In June 2025, president Bola Tinubu signed four new tax reform bills into law, bringing big changes to how taxes are managed in Nigeria.
After the signing, Zacch Adedeji, the executive chairperson of the Federal Inland Revenue Service, now renamed the National Revenue Service, said the new laws would start on 1 January 2026.
The reforms began in 2023, when Tinubu set up a committee shortly after taking office. He appointed Taiwo Oyedele, a tax expert from PriceWaterhouseCoopers, to lead the group.
The committee of more than 80 members was asked to simplify taxes, merge revenue collection efforts, reduce tax evasion and avoidance, and increase tax income to at least 18% of Nigeria’s gross domestic product (GDP).
The committee’s work resulted in four tax bills that replaced old tax laws and set up a new tax system. However, the bills faced strong pushback from various groups, including governors of 19 northern states and the Northern Elders Forum.
Even the powerful National Economic Council, chaired by the vice president, urged the president to withdraw them, but Tinubu declined to do so. Despite the protests and some false claims, the bills were passed by parliament, though with a few changes.
This factsheet highlights key parts of the new tax laws and how they may affect people and businesses in Nigeria.
What are the four new laws?
- Nigerian Tax Act: combines many old tax laws into one and removes over 50 overlapping taxes. This makes the tax system easier to follow, with the aim to increase compliance.
- Tax Administration Act: unifies the rules for tax collection at the federal, state and local levels to reduce confusion and administrative clashes.
- The Nigeria Revenue Service Act: replaces the Federal Inland Revenue Service with an independent Nigeria Revenue Service to regulate how taxes and other government revenue are managed.
- Joint Revenue Board Act: creates a tax ombud and tax appeal tribunal to help settle disputes and coordinate between different levels of government.
Misinformation and controversy around the tax laws
Tinubu’s reforms faced serious challenges along the way. During debates in parliament, false claims spread, including from the governor of the northern Borno state, Babagana Zulum.
In a TV interview, he said that “only Lagos will benefit” and wrongly claimed that the Tertiary Education Trust Fund (Tetfund), the National Agency for Science and Engineering Infrastructure (Naseni) and the National Information Technology Development Agency (NITDA) would be scrapped by 2029 because companies would stop funding them.
Tetfund funds public tertiary institutions and Naseni supports research and technology development, while NITDA promotes information technology.
The claim was false but reflected the fears of some leaders in the north, which is heavily affected by the Boko Haram militant insurgency and less developed than other parts of the country.
One of the most debated changes has been the new value-added tax (VAT) system. The Northern States Governors Forum rejected these, saying they would hurt their region. They argued that VAT was paid based on where a company’s head office was, which gave an unfair advantage to states like Lagos, the country’s economic hub.
The new VAT sharing formula gives 10% to the federal government, 55% to states and 35% to local governments, compared to the old model of 15%, 50% and 35%.
Previously, states received their VAT share based on where it was collected (20%), population (30%) and equally shared (50%). Under the new law, it will be 50% equally shared, 20% by population and 30% based on consumption, greatly affecting state revenues as VAT is a major source of the money states get from the federation account each month.
Nigeria’s tax-to-GDP ratio is one of the lowest in Africa and is a topic of ongoing debate.
The tax reforms made big changes to how taxes are collected in Nigeria. What are some of these?
1. Changes to income tax for both individuals and companies
One major area is personal income tax, which could affect how much money states receive.
People earning N800 000 (US$523) or less per year won’t pay any tax. This includes those earning the N70 000 ($46) monthly minimum wage. (Note: Any dollar amounts in this article are approximates based on July 2025 exchange rates and are provided for guidance only.)
Above that, tax rates are applied as follows:
Since personal income tax goes to the person’s state of residence, states with mostly low-income earners may get very little tax revenue because many residents fall under the N800 000 exemption.
For companies, the new law says tax shall be levied annually based on their total profits.
At time of publication, companies making N25-million ($16 340) or less paid 0%. Those earning between N25-million and N100-million ($65 360) paid 20% of their profit. In contrast, large companies with a turnover of more than N100-million paid 30% income tax.
Under the new law, small companies will still pay 0%. However, the definition of small company has changed, to a company that earns N50-million or less annually and has fixed assets valued at N250-million or less. Other companies will pay 30% from 2026 onward.
2. Individual tax registration and filing returns are now mandatory
The new tax administration law makes it compulsory for individuals to register for tax and file returns.
It says that “a person engaged in banking, insurance, stock-broking, or other financial services in Nigeria shall make the provision of a tax ID a precondition for opening a new account or operating an existing account”.
Previously, only businesses needed a tax identification number (tax ID) when opening a bank account.
A non-resident person who supplies taxable goods or services to any person in Nigeria, or derives income from Nigeria, must also now register for tax purposes and obtain a tax ID. This was previously not required.
Under the new pay-as-you-earn system:
- Employers must file a return with the relevant tax office for all payments made to employees the previous year by 31 January.
