Introduction

On January 1, 2026, the New Tax Act signed into law on 26 June 2025 by President Bola Ahmed Tinubu will take effect. Since 3 October 2025, when this law was introduced to the National Assembly as a bill, there have been several conversations about the contents of the new tax bill and the kind of effect it will have on the everyday life of both the privileged and non-privileged alike.

The aim of this article is to do just that: to enlighten the public on what the aim of the new tax law is, why it was created in the first place, and what its implementation could mean for privileged and non-privileged Nigerians alike.

The New Tax Act

Contrary to popular belief, Nigeria’s tax reform is not a single statute, but a package of four interrelated Acts, with the Nigeria Tax Act, 2025 (NTA) serving as the substantive tax code.

The four Acts are:

1. Nigeria Tax Act, 2025: the core law setting out taxable income, rates, exemptions, and liabilities.
2. Nigeria Tax Administration Act, 2025: governing assessment, collection, enforcement, and compliance.
3. Nigeria Revenue Service (Establishment) Act, 2025: replacing FIRS with the Nigeria Revenue Service.
4. Joint Revenue Board (Establishment) Act, 2025: coordinating federal and sub-national tax authorities.

This article focuses primarily on the Nigeria Tax Act, 2025, as it is the law that directly affects what Nigerians earn, pay, deduct, or are exempt from.

What is the Nigeria Tax Act, 2025?

The Act is organised into Parts, each covering a broad tax category, from personal income tax to corporate tax, capital gains, development levy, and incentives, with specific sections and schedules detailing rates and definitions.

Personal Income Tax

The Act creates a unified tax regime for individuals and replaces the older Personal Income Tax Act rules. Although the official detailed personal income tax rate schedule is contained in a schedule rather than a numbered section, key provisions include:

Tax-Free Threshold and Bands

i. Section 58

a) Sets tax rates for individuals according to the Fourth Schedule of the Act, which contains the formal list of progressive brackets and rates.

b) Individuals earning below the prescribed threshold of ₦800,000 annual income, are exempt from tax.

Tax Relief and Deduction Rules

While the Act’s Personal Income Tax structure is mainly contained in schedules, section 30 (2) mentions eligible deductions and what qualifies as such. These eligible deductions include; contributions under the National Housing Fund, National Health Insurance and contributions under the Pension Reform Act.

Section 30 (2)(Vi) mentions tax relief on rent as an eligible deduction. This rent relief, is up to ₦500,000 or 20% of rent paid, whichever is lower. However, the rent must be accurately declared. Although the authorised text specifying this is found in the schedules accompanying Section 58.

This change is significant because it replaces older blanket reliefs such as the Consolidated Relief Allowance used under previous law, making the system more targeted and modern.

Corporate Tax Provisions

Company Definitions and Rates

i. Section 56

a) Defines small companies, taxed at 0%, and other companies, taxed at 30%. Small companies are exempt from companies income tax, capital gains tax, and the Development Levy if they meet the prescribed turnover and asset thresholds.

b) This provision simplifies prior multi-tier company classifications.

Effective Tax Rate

Effective Tax Rate means the rate produced by dividing the aggregate i.e. total covered tax paid by a company for a year of assessment by the profits of the company. This means if the total tax paid by a company for a year is N5,000,000 and the company’s profit is N10,000,000 then it will be N10,000,000/N5,000,000 to get the Effective Tax Rate for said company.

Minimum Effective Tax Rate

ii. Section 57

a) Introduces a Minimum Effective Tax Rate of 15% for large companies, notably those with aggregated turnover exceeding ₦20 billion or those forming part of multinational groups, ensuring they pay at least this percentage in tax.

b) Where the calculated tax falls below 15%, a top-up tax is payable to meet the minimum threshold.

Capital Gains Tax

i. Capital gains tax for companies is aligned with corporate income tax rates, approximately 30 percent, eliminating the former separate 10% capital gains tax rate.

ii. Gains arising from indirect share transfers and offshore disposals are now expressly taxable, subject to defined exemptions, including threshold exemptions such as ₦150 million with a per-disposal cap.

This effectively expands and modernises capital gains tax to cover share sales and digital asset gains.

