- with Senior Company Executives, HR and Finance and Tax Executives
- in United States
- with readers working within the Accounting & Consultancy, Oil & Gas and Securities & Investment industries
Introduction
Nigeria is home to several small business entities run by individuals or group of business partners. Statistics show that businesses on this scale of operations are more than large scale businesses and multinational enterprises operating in the country. This is especially considering the several exits and business restructurings that the Country has recorded in recent years.
As Nigeria’s tax laws change, small and medium scale business owners may wonder how they stand to benefit. It is therefore imperative to expand on the opportunities that exist for business owners in the wake of the recent tax reforms in Nigeria.
This article seeks to highlight relevant provisions of the tax reform Acts that support small businesses and provide them with fiscal leverage as the implementation of the Acts unfolds.
Overview of the 2025 Tax Reform Acts
On June 26, 2025, the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board Nigeria (Establishment) Act, (collectively referred to as the tax reform Acts) were assented to by Nigeria’s President, cementing their transition from the much-anticipated reform bills into Law.
The enactment of these reform Acts was significant for many sectors of the Nigerian economy, as it signaled fiscal shifts, revised compliance and reviewed perspectives to Nigerian taxation. At the commencement of the reform exercise, the Government had stated that its objective of the review process was to promote tax equity and fairness, simplify and harmonise existing tax laws, improve the business environment and support small businesses, amongst others. For small and medium enterprises (“SMEs”), the government’s focus is to boost economic growth, simplify the tax obligations and create room for the informal sector to earn higher revenue to sustain the Nigerian economy.
The NTAA1 defines small businesses as businesses that earn a gross turnover of 100,000,000 naira or less per annum and have fixed total assets worth less than 250,000,000 naira. It is interesting to note that the Act exempts businesses that provide professional services from the classification of small businesses. Therefore, regardless of the revenue and total assets threshold, professional service providers would not fall within the small business definition.
Although the Act contains only the “small business” description, this definition could be extended to conventionally recognized SMEs that operate within the thresholds pre-defined by the Act and employ between 50- 250 personnel.
Key Provisions Supporting SMEs
Simplified Tax Returns2
The NTAA introduces a provision for tax authorities to issue guidelines for the filing of simplified income tax returns by low-income earners or persons operating in the informal sector. Where the tax authority releases these guidelines, SMEs would enjoy reduced compliance burdens commensurate with the size of their operations.
Exemption from Company Income Tax Obligations3
SMEs with an incorporation status, unlike companies with large business operations and high revenue thresholds, are liable to income tax at 0%. SMEs in this category that earn less than 100,000,000 naira are therefore exempt from the payment of income taxes. Notwithstanding the foregoing, business owners in their individual capacity are chargeable to personal income tax under the reform laws.
Exemption from Withholding Tax and Value Added Tax (VAT) Obligations4
SMEs, unlike conventional taxpayers, are also exempt from the obligation to charge VAT and file VAT returns. In determining the qualification of a small business, the following shall not be taken into consideration; i. the supply of a capital asset of the person and ii. supplies made solely because of the person selling a whole or part of its business or permanently ceasing to operate. Additionally, SMEs are exempt from the obligation to collect, deduct or withhold and remit taxes due under relevant provisions of the new laws.
National Single Window Portal for Trade5
The tax reforms contain a provision for the tax authority to operate a National Single Window Portal to enhance revenue assurance, streamline import and export processes and facilitate international transit operations. This system is designed to ensure efficiency and transparency in trade and revenue administration. For more efficient operations, SMEs in international trade can take advantage of the one stop tax shop after the portal is established by the tax authority.
Advance Rulings for Tax Certainty6
The NTAA introduces provisions for the issuance of advance rulings by relevant tax
authorities. SMEs can now apply to the tax authority for specific rulings on various tax issues for the purpose of clarity, consistency and certainty of tax treatments in their operations.
Simplified Dispute Resolution7
The Joint Revenue Board of Nigeria (Establishment) Act establishes the Office of the Tax Ombud. The Tax Ombud is an independent and impartial arbiter established to review and resolve tax-related complaints. The Tax Ombud is expected to adopt simple alternative dispute resolution techniques like mediation or conciliation to resolve issues between taxpayers and tax authorities. In the event of disputes, SMEs may approach the Tax Ombud for more cost-effective dispute resolution procedures before approaching the courts (should the need arise) for more complex litigation processes.
Conclusion - Practical Implications for SMEs
The general ambit of the reform Acts seeks to reduce the compliance burden on SMEs, provide them with increased economic leverage and provide them with opportunities to channel their resources into more efficient, profit-making areas. Business owners are therefore encouraged to review their existing positions and take advantage of the provisions of the reform Acts to save costs, reduce administrative burdens and channel their resources into optimized areas.
As the reform Acts become mainstay within the Nigerian tax regime, SMEs are encouraged to re-evaluate their operations and leverage existing provisions to better their operations and increase their growth exponentially.
Footnotes
1. Section 147, Nigeria Tax Administration Act, 2025
2. Section 15 of the Nigeria Tax Administration Act, 2025
3. Section 56 of the Nigeria Income Tax Act, 2025
4. Section 22 (4) of the Nigeria Tax Administration Act, 2025
5. Section 83 of the Nigeria Income Tax Act, 2025
6. Section 73, of the Nigeria Tax Administration Act, 2025
7. Section 36 and Section 41, Joint Revenue Board of Nigeria (Establishment) Act, 2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