- Employees must also file their own annual income return, including income from jobs and any other sources. This aims to ensure that side incomes are also taxed.
Under the old system, the deadline for filing was at the end of March, and only salaries were taxed. Extra income was often not reported or taxed.
3. Digital assets are now taxable
The new law defines digital assets as “digital representation of value that can be digitally exchanged, including, but not limited to, crypto assets, utility tokens, security tokens, non-fungible tokens (NFT), such other similar digital representation or derivatives of any of the listed or similar assets and any other asset as may be defined by the relevant regulatory authority”.
Under the new laws, these assets are now classified as property or assets and are taxable, including profits and gains from transactions involving these assets.
The cryptocurrency market in Nigeria was worth $400-million by 2024, according to some official estimates.
4. New development levy for most companies, but none on food or small businesses
The new law introduces a 4% development levy on the profits of all Nigerian companies, except small ones.
This levy consolidates several levies, including the Tertiary Education Tax, Information Technology Levy, the Naseni levy, the National Information Technology Development Fund and the Police Trust Fund (PTF) levy.
The new law also exempts these small companies from company income tax and capital gains tax.
5. More goods and services are now exempt from VAT
The list of items that don’t attract VAT has been expanded. These now include basic food, medicines and medical services, medical equipment, school books and materials, tuition fees, exports (except oil and gas) and electricity generation and transmission.
The VAT rate stays at 7.5%, even though there were plans to raise it. But businesses must now use electronic invoicing to make VAT collection more transparent and efficient.
6. New taxes for foreign companies
The new tax law expands what foreign (non-resident) companies can be taxed on in Nigeria.
At time of publication, even if certain activities were done by partners or affiliates and not directly through their local office, they could still be taxed as part of the company’s presence in Nigeria.
Also, foreign companies that earn income in Nigeria must in future pay a minimum tax based on a portion of their earnings before interest and tax.
7. Stricter penalties for breaking tax rules
The new tax administration law introduces tougher penalties for not following tax rules.
For instance, if a taxable person fails to file tax returns, the fine is now N100 000 ($65)] for the first month (up from N5 000) and N50 000 for every extra month (up from N5 000).
If someone doesn’t register for tax, they must pay N50 000 in the first month, and N25 000 each month after until they register.
Government agencies and companies are banned from giving contracts to anyone not registered for tax. The penalty for doing so is a N5-million fine. That did not exist previously.
Some offences can lead to jail time, such as failing to send in taxes collected or withheld by the 21st of the following month, falsifying tax documents or attempting to bribe tax officials.
8. Banks must report large customer transactions
Under the tax law, financial institutions must report individual accounts with cumulative transactions of N25-million (about $16,340) or more in a month to the tax authorities.
Corporate accounts with transactions of up to N100-million (about $65 360) or more in a month are also to be reported.
This is meant to help track taxable income more effectively.
This rule adds to the existing anti-money laundering law, which already requires banks to report any single transaction over N5-million for individuals or N10-million for companies.
However, some experts have warned that this could lead to more people avoiding banks.
“Only a fraction of Nigeria’s population operates bank accounts,” Russell Somoye, professor of banking and finance at Olabisi Onabanjo University, Ago-Iwoye, south-west Nigeria, told Africa Check.
“When people know that tax authorities are watching their bank accounts, some will take more of their transactions outside the banking system or manage them in a way to avoid exceeding the threshold,” Somoye said.
Experts: Implementation is key
The new tax laws will affect individuals, businesses and government agencies in different ways, said Prof Muhammad Tanko, an accounting expert with research interests in tax and financial reporting. Tanko teaches at Kaduna State University in northwestern Nigeria.
“It’s good that the new tax laws exempt the lowest income earners from personal income tax. Generally, low-income earners will now pay less, while high-income earners will pay more,” Tanko told Africa Check.
He said that while zero VAT on essentials like food, medicine and electricity could make them cheaper, this would depend on how it was implemented.
Tanko warned that the new laws could affect government efficiency.
“Now that government revenues have been streamlined, all government agencies will have to rely on budgetary allocations. In a case where the release of funds is delayed, the efficiency of the government agency in question would be affected," he said.
Tanko said that enforcing the new tax laws would be challenging because people and businesses might try to avoid paying taxes, for example, by using cash and avoiding bank transfers.
Philip Alege is a professor of economics at the Covenant University in Ota, southwestern Nigeria. He said that the reforms could increase productivity and diversify the economy, if properly enforced.
“Hopefully, the changes the tax reforms have brought would push state governors to think more deeply about how to increase economic activities in their states,” he told Africa Check
He added that if the government could use the reforms to stop high-income earners and the wealthy from evading taxes, then it “will have more funds to fix public infrastructure such as roads and electricity, helping create a better business environment and stimulate the economy”.
This report was written by Africa Check., a non-partisan fact-checking organisation. View the original piece on their website.
