilities of tax authorities and deals with other connected issues. According to Section 77 of the NTAA, the revised formula allocates a larger portion of VAT collections to States and Local Governments — 55% and 35% respectively — while the Federal Government receives only 10%.

This new structure reflects a move toward fiscal federalism. However, it is important to highlight that the VAT derivation model under Section 77(8) could result in uneven revenue distribution among states. Under the 60% derivation principle, states generating higher VAT revenue will receive a larger share, whereas those with lower contributions may face substantial revenue reductions.

Additionally, the NTAA introduces a system of digital taxation by integrating digital tools to streamline tax collection and enhance transparency. It introduces automated tax filing systems, reducing paperwork and bureaucratic inefficiencies.

Under Section 4 of the NTAA, individuals (residents & non-residents) earning taxable income in Nigeria, Ministries, Departments & Agencies (MDAs), and Non-residents making taxable supplies or deriving income in Nigeria (excluding passive investment income) must register and obtain a valid Tax Identification Number (TIN).

Under section 28 of the NTAA, financial institutions must report transactions of individuals exceeding ₦25 million per month, and of companies where such transactions exceed ₦100 million per month, thereby, ensuring that high-income earners contribute fairly. This measure further aims to reduce tax evasion among wealthy individuals, and companies.

Under section 38 of the NTAA, businesses are now permitted to pay taxes and royalties in the currency of assessment or in Naira at the official exchange rate. This flexibility accommodates companies earning in foreign currencies, reducing the burden of mandatory currency conversion. It further encourages ease of doing business in Nigeria with the goal of boosting foreign direct investment in Nigeria.

Also, the NTAA introduces significant administrative penalties to deter non-compliance. For instance, where a taxable person fails or refuses to register for tax under Section 4 of the NTAA, such shall be liable to pay an administrative penalty of ₦50,000 in the first month in which the failure occurs; and ₦25,000 for each subsequent month in which the failure continues (Section 95, NTAA 2024). A statutory body or company who awards a contract to an unregistered person, shall be liable to pay an administrative penalty of ₦5,000,000. Again, where a taxable person fails to file its annual returns or files incomplete or inaccurate annual returns to the relevant tax authority, the same shall be liable to pay a penalty of ₦100,000 in the first month in which the failure occurs and ₦50,000 for each subsequent month in which the failure continues (Section 96, NTAA 2024). Under section 100 of the NTAA, a person who has an obligation to collect, deduct or withhold tax under the relevant tax laws, and fails to do so shall be liable to an administrative penalty of 40% of the amount not deducted, a substantial increase from the previous 10% under section 40 of the Companies Income Tax Act and Section 74 of the Personal Income Tax Act.

Overview of the Key Provisions of the Nigeria Revenue Service (Establishment) Act, 2024

The objective of the Nigeria Revenue Service (Establishment) Act (NRSA) is to provide for a legal, institutional and regulatory framework for the administration of taxes and revenue under any law made by the National Assembly and to account for such taxes and revenue collected (Section 1, NRSA, 2024). Section 3 of the NRSA establishes the Nigerian Revenue Service (NRS) to replace the Federal Inland Revenue Service. Essentially, by section 41 of the NRSA, the NRS is vested with all powers, rights, functions, obligations, and other acts of the Federal Inland Revenue Service.

The NRS will serve as a corporate body, with perpetual succession, and a common seal. By section 4 of the NRSA, the NRS shall be the tax regulatory body vested with the authority regulate assessment, collection and regulation of federal taxes in Nigeria including taxes of corporations, companies, partnerships, enterprises and individuals chargeable with tax, as well as taxes accruing to the Federal Government ensuring proper remittance of collected revenues. Its core aim is to create a solid legal, institutional, and regulatory foundation for administering all taxes and revenues under laws passed by the National Assembly.

By virtue of the NRSA, the NRS is granted full autonomy over the administration of taxes and revenues accruable to the government of the federation. This centralization eliminates the roles of over 60 other revenue-collecting agencies, such as the Nigeria Customs Service and the Nigerian Ports Authority, in tax collection activities. This can be seen from a combined reading of section 4 of the NRSA which clearly spells out the functions of the NRS, and section 42 of the NRSA which defines “tax” in such a way that broadens the scope of the NRS's authority. A concern which the creation of the NRS raises, however, is as to how the existing tax collection bodies would find the enforcement of this innovation.

