Key details to know about Nigeria’s new tax law

Last year, Nigeria introduced massive tax reforms in order to modernize its revenue system, address equity issues, and hence, generate more income for the government, given fiscal deficits that have become chronic. And even as it became important for individuals and businesses to know about these compliance changes, it was more about forecasting financial futures. This article addresses Nigeria’s new tax law.

What is the new tax law?

The new tax law involves a set of reforms put in place around 2024 to 2025, and these include:

• The Nigerian Tax Act, 2025 (also referred to as the Nigerian Tax Reform Acts). 
• The Nigeria Revenue Service (Establishment) Act, 2025, which changes FIRS into NRS, thus providing larger powers to an updated agency. 
• Other Acts, such as the Joint Tax Board Act, the Development Levy Act, and changes in how VAT, excise, and minimum taxes are collected. 

These are intended to consolidate and clean up older tax laws, eliminate redundancies, broaden the tax net (especially concerning digital economies), and simplify tax administration.

Major changes to know

These are the most noteworthy reforms that have implications for individuals, small and large businesses, and foreign firms.

Agency reconstructing and tax administration

• FIRS (Federal Inland Revenue Service) has been replaced by Nigeria Revenue Service (NRS). Several revenue collection, compliance, and taxpayer registration now fall under NRS, the new replacement for FIRS. 
• The Joint Tax Board has been empowered to have statutory excess exercised on tax collection heading across federal, state, and local borders. 
• More emphasis is placed on digital systems to enhance traceability and reduce tax evasion. This is done by linking the Taxpayer Identification Number (TIN), National Identification Number (NIN), and Bank Verification Number (BVN). 

Personal Income Tax (PIT) and tax thresholds 

• From now on, those earning ₦800,000 or less per annum will not be liable for personal income tax. 
• Increased earnings will introduce progressive tax bands with a top rate of up to 25% for high-income earners. 
• There is a residential relief; salaried workers may deduct rent up to ₦200,000 every year before income-tax liability. 

Corporate changes and business taxes

• Low business turnover (turnover ≤ ₦100 million and fixed assets ≤ ₦250 million) will be subject to some major tax exemptions: Companies Income Tax (CIT), Capital Gains Tax (CGT), and the newly introduced Development Levy. 
• The corporate income tax rate is to be gradually reduced for larger companies: reductions would cut down the old corporate income tax of 30% to 25%. 
• Development Levy of 4% on assessable profits for companies (other than small ones). This consolidates several currently existing levies (ITF, NITDA, Tertiary Education Tax, etc.). 

VAT, digital economy, and exemptions

• The VAT will stay at the usual 7.5%, but the scope has expanded. Foreign digital services supplying into Nigeria (e.g., streaming, e-learning) are now required to register and remit VAT. 
• The exemption and zero-rated goods have broadened. Many basic items, such as food, medical services, educational materials, electricity, and exported goods, are now treated favorably in many cases. 

Minimum tax, anti-avoidance, and expanded tax base 

• Now there is a minimum tax rule that will require some tax obligations even by companies making a loss under certain circumstances, thereby reducing loopholes. 
• There are more stringent anti-avoidance measures. Foreign subsidiaries, undeclared income, and profit shifting are now more tightly regulated. 
• There are now more robust definitions of taxable entities. Now, “Nigerian company” includes foreign-incorporated companies whose central or effective management is in Nigeria. That brings more entities into the tax net. 

New penalties and compliance requirements

• Penalties for non-compliance will be more vividly defined. For example, failure to register, late filing, or erroneous returns will attract fines tied to months of non-compliance or income levels. 
• More intense enforcement on documentation, record-keeping, and digital filing. Valid TIN/NIN/BVN becomes a requirement in many transactions. 

Who benefits and who may be more at risk

Just knowing who has more to gain and who might pay more helps in planning. 

