President Bola Ahmed Tinubu has signed into law four transformative tax reform bills, marking a comprehensive restructuring of the nation’s fiscal and tax architecture. The newly enacted laws include the Nigeria Tax Law, Nigeria Tax Administration Law, Nigeria Revenue Service (Establishment) Law, and the Joint Revenue Board (Establishment) Law. Together, they aim to simplify tax compliance, boost government revenue, protect taxpayer rights, and stimulate economic growth across all sectors particularly small businesses, low-income earners, subnational governments, and investors.
The reforms were signed into law at the Presidential Villa in Abuja, in the presence of key stakeholders including leaders of the National Assembly, Ministers of Finance and Justice, governors, and members of the Presidential Tax Reform Committee, which had been chaired by tax expert Taiwo Oyedele. These laws were developed following extensive consultations with both federal and subnational governments, the private sector, and civil society, and reflect President Tinubu’s commitment to a modern, fair, and growth-oriented fiscal regime.
Major Benefits of the Reforms
For Small Businesses
Small businesses in Nigeria considered the backbone of employment and innovation stand to benefit immensely from the new tax laws. Highlights of the reforms include:
- Increased Tax Exemption Threshold: Small businesses with an annual turnover of up to ₦50 million are now exempt from company income tax (CIT), raised from the previous ₦25 million threshold.
- Zero CIT Rate: Businesses under this threshold are taxed at 0%, a move aimed at reducing financial pressure and encouraging formalization.
- No Withholding Tax Deduction: Small businesses will no longer have withholding tax deducted from their income.
- Exemption from Tax Withholding Obligations: Small firms are no longer required to deduct or remit taxes on payments made to vendors.
- Simplified Tax Filing: Business owners can submit a simplified statement of accounts instead of audited financials for filing tax returns.
- Office of the Tax Ombudsman: A new body has been established to protect taxpayers from arbitrary assessments and ensure disputes are resolved within 14 days.
- Elimination of Roadblocks and Cash Payments: Enforcement practices such as cash tax collections and roadblocks, which burden small traders, are now outlawed.
- Harmonisation of Levies: Multiple and overlapping taxes have been repealed in favor of a more unified and manageable structure.
- Friendly Tax Policies: The new environment is designed to attract informal businesses to the formal economy and facilitate sustainable growth.
For Workers and Consumers
- Exemption for Low-Income Earners: Individuals earning up to ₦1 million annually (roughly ₦83,000 monthly) are completely exempt from Pay-As-You-Earn (PAYE) tax.
- Reduced PAYE Rates: Those earning ₦1.7 million or less monthly will pay lower PAYE rates.
- 0% VAT on Essentials: Items such as food, healthcare, education, and electricity transmission are VAT-exempt.
- Broader VAT Reliefs: Products like transportation, baby care goods, sanitary towels, CNG, rent, fuel, and renewable energy systems are also exempt from VAT.
- Tax Breaks for Employers: Companies offering wage increases or transport subsidies to low-income employees will receive incentives.
- Employment Incentives: Businesses hiring more staff than in the previous three years are eligible for tax credits.
- Stamp Duty Relief: Rent payments below ₦10 million are exempt from stamp duties.
- Special Exemptions for Armed Forces: Personnel involved in combating insecurity are granted PAYE exemptions.
- Remote Work and Digital Taxation: A friendly regime for remote workers and digital nomads has been introduced, alongside clear rules for digital asset taxation to prevent double taxation.
For Subnational Governments
The reforms also grant states greater fiscal authority and revenue autonomy:
- 5% VAT Allocation: The Federal Government will now cede 5% of VAT collections directly to the states.
- Electronic Levy Revenue: States will receive 100% of income from the Electronic Money Transfer levy as part of their stamp duty entitlements.
- Stamp Duty Repeal: The outdated Stamp Duties Act has been repealed and replaced with a modern, streamlined law.
- Taxation Rights Expanded: States are now entitled to tax Limited Liability Partnerships and have the same bond tax exemptions as the federal government.
- Improved VAT Sharing Formula: A more equitable method for VAT distribution and attribution has been adopted.
- Tax Intelligence and Autonomy: States now have greater capacity to collect, analyze, and act on tax intelligence through an integrated administration system.
- Expanded Tax Appeal Tribunal Scope: The tribunal will now handle disputes concerning state-level taxes.
- Enforcement Powers: The Attorney General of the Federation is empowered to deduct unremitted taxes from defaulting MDAs or governments and remit to the rightful authorities.
- Legal Framework for Gaming Taxation: A new system has been introduced for taxing lottery and gaming activities.
For Businesses and Investors
Larger corporations and investors are not left out:
- Corporate Tax Reduction: The company income tax rate has been reduced from 30% to 25%.
- Harmonized Earmarked Taxes: These are now streamlined and charged at a lower rate.
- Tax Credit for Foreign Income: Businesses will enjoy unilateral tax credits on income earned abroad, reducing double taxation.
- VAT Input Credit on Assets: This helps reduce cost of production by allowing VAT on capital goods to be credited.
- Incentives for Priority Sectors: Economic development incentives are now available to investors in high-impact industries.
- Tax Breaks for Restructuring: Businesses can now restructure or reorganize without incurring punitive tax charges.
- Statute of Limitation Clarity: If tax authorities do not resolve an objection within 90 days, the case will be ruled in the taxpayer’s favor.
- Foreign Currency Transactions: Companies may now pay tax liabilities on dollar transactions in Naira.
- Faster Tax Refunds: Tax refunds must be processed within 90 days or 30 days for VAT with an option to offset future liabilities.
- Advance Rulings: Businesses can request a tax ruling and receive a formal response within 21 days.
- Start-Up Cost Deductibility: Expenses incurred up to six years before a business commences operations are now tax-deductible.
- Interest Deduction Clarity: Limits on interest deductions now only apply to loans from related parties, making borrowing more viable.
A New Era of Fiscal Governance
President Tinubu’s approval of these tax reform laws marks a new chapter in Nigeria’s pursuit of a modern, inclusive, and transparent fiscal system. The reforms are expected to widen the country’s tax base, reduce compliance burdens, and generate increased revenues to support infrastructure, education, and healthcare without stifling economic growth.
While implementation will require strong coordination and vigilance, especially from the newly created Nigeria