Development Levy (New Unified Levy)

This is provided for in section 59

i. Imposes a 4% levy on the assessable profits of companies other than small and non-resident companies.

ii. Revenue raised is allocated to designated national funds as follows:

a) Tertiary Education Trust Fund – 50%

b) Nigerian Education Loan Fund – 15%

c) National Information Technology Development Fund – 8%

d) Science and Engineering Infrastructure Fund – 8%

e) Board for Technological Incubation – 4%

f) Defence and Security Infrastructure Fund – 10%

g) National Cybersecurity Fund – 5%

This section of the Act is particularly significant because it consolidates multiple overlapping levies, such as the Tertiary Education Tax, IT levy, and NASENI levy, into a single 4% charge, simplifying compliance and aligning revenue use with strategic national goals.

Capital Allowances and Deductions

The Act modernises deductions and capital allowances:

i. Section 20 allows the deduction of business expenses, including those incurred up to six years before the commencement of the Act.

ii. Section 21 lists non-deductible expenses, including instances where VAT or import duties are unpaid.

iii. Section 27 provides for capital allowances, generally on a straight-line basis, replacing previous variable initial and annual allowance regimes.

iv. Section 23 simplifies the computation of tax where an accounting date changes.

These changes promote clarity and fairness in how companies claim expenses and allowances.

Expanded Tax Base

The Nigeria Tax Act broadens the definition of taxable income beyond prior laws:

i. Digital and virtual assets, including cryptocurrencies and NFTs, are expressly taxable.

ii. Worldwide residency taxation applies, such that individuals resident in Nigeria are taxed on global income, while non-residents are taxed only on Nigerian-sourced income.

iii. New sources of income, including prizes, honoraria, and digital revenue, are brought within the tax base.

Although the specific section numbers for some of these expansions are embedded within schedules and definitions, they reflect a deliberate broadening of scope.

Supporting Acts

Although these provisions are contained in separate Acts and not in the Nigeria Tax Act itself, they interact directly with the substantive tax rules outlined above.

Nigeria Tax Administration Act

i. Tax Identification Number registration is mandatory for individuals and entities.

ii. Financial institutions are required to ensure customers have a Tax Identification Number to open or maintain accounts.

iii. Penalties apply to non-registrants.

Revenue Sharing and VAT Rules

Under the Nigeria Tax Administration Act:

i. VAT revenue sharing is defined as follows: Federal Government – 10% ; States and the Federal Capital Territory – 55 %; Local Governments – 35%.

ii. Mandatory electronic invoicing and digital reporting systems are introduced.

Tax Ombudsman and Dispute Resolution

i. The Act establishes a Tax Ombuds Office and a Tax Appeal Tribunal to protect taxpayers and resolve disputes.

Joint Revenue Board Act

i. This Act facilitates intergovernmental coordination and promotes consistent tax administration across federal, state, and local governments.

Alleged Padding of the Act

The issue was formally raised in the House of Representatives by Hon. Abdussamad Dasuki and subsequently echoed by other lawmakers.

Sections Allegedly Altered or Removed

Based on publicly available legislative statements and documents, the following provisions are under scrutiny:

Nigeria Revenue Service (Establishment) Act

1. Section 25

2. Section 26

3. Section 30

Joint Revenue Board (Establishment) Act

1. Section 9

2. Section 14

3. Section 30

4. Section 40

5. Section 44

These sections reportedly relate to audit and enforcement powers, control of funds and accounts, and oversight and governance structures. Lawmakers allege that some provisions were removed, modified, or expanded after legislative passage, raising constitutional concerns.

Steps Currently Being Taken to Protect Public Interest

In response, the House of Representatives has constituted an ad hoc investigative committee to compare the bills passed by the National Assembly with the gazetted versions. Several lawmakers have called for a suspension or review of implementation pending clarification. Civil society organisations have demanded the release of certified true copies of the bills transmitted for presidential assent. The Presidency has denied any unlawful alterations, insisting that the laws were properly enacted.

Conclusion

The Nigeria Tax Act, 2025 represents the most ambitious restructuring of Nigeria’s tax system in decades. It consolidates old laws, expands the tax base, introduces modern concepts such as digital asset taxation, and seeks to balance revenue generation with social equity.

However, the unresolved allegations of post-passage alterations underscore the importance of transparency, legislative fidelity, and constitutional process. As January 1, 2026 approaches, the outcome of the National Assembly’s investigation will be crucial, not only for tax compliance but also for public trust in the rule of law.

Written by Oladeji Ibukunoluwa

Edited by Onyinyechi Ezeoke