Nigeria’s Tax Reform Acts: 20 Major Changes Businesses Need to Know and 6 Practical Steps to Take

Introduction
On June 26, 2025, President Bola Ahmed Tinubu signed into law four major pieces of legislation that are set to reshape Nigeria’s tax landscape. Together, the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA) introduce sweeping reforms designed to boost revenue, modernize administration, and create a more business-friendly environment.

While the exact commencement date is yet to be announced, it is unlikely to be earlier than January 1, 2026. For businesses, this is the time to understand the changes and prepare for what lies ahead.

The 20 Key Changes

1. Higher Exemption Threshold for Small Companies
Small companies with annual turnover of up to ₦100 million (previously ₦25 million) and fixed assets not exceeding ₦250 million will now be exempt from Companies Income Tax, Capital Gains Tax, and the new Development Levy.

2. Increase in Capital Gains Tax (CGT) Rate
CGT for companies rises from 10% to 30%, aligning it with the Companies Income Tax rate. For individuals, capital gains will now be taxed progressively based on their income bracket.

3. CGT on Indirect Share Transfers
Gains from indirect transfers of Nigerian shares through offshore entities will now be taxed in Nigeria, with some treaty exemptions. The exemption threshold for share disposals is also raised to ₦150 million within 12 months, provided gains do not exceed ₦10 million.

4. New Development Levy
All companies (except small ones) must pay a 4% levy on assessable profits. This replaces multiple levies such as TET, IT Levy, NASENI Levy, and Police Trust Fund Levy, consolidating them into a single charge.

5. Minimum Effective Tax Rate (ETR)
Large companies with turnover above ₦50 billion or those that are part of multinational groups with turnover above €750 million must pay at least 15% of net income as tax. Nigerian parent companies must also pay a top-up if subsidiaries abroad pay below this rate.

6. Controlled Foreign Company (CFC) Rules
Undistributed profits of foreign subsidiaries controlled by Nigerian companies may now be taxed locally if those profits could reasonably have been distributed.

7. Broader Tax Scope for Non-Resident Companies
Non-residents will face expanded tax obligations, including “force of attraction” rules where related-party activities can be taxed in Nigeria, even if conducted outside the country. EPC contracts are also now taxable.

8. Minimum Tax for Non-Resident Companies
Non-resident firms with taxable presence will pay tax based on EBIT from Nigerian income, but not less than the applicable withholding tax or 4% of their income.

9. Limits on Free Zone Exemptions
Free Zone entities retain exemptions on exports, but from 2028, any sales to Nigeria’s customs territory will trigger full taxation.

10. Economic Development Incentive (EDI)
Replacing the pioneer tax holiday, companies can now claim a 5% annual tax credit for five years on qualifying capital expenditure, with unused credits carryable for another five years.

11. More Progressive Personal Income Tax (PIT)
Individuals earning ₦800,000 or less yearly are now exempt. Higher earners face up to 25% tax. Compensation exemptions for job loss or injury rise from ₦10 million to ₦50 million.

12. Clearer Definition of Residency for Individuals
Residents are now explicitly defined to include those with strong economic and family ties to Nigeria. Their worldwide income becomes taxable. Employment income is taxable if earned in Nigeria and untaxed abroad.

13. Establishment of a Tax Ombuds Office
A new independent office will mediate disputes between taxpayers and authorities, improving fairness in administration.

14. Broader VAT Input Recovery
Businesses can now recover input VAT on all purchases, including services and fixed assets, provided they relate to taxable supplies.

15. Zero-Rated VAT on Essentials
Essential items such as basic foods, medicines, books, medical services, tuition fees, electricity, and non-oil exports are now zero-rated, allowing businesses to reclaim VAT costs.

16. VAT Fiscalisation and E-Invoicing
Mandatory e-invoicing and VAT fiscalisation have been introduced, making Nigeria one of Africa’s early adopters of digital tax compliance systems.

17. Revised VAT Revenue Sharing
The Federal Government’s share of VAT drops from 15% to 10%. States and local governments now take 55% and 35% respectively, with further distribution based on equality, population, and consumption.

18. Stiffer Penalties for Non-Compliance
Penalties for late filing now start at ₦100,000 in the first month and ₦50,000 for each subsequent month. New offences, such as awarding contracts to unregistered entities, attract fines up to ₦5 million.

19. Mandatory Disclosure of Tax Planning
Companies must now disclose tax planning schemes that result in a tax advantage, such as reliefs, reduced charges, or deferred payments.

20. FIRS Becomes NRS
The Federal Inland Revenue Service is renamed the Nigeria Revenue Service (NRS), with State Revenue Services granted greater autonomy. Joint audits and support mechanisms have also been formalized.

Six Practical Steps Businesses Should Take

1. Create Awareness
Train management and staff on the new rules to ensure readiness.

2. Assess Impact
Conduct a detailed review of how the reforms affect operations, structures, incentives, and compliance.

3. Reframe Tax Strategy
Align tax planning with broader business goals, and maintain a dynamic tax risk register.

4. Update Processes
Adapt compliance systems, accounting software, and ERP tools for new rates, VAT recovery, and e-invoicing.

5. Engage Stakeholders
Communicate proactively with shareholders, employees, customers, vendors, and tax authorities.

6. Monitor and Manage Change
Stay updated on government guidance and implement change management strategies for smooth adoption.

Conclusion
These reforms represent one of the most significant overhauls of Nigeria’s tax framework in decades. While they aim to broaden the tax base and simplify administration, they also introduce new compliance challenges for businesses.

Forward-looking companies will not only review their tax structures but also leverage technology, upskill their teams, and build resilience into their governance frameworks. Businesses that prepare early will be best positioned to adapt and thrive in this new era of tax administration.