Nigeria’s Tax Overhaul: What You Absolutely Need to Know (and Do!)

Big news for every business and individual in Nigeria! On June 26, 2025, President Bola Ahmed Tinubu signed four game-changing Tax Reform Bills into law. These aren’t just minor tweaks; we’re talking about a complete revamp of Nigeria’s tax system designed to fuel economic growth, boost government revenue, make doing business easier, and streamline tax administration across the board.

While we’re still waiting for the official effective date (rumor has it, it won’t be before January 1, 2026), the clock is ticking for you to get up to speed. This overhaul is comprehensive, and understanding it now will save you headaches and potentially significant costs later.

Let’s dive into the top 20 changes you need to be aware of:

The Top 20 Game-Changing Tax Reforms

1. Small Companies Get a Bigger Break: Good news for smaller players! If your company has an annual gross turnover of NGN100 million or less (up from NGN25 million) AND total fixed assets not exceeding NGN250 million, you’re now exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT), and the new Development Levy. A significant relief for budding businesses!
2. Capital Gains Tax (CGT) Jumps: For companies, the CGT rate is increasing from 10% to a substantial 30%. This change aims to align CGT with Companies Income Tax, closing potential loopholes. Individuals will see their capital gains taxed at their personal income tax rate.
3. Indirect Share Transfers Now Taxed: The NTA now covers CGT on indirect transfers of shares in Nigerian companies. This means if shares in an offshore intermediary holding company are sold, a Nigerian CGT will be triggered (treaty exemptions may apply). The tax-exempt threshold for selling shares in Nigerian companies has also increased to NGN150 million (from NGN100 million) within 12 consecutive months, provided gains don’t exceed NGN10 million.
4. Introducing the “Development Levy”: Most Nigerian companies (except small ones) will now pay a 4% “Development Levy” on their assessable profits. This new levy consolidates several existing taxes, simplifying the payment process.
5. Minimum Effective Tax Rate (ETR) for Big Players: If you’re part of a multinational group with a total turnover of EUR750 million or more, or if your company alone has an annual turnover of NGN50 billion+, you’ll face a minimum effective tax rate (ETR) of 15% on your “Net Income.” This rule aims to ensure larger entities contribute their fair share.
6. Controlled Foreign Company (CFC) Rules: The NTA introduces taxes on undistributed profits of foreign companies controlled by Nigerian companies, especially if those foreign subsidiaries could have comfortably distributed dividends.
7. Expanding Tax for Non-Residents: The scope of activities subject to tax for non-resident companies in Nigeria has broadened. “Force of attraction” rules are in play, meaning even activities not physically conducted through a Permanent Establishment (PE) could be taxed. Engineering, Procurement, and Construction (EPC) contracts also face new tax rules, even if parts are performed outside Nigeria.
8. Minimum Tax for Non-Resident Companies: Non-resident companies with a taxable presence in Nigeria will now face a minimum tax based on a percentage of their earnings before interest and tax (EBIT) relative to their total Nigerian income. The tax won’t be less than the applicable withholding tax (WHT) rate or 4% of the income.
9. Free Zone Exemptions Are Changing: While Free Zone companies will continue to enjoy full tax exemption on exports or goods/services eventually exported (or supplied to oil and gas companies), proportionate taxes will apply if over 25% of their sales are made to the customs territory. From January 1, 2028, all profits of Free Zone entities will be taxed if they make ANY sales to the customs territory.
10. Economic Development Incentive (EDI) Replaces Pioneer Status: Say goodbye to “pioneer” tax holidays and hello to the “Economic Development Incentive” (EDI). This new incentive offers a 5% per annum tax credit for 5 years on qualifying capital expenditure for eligible companies. Unused credits can be carried forward for another 5 years before expiring.
11. A More Progressive Personal Income Tax (PIT): The NTA is tweaking income brackets and tax rates. Individuals earning NGN800,000 or less annually are now tax-exempt, while higher earners will face up to a 25% rate. The tax exemption for employment loss or injury compensation has also increased from NGN10 million to NGN50 million.
12. Clearer Definitions for Resident & Non-Resident Individuals: The Act now clearly defines “resident individual,” expanding the tax net to include those with substantial economic and immediate family ties in a given assessment year. Employment income will only be taxed in Nigeria if the individual is resident or performs duties here without paying tax in their country of residence.
13. Introducing the Tax Ombuds Office: A fantastic new addition! The Tax Ombuds office will act as an independent arbiter, liaising with tax authorities on behalf of taxpayers and resolving complaints related to taxes, levies, and regulatory charges.
14. Input VAT Recovery Is Here: Nigeria is adopting global VAT principles! You can now claim input VAT on all purchases, including services and fixed assets, provided it’s directly related to your VAT-subject supplies. This is a game-changer for many businesses!
15. Zero VAT Rate on Essential Goods & Services: The list of zero-rated items has expanded to include essentials like basic food, medical products, educational materials, and more. This means businesses selling these items can now recover their VAT costs, which wasn’t previously possible.
16. VAT Fiscalisation & Mandatory E-invoicing: Get ready for digital transformation! Nigeria is codifying VAT fiscalisation rules and making e-invoicing mandatory. This puts Nigeria at the forefront of e-invoicing adoption in Africa. You’ll need to implement the tax authority’s fiscalisation system for VAT collection.
17. Updated VAT Sharing Formula: The Federal Government’s share of VAT will decrease from 15% to 10%, while states will see an increase to 55% and Local Government Areas to 35%. This aims to empower local governance.
18. Steeper Penalties for Non-Compliance: Beware! Penalties for not following the rules have significantly increased. For instance, failing to file returns could cost you NGN100,000 in the first month and NGN50,000 for every subsequent month. New penalties include NGN5 million for awarding contracts to unregistered entities and fines for not granting access for technology deployment.
19. Disclosure of Tax Planning Arrangements: Companies are now required to proactively inform tax authorities about tax planning transactions or schemes that could offer a “tax advantage.” This broadly covers anything that leads to a more favorable tax outcome, from obtaining new reliefs to deferring payments.
20. FIRS Becomes the Nigeria Revenue Service (NRS) & Autonomous SIRS: The Federal Inland Revenue Service (FIRS) has been rebranded as the Nigeria Revenue Service (NRS), reflecting its broader responsibilities. State Internal Revenue Services (SIRS) will also gain autonomy. The law also paves the way for joint audits and NRS support for state and local government tax collection.