Overview of the Key Provisions of the Nigerian Tax Act, 2024

The Nigeria Tax Act 2024 (NTA) consolidates administrative provisions from existing tax laws—such as the Companies Income Tax Act, Personal Income Tax Act, Petroleum Profits Tax Act, Value Added Tax Act, Stamp Duties Act, and Capital Gains Tax Act—into a single, cohesive framework. This aligns with its objectives to provide uniform procedures for a consistent and efficient administration of tax laws as reflected in section 1 of the NTAA. Hitherto, the tax legislation in Nigeria has been fraught with several complexities in view of the multiple laws and regulations administering taxes in Nigeria. This unification aims to eliminate redundancies and inconsistencies, thereby simplifying tax administration and compliance for both taxpayers and authorities.

Further, to stimulate business growth and attract investment, the NTA 2024 proposes a phased reduction in corporate income tax rates. Section 56 of the NTA, proposes the reduction of the companies income tax rates for companies from 30% to 27.5% in 2025, and 25% from 2026. By the NTA, the previously existing minimum tax of 1% for companies without profit is now abolished. Furthermore, Section 20(1)(a) - (l) of the NTA 2024 outlines the allowable deductions for companies, effectively eliminating the previous minimum tax requirement. Under the previous regime, companies that reported losses or minimal profits were still subject to a minimum tax of approximately 1% of their gross income. The NTA removes this obligation, providing relief to businesses facing financial challenges.

Small companies are now exempt from company tax. The NTA raises the threshold in the definition of a small company from an annual turnover of ₦25 million and below to an annual turnover of ₦50 million or less (Section 56, NTA, 2024). Section 203 of the NTA defines a small company to mean a business that earns gross turnover of ₦50,000,000 or less per annum with total fixed assets not exceeding ₦250,000,000.00, provided that any business providing professional services shall not be classified as a small business. This means that companies with annual turnover of ₦50 million or less are exempt from remitting companies income tax.

This innovation is of far-reaching importance to growing businesses in Nigeria. This is because, at least 90% – 96% of all registered businesses (including the informal sector) in Nigeria likely earn less than ₦25 million annually. A study of Nigerian Small and Medium Industries found that 20% of companies have an annual turnover between ₦5 million and ₦50 million. Thus, this innovation of the NTAA would foster the ease of doing business in Nigeria, allowing smaller companies to grow and gain stability in Nigeria, and accelerate the overall business and economic growth in the country.

Section 20 of the NTA also allows for the deduction of all expenses wholly and exclusively incurred in the production of income, thus, simplifying the process for businesses to determine taxable profits. This aligns Nigeria's tax practices with international standards.

The Fourth Schedule of the NTA outlines a progressive tax structure, offering relief to individuals earning less than ₦800,000 annually by exempting them from tax. Hitherto, the personal income tax rates for different bands of annual income are as follows:

1. First N300k – 7%
2. Next N300k – 11%
3. Next N500k – 15%
4. Next N500k – 19%
5. Next N1.6m – 21%
6. Above N3.2m 24%

However, once the relief allowance and exemptions under Section 30(1) of are applied, taxable income will be subject to the following rates:

1. First NGN 800,000 – 0%
2. Next 2.2 million naira – 15%
3. Next 9 million naira – 18%
4. Next 13 million naira – 21%
5. Next 25 million naira – 23%
6. Above 50 million naira – 25%

This structure is designed to ease the tax burden on low-income earners while applying higher rates to higher income brackets.

Section 50 of the NTA introduces a new Development Levy is to replace multiple existing levies as follows:

1. For 2025 and 2026 years of assessment - 4%;
2. For 2027, 2028 and 2029 years of assessment - 3%; and
3. For 2030 year of assessment and thereafter - 2% which shall be solely for the Student Education Loan Fund.

Under section 188 of the NTA, certain items are now charged to VAT at a rate of 0%. These items include; basic food items, all medical and pharmaceutical products including medical herbal products, educational books and materials, exported goods (excluding oil and gas) and services, tuition relating to nursery, primary, secondary or tertiary education, and so on. Supplies including oil and gas exports, baby products, shared passenger road-transport service, and so on are, by section 187 of the NTA, completely exempt from VAT.

