Introduction
On June 26, 2025, President Bola Ahmed Tinubu signed four groundbreaking tax reform bills into law: the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service (Establishment) Act (NRSA), and the Joint Revenue Board (Establishment) Act (JRBA). These laws overhaul Nigeria’s tax system, streamlining administration, boosting revenue, and promoting equity for businesses and individuals. For corporate entities, small businesses, and taxpayers, the Nigeria Tax Act 2025 introduces pivotal changes requiring strategic legal planning. This guide breaks down key provisions, implications, and offers actionable compliance tips.
Key Provisions of the Nigeria Tax Act 2025
The 2025 Act unifies laws on companies’ income tax, personal income tax, value-added tax (VAT), and capital gains tax, eliminating over 50 overlapping taxes for a simpler, investor-friendly framework. Below are some of the Act’s most impactful provisions:
- Relief for Low-Income Earners and Small Businesses: Individuals earning up to ₦800,000 annually (after ₦200,000 rent relief for those up to ₦1 million) are exempt from personal income tax. Small companies with turnovers under ₦100 million and fixed assets below ₦250 million are exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT), and the new Development Levy. These measures aim to alleviate financial burdens on small businesses and informal traders, encouraging formalization and compliance. However, professional service providers, even if meeting these thresholds, are excluded from these exemptions.
- Development Levy Introduction: A 4% levy on assessable profits applies to companies (excluding small or non-resident ones), replacing taxes like Tertiary Education Tax and Information Technology Levy. The funds support TETFUND and student loans, thus aiding national development but adding compliance layers for mid-sized firms.
- Digital Assets Taxation: Aligning with the Investment and Securities Act 2025, profits from digital or virtual assets (e.g., cryptocurrencies) are now taxable. This targets Nigeria’s growing digital economy, but raises enforcement challenges like valuation and decentralization, which may lead to disputes.
- Corporate Tax Cuts and Incentives: Corporate tax rates drop from 30% to 27.5% in 2025 and 25% thereafter. Businesses can claim VAT credits on expenses and assets, reducing costs. The Economic Development Tax Incentive (EDTI) replaces Pioneer Status, targeting priority sectors for structured relief.
- Anti-Avoidance Measures: Sections 190–195 tighten transfer pricing rules, mandating arm’s-length pricing and audits of offshore deals to combat base erosion and profit shifting (BEPS)[1]. This aligns with OECD/G20 standards, intensifying scrutiny on multinational transactions.
Tax Implications for Businesses and Individuals
The Nigeria Tax Act 2025 presents both opportunities and challenges. For businesses, the simplified tax code and reduced rates lower compliance costs and enhance predictability, fostering a more attractive investment climate. The establishment of the Nigeria Revenue Service (NRS), replacing the Federal Inland Revenue Service (FIRS), introduces a digitally enabled, autonomous agency with enhanced enforcement powers, including real-time VAT tracking and API-based validation. This digital transformation, coupled with mandatory Tax Identification Numbers (TINs) linked to National Identity Numbers (NIN) and Bank Verification Numbers (BVN), aims to reduce tax evasion and capture the informal sector. However, businesses must invest in digital infrastructure and training to meet these requirements.
For individuals, the tax exemptions and VAT relief on essentials like food, healthcare, and education promise to ease financial pressures, particularly for low-income households. Yet, the lack of a comprehensive taxpayer handbook or simplified rate schedule may create confusion, especially for small businesses navigating the new regime. Additionally, the absence of gender-responsive provisions overlooks the unique challenges faced by women-led businesses, particularly in the informal sector, which could prompt future legal advocacy.
Legal Considerations and Dispute Resolution
The establishment of the Tax Ombudsman and the restructured Tax Appeal Tribunal under the JRBA provides new avenues for resolving tax disputes efficiently. The Ombudsman serves as an impartial mediator, enhancing taxpayer trust, while the Tribunal offers a formal mechanism for appeals. However, the interplay between these bodies and the court system remains untested. Moreover, the taxation of digital assets and strengthened transfer pricing rules may lead to complex litigation, particularly for multinational corporations and tech-driven enterprises.
Practical Steps for Compliance
To adapt to the Nigeria Tax Act 2025 (effective January 2026), it is important that businesses and individuals take certain proactive measures like:
- Conducting a Tax Impact Assessment: Review how exemptions, levies, and rates affect their operations, using tools like FIRS calculators.
- Updating Tax Strategies: Align with arm’s-length pricing; seek EDTI eligibility for incentives.
- Investing in Training: Train staff on TIN requirements and digital reporting.
- Seeking Professional Advice: Engage tax lawyers for audits and disputes.
Tax Rate Comparison Table
| Category | Pre-2025 Rate | 2025 Rate | 2026+ Rate |
| Corporate Tax | 30% | 27.5% | 25% |
| Development Levy | N/A | 4% | 4% |
| Small Business CIT | 30% | Exempt (under ₦100M turnover) | Exempt |
Frequently asked questions:
- What is the Development Levy under Nigeria Tax Act 2025?A 4% levy on profits funding education and development, exempting small businesses.
- How does Nigeria Tax Act 2025 affect digital assets?Profits from cryptocurrencies are taxable, with potential valuation disputes—consult a lawyer.
- Who is exempt from taxes in Nigeria 2025?Low earners (up to ₦800,000) and small businesses (under ₦100M turnover).
- What are BEPS measures in Nigeria Tax Act 2025?Strengthened transfer pricing and anti-avoidance rules to prevent profit shifting.
Conclusion
The Nigeria Tax Act 2025 marks a bold step toward modernizing Nigeria’s tax system, fostering economic growth, and enhancing fairness. While its provisions offer significant benefits, they also introduce new compliance challenges that require strategic planning and legal expertise. As the Act takes effect from January 2026, stakeholders must stay ahead of the curve by taking proactive steps to adapt to the new tax regime.
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[1] Base Erosion and Profit Shifting (BEPS) refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in international tax rules to artificially shift profits to low or no-tax jurisdictions, thereby eroding the tax base of higher-tax jurisdictions where economic activities and value creation occur. These strategies reduce the taxable income in countries where MNEs operate, leading to significant revenue losses for governments globally. BEPS is a critical issue in international taxation, as it undermines the fairness and integrity of tax systems, particularly in developing countries like Nigeria, where tax revenues are essential for public services and development.