On June 26, 2025, President Bola Ahmed Tinubu signed into law four landmark bills, including The Nigeria Tax Act, The Nigeria Tax Administration Act, The Nigeria Revenue Service Act, and The Joint Revenue Board Act. Collectively known as the Tax Reform Acts, these legislations mark a major restructuring of Nigeria’s tax landscape, aimed at simplifying administration, expanding the tax base, increasing revenue, and improving the overall investment climate. The laws are set to take effect from January 1, 2026.
Broadening the Tax Base and Enhancing Equity
The reform introduces a progressive shift in corporate and individual taxation. For small companies (defined as entities with an annual turnover not exceeding ₦100 million and total fixed assets below ₦250 million), the Acts provide a significant relief, including exemption from Companies Income Tax, Capital Gains Tax, and the newly created Development Levy. This exemption not only reduces administrative burdens on micro and small businesses but encourages formalization within the informal sector. It is expected that this move would unlock the economic potential of Nigeria’s SMEs, contributing positively to employment and overall economic growth. However, for larger companies and multinationals, the Acts impose more stringent obligations. A Minimum Effective Tax Rate of 15% has been instituted for companies with turnover exceeding ₦50 billion or that belongs to multinational groups with global revenue above €750 million.
Personal Income Tax to Reflect Equitable Structure
Personal Income Tax has also been reshaped to reflect a more equitable structure. Income thresholds have been adjusted, exempting individuals earning up to ₦800,000 annually, while high-income earners will face increased tax rates up to 25%. We expect this move to reduce income inequality and possibly increase the purchasing of the bottom of the income pyramid.
A New Levy and the End of Certain Incentives
In a move to consolidate levies and improve transparency, the Acts introduce a new Development Levy set at 4% of assessable profits for companies (excluding small companies). This levy replaces the Tertiary Education Tax, IT Levy, NASENI Levy, and the Police Trust Fund Levy. Also, the Pioneer Status Incentive has been replaced by a new Economic Development Incentive – a 5% tax credit for eligible capital expenditures, valid for five years. This marks a shift from tax holidays to targeted investment stimulation.
Decentralization and Institutional Reforms
On the institutional front, the Federal Inland Revenue Service (FIRS) has been rebranded as the Nigeria Revenue Service (NRS). Alongside this, State Internal Revenue Services have been granted full autonomy. A framework for joint audits and federal support to subnational governments is also introduced. Additionally, a new Tax Ombuds Office has been created to serve as an independent dispute resolution body, offering taxpayers an alternative to lengthy administrative litigation.
The VAT sharing formula has also been revised to increase subnational entitlements: states now receive 55% and local governments 35%, while the federal share has been reduced to 10%. This aligns fiscal incentives with service delivery closer to the grassroots.
Governance, Disclosure, and Penalties
Transparency and governance are central to the new Acts. Companies are now legally required to disclose tax planning schemes that confer tax advantages, including deferral, avoidance, or exemption strategies. The penalties for non-compliance have been significantly increased. Failure to file returns now attracts an initial ₦100,000 fine, with an additional ₦50,000 for each month of default. A penalty of ₦5 million is also introduced for awarding contracts to unregistered tax entities.
Conclusion
The Nigerian Tax Reform Acts of 2025 represent a fundamental recalibration of the country’s tax policy and administrative structure. While they are designed to strengthen the fiscal system, improve transparency, and attract responsible investment, their success will depend heavily on effective implementation, stakeholder engagement, and technological adaptation.