This is also very progressive in nature because, according to the National Bureau of Statistics, Nigerians spend majority of their income on basic needs. For instance, about 50 – 60% of Nigerians spend their income on food and non-alcoholic beverages, 5 – 8% of Nigerians spend their income on health including medicine, and 5 – 10% spend their income on transportation. Thus, the exemption of VAT on these basic living expenses will greatly benefit, especially the low-income citizens by cushioning the harsh living costs currently being experienced in Nigeria. For instance, A family spending ₦80,000 monthly on food and ₦10,000 on basic medication would have paid ₦6,750 in VAT under a flat 7.5% regime. Due to exemptions, they now pay ₦0 VAT on most of those items, saving thousands annually. It is submitted that proper grassroot sensitizations be conducted especially to vendors in order to ensure effective compliance with the new VAT regime.

In relation to Capital Gains Tax (CGT), the NTA introduces a significant reform to the capital gains regime in Nigeria. For instance, section 4 of the NTA expressly includes gains from the disposal of digital assets, such as cryptocurrencies, non-fungible tokens (NFTs), digital tokens, domain names, and other virtual assets (See also, Section 203 of the NTA, 2024). These are now treated as chargeable assets, subject to 10% CGT for individuals and 30% CGT for companies.

The NTA also imposes tax on gains derived by a non-resident person from the disposal of chargeable assets deemed to be located in Nigeria (subject to treaty exemptions). Under section 46(f) of the NTA, shares or comparable interests in any foreign entity are deemed to be located in Nigeria, if, at any time during the 365 days preceding the alienation, more than 50% of the value of the shares or other interests is derived, directly or indirectly; (i) through one or more interposed entities resulting in the change in direct or indirect ownership structure of a Nigerian entity, or (ii) from immovable property or any other chargeable assets situated in Nigeria. This would include cases where foreign entities dispose of shares in offshore companies that own significant Nigerian assets.

Accordingly, transactions where shares are sold via offshore holding companies would trigger CGT under the NTA. Notably, the NTA increases the exemption threshold for sale of shares in Nigeria from ₦100 million to ₦150 million in any 12 consecutive months provided that the gains do not exceed NGN10million. Accordingly, CGT on sale of shares in Nigeria will apply where the disposed interest relates to ₦150 million or more in value within a 12-month period provided that the gains do not exceed ₦10million.

Overview of the Key Provisions of the Joint Revenue Board of Nigeria (Establishment) Act, 2024

The Joint Revenue Board of Nigeria (Establishment) Act, 2024 (JRBA) offers a centralized and consistent framework that enables all taxpayers to easily access clear information on where, when, and how much tax to pay. Its main goal is to establish standardized procedures that ensure the effective and uniform administration of tax laws, provide a mechanism for efficient dispute resolution, simplify compliance for taxpayers, and maximize tax revenue collection. The JRBA established the Joint Revenue Board (JRB) to replace the Joint Tax Board. The JRB will have expanded functions and membership, focusing on maintaining a centralized taxpayer identification database in collaboration with the NRS (See sections 4, 5 and 6 of the JRBA, 2024).

Section 26 of the JRBA establishes the Tax Appeal Tribunal, empowered to handle tax-related disputes and issues arising from the implementation of the Nigerian Tax Act, the Nigerian Tax Administration Act, or any other existing or future tax laws. It will be composed of five Tax Appeal Commissioners appointed by the Minister (See section 24 of the JRBA, 2024). Section 29 details its authority, which includes making decisions on tax matters governed by legislation from the National Assembly.

Notably, the JRBA, under section 35, establishes the Office of the Tax Ombudsman, to serve as a neutral body that receives and investigates complaints about tax issues or the conduct of tax officials. It is also empowered to issue directives and take corrective action where necessary. A concern however, that is raised is as to how accessible these bodies would be especially to the common Nigerian citizens. It is suggested that a robust framework be put in place to ensure that these bodies are properly set up in a way that makes it easily accessible to Nigerians.

Conclusion

The passage of the Tax Reform Bills into law is a significant milestone for Nigeria's tax system and administration. Its impact eradicates reliance on hitherto existing overly complex system of tax legislation and administration, by making it easier for taxpayers to be aware of their tax obligations, which in turn, fosters tax compliance. Again, the tax reform acts enforce economic equity as it greatly caters for the many economic concerns of Nigerian citizens. It also fosters foreign direct investment and reduces financial burden on low-income earners and small businesses. If properly implemented, these laws would eventually bolster the economy for not only citizens but also for foreign investors.

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