---

Your Top 6 Actions to Take Now

These reforms are massive, and proactive preparation is key. Here’s what you need to do:

• Become Aware & Educate:
  • Sensitize Your Leadership: Organize workshops for your board and executive management to discuss the specific impacts of these reforms on your business.
  • Empower Your Team: Train and upskill your staff to ensure a smooth adoption of these new tax laws within their specific roles and processes.

• Assess Everything:
  • Holistic Impact Analysis: Don’t just look at one area. Proactively assess how these laws will affect your corporate structure, operations, finances, and compliance. Consider the ripple effects on your supply chains, commercial deals (like acquisitions and divestments), and even existing incentive regimes.
• Articulate Your Strategy:
  • Reframe Your Tax Strategy: Your tax approach needs to align with your overall business goals. The tax function will now play an even more critical role in protecting business value amidst these changes and new technologies like VAT fiscalisation.
  • Set Up a Tax Risk Register: Implement a live register to continuously identify, monitor, and control tax risks and opportunities triggered by these reforms in real-time.
• Operationalize & Implement:
  • Update Compliance Processes: You’ll need to update your internal compliance processes to match the new laws. This includes adapting your systems for new rates, revised filing requirements, information sharing, and claiming input VAT.
  • Execute Your Plan: Make sure your implementation plan is executed efficiently and effectively, keeping your strategic objectives in mind.
  • Leverage Technology: Update your accounting software and ERP systems to reflect the new rules. Ensure your processes and technology are in sync for end-to-end compliance, especially with e-invoicing on the horizon.
  • Optimize Governance: Evaluate, expand, or streamline your tax functions and processes to ensure effectiveness, close compliance gaps, and embed robust internal controls.
• Engage Your Stakeholders:
  • Develop a Communication Strategy: Determine how you’ll communicate these changes to key internal and external stakeholders. This includes shareholders (on ROI impact), employees (on PAYE), customers (on e-invoicing), vendors (on KYC and validation), and tax authorities (for rulings on new risks). Smooth communication is essential for a seamless transition.
• Monitor Constantly:
  • Stay Updated: Regularly monitor official government communications, circulars, and regulations related to the new tax laws.
  • Manage Change: Beyond training, have a deliberate change management plan in place to drive new behaviors, review the transition process, and monitor the adoption of these new rules across your organization.

Conclusion

Nigeria’s tax landscape is undergoing a profound transformation. It’s not enough to simply be aware; businesses must conduct a comprehensive review of their tax strategies, processes, and compliance frameworks. Readiness and resilience will be your greatest assets in this evolving environment.

Don’t Navigate This New Landscape Alone.

The new Tax Reform Acts are complex, far-reaching, and demand expert interpretation to avoid pitfalls and uncover opportunities. At T. A. Williams Firms, we specialize in providing the clarity and strategic guidance your business needs to thrive, not just survive, in this evolving environment.

As seasoned accountants, astute tax experts, and dedicated professional consultants, we offer:

• Expert Accounting: Navigate the new reporting standards and ensure your financial records are impeccable and compliant.
• Strategic Tax Expertise: Optimize your tax strategy under the new laws, identify potential savings, and mitigate risks, turning complexity into your advantage.
• Professional Consultancy: Develop robust compliance frameworks, streamline your processes for VAT fiscalisation and e-invoicing, and empower your business for success in the new Nigerian tax landscape.

Let T. A. Williams Firms be your trusted partner in financial resilience. We’ll help you understand every nuance, implement necessary changes, and position your business for sustained growth.

Contact Us Today for a Consultation:

T. A. Williams House, Efab Sunshine Estate, House 11, A-Close, Tanzania Street, Apo, F.C.T – Abuja, Nigeria.
+234 916 369 8322 | +234 703 893 3502
info@tawilliams.com | contact@tawilliamsfirms.com
www.tawilliamsfirms.com