What’s Different In New Tax Laws

The federal government in a move to reposition Nigeria’s tax landscape for long-term sustainability, had recently signed into law a tax reform package which consists of the Nigeria Tax Act (NTA), The Nigeria Tax Administration Act (NTAA), The Nigeria Revenue Service Act (NRSA) and the Joint Revenue Board Act (JRBA).
The acts which were a work of the Presidential Fiscal Policy and Tax Reforms Committee, has been a pillar of President Bola Ahmed Tinubu’s fiscal reset that is aimed at ensuring that the country achieves its $1 trillion economy follows months of stakeholder engagement and expert consultations.
At its core, the new tax laws represent more than a policy reform, it is a recalibration of the relationship between the Nigerian state and its citizens as it demands more compliance, but it also whilst offering more fairness, transparency, and protection.
The act introduces a unified and modern tax framework designed to boost voluntary compliance, simplify administration, and support broader economic growth. It also establishes new thresholds, incentives, and digital processes aimed at aligning Nigeria’s tax policy with global best practices.
A major factor in the new law is the unification of the tax system to ensure efficiency and accountability. The act establishes a unified tax administration system that centralises oversight and reduces duplication. It designates the Nigeria Revenue Service (NRS) as the lead federal body overseeing tax administration for companies, non-residents, and certain federal employees, while empowering relevant state tax authorities (RTAs) to manage personal income tax and related levies within their jurisdictions.
It also encourages seamless collaboration between tax bodies such that when non-compliance is identified outside an authority’s domain, the matter can be referred or audited jointly, enhancing the efficiency of tax administration across all tiers of government.
The act also brings structured processes to bring more Nigerians especially those in the informal economy into the tax system. Small businesses and low-income earners are encouraged to file simplified returns, while comprehensive identification procedures and penalties are now in place to ensure compliance.
Asides this, it introduces new requirements for Virtual Asset Service Providers (VASPs), including mandatory reporting of cryptocurrency and digital asset transactions, KYC standards, and defined tax liabilities. According to the law, non-compliant VASPs risk both license suspension and steep fines reaching N10 million for the first month of default and N1 million for each subsequent month.
Paving the path for a digitised economy, the Act favoured the adoption of electronic fiscal systems (EFS) for recording, invoicing, and transmitting tax data as businesses will now operate under a fiscalised VAT regime, with e-invoicing and digital filing integrated directly into tax authority platforms.
Some of the major changes that come with the tax reform Act include increased exemption threshold for small companies. Under the new Act small companies with annual gross turnovers of N100million and below and total fixed assets not exceeding N250million, are now exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT) and the newly introduced Development levy. Before now only companies with annual gross turnovers of N25 million are exempted from these taxes.
The NTA increased the Capital Gains Tax rate from 10 per cent to 30 per cent for companies. This effectively aligns the CGT and Companies Income Tax rate and reduces any tax arbitrage that could have been unduly enjoyed in the classification between chargeable gains and trading income. For individuals, capital gains will be taxed at the applicable income tax rate based on the progressive tax band of the individual.
The Act also introduced CGT on indirect transfers of shares in Nigerian companies so that where shares are disposed of in intermediary holding companies offshore, a Nigeria CGT is triggered. Also, the tax exemption threshold for the sale of shares in Nigerian companies has been increased to N150million from N100 million in any 12 consecutive months, provided that the gains do not exceed N10million.
In place of the several levies imposed on companies such as Tertiary Education Tax (TET), Information Technology Levy (IT), the National Agency for Science and Engineering Infrastructure (NASENI) levy and the Police Trust Fund (PTF) levy, Nigerian companies, except small companies will now pay a four per cent Development Levy of their tax profits before deducting tax depreciation and losses.
There is also the introduction of the Minimum Effective Tax Rate (ETR). Nigerian companies who are members of a multinational group with aggregate group turnover of £750million and above or have an annual turnover of N50billion and above, will now be subject to a minimum effective tax rate (ETR) of 15 per cent of their Net Income.
Net Income, in this instance is defined as profits before tax excluding franked investment income and unrealised gains or losses, except for life insurance companies where the definition of Net Income also excludes gross and investment income for policyholders. The minimum effective tax rule however does not apply to Free Zone companies on their exports out of Nigeria, provided that such companies are not part of multinational groups.
More appealing to the low income earners is the changes to the income brackets for the Personal Income Tax (PIT). The NTA changes the income brackets and applicable tax rates for each bracket such that individuals earning N800,000 or less per annum will now be exempt from tax on their income and gains, while higher income earners will be taxed at a higher rate up to 25 per cent. The Act also increases the tax exemption threshold for compensation for loss of employment or injury from N10million to N50million.
The Acts also replace the “pioneer” tax holiday incentive, with an “Economic Development Incentive” (or EDI). This incentive introduces a tax credit of five per annum for five years on qualifying capital expenditure purchased by eligible companies within five years effective from the production date.
Also, the PIT will now apply to the worldwide income of a resident individual which is now clearly defined in the new Act. Prior to now there had been varied interpretations due to a lack of proper definition of “residence”.
With the definition extending to individuals with substantial economic and immediate family ties in a year of assessment, the law widens the tax net. Employment income will now be taxed in Nigeria only if the individual is resident in Nigeria or performs duties in Nigeria without paying tax in their country of residence.