Beneficiaries: 

• Low and middle earners who have incomes below the ₦800,000 threshold, so they can access some forms of relief and have disposable income. 
• Small businesses having turnovers ≤ ₦100 million and fixed assets ≤ ₦250 million. Reduced tax burden, reduced compliance hassles.  
• Exporters, digital providers, educational services, healthcare, and basic food/medical goods, which have gained favorable VAT or zero/exempt treatment.  

Those likely to pay more / face new costs: 

• By the increase, the effective tax burden on larger corporations will rise, especially with high turnover and international presence, along with minimum tax and heavier compliance regulations. 
• Local and foreign digital businesses that deliver services into Nigeria will need to register, collect, and remit VAT, and ensure proper documentation.
• Individuals earning above a significant amount of income and thus holding capital assets, foreign subsidiaries, and digital income gains will be subjected to increased attention and bear more tax liability. 

What it means for ordinary Nigerians and businesses 

Here are practical implications for possibilities: 

• Increased documentation needs: Many businesses and individuals will have to show they have the proper IDs (TIN, NIN, BVN), have accurate record-keeping, consistent documentation, and possibly upgrade tools/software for tax filings.
• Cashflow and pricing might be ever-changing: Some businesses might want to put the new VAT obligations, development levies, and stricter penalties on the neck of consumers in the form of price increases.
• Possibility of planning and saving: By exemptions, deductions, and relief (rent, thresholds, and co.), individuals and companies can now better plan their finances to minimize taxable incomes or exploit investments in tax-friendly sectors.
• Pressure towards formalization: The informal sector can expect growing pressure toward formalizing its operations for proper registration, issuing receipts, and maintaining bookkeeping. These can bring long-term benefits such as accessing finance and protecting their legal rights, but will no doubt increase visible costs. 
• Mixed reactions and impacts: Some changes, particularly those relating to digital VAT, foreign income, and penalties, are likely to be met with resistance or confusion. Therefore, the public understanding of the changes and government transparency in implementing them will be crucial.

What you should do to prepare

The following steps are what individuals, entrepreneurs, and businesses should consider to stay ahead:

• Verify your tax IDs: Confirm the following identifiers are correct and properly linked: TIN, NIN, and BVN. If they don’t exist or are obsolete, updates or registrations now are preferred.
• Assess your income against new thresholds: If your income reaches or slightly exceeds ₦800,000/year, assess the tax bands. If your business turnover nears ₦100 million, do not forget to weigh small business exemptions.
• Review your business structure and financial docs: Keep records, receipts, and invoices maintained meticulously. Your accounting is required by law to meet the specifications made by the new law, which may require an investment in accounting software or engaging help from a professional. 
• Plan for VAT and digital compliance: Understand whether you need to collect/remit VAT if you provide digital services or import digital goods/streaming. Include this in your pricing or contracts.
• Use exemptions and reductions wisely: Claim full benefits if there are rent relief, personal reliefs, or exemptions that apply in your area. These serve to lower tax liabilities.
• Stay updated on calendar timelines for operations: For instance, the fuel surcharge part of the new law has been postponed; implementation might be delayed for some portion of the law. A heads-up on the timelines allows for planning.

Conclusion

With the new tax law in Nigeria, there is the most significant array of fiscal reforms in recent years. Balancing relief for low-income earners and small businesses with fairer contributions from high earners and large corporations is the aim. Simple system, broadened taxable activity base, and stronger compliance and administration are some of the means by which the government seeks to raise revenue, curb evasion, and gain public trust.

Practically, if you can keep your eyes on the changes, update your records and structure, and make plans, you may earn some tax relief and discounts or avoid some penalties. The reforms possess some potential, but their success hinges on the transparent implementation of the new law with efficient functioning of the relevant agency and acceptance by the public.

For anyone (individual, small business, or larger company) affected by any of these changes, now is the time to acquire knowledge, consult accountants or tax professionals, and harmonize their operations according to the new regime. Being ahead will not only ensure compliance but may also uncover fresh opportunities in the new tax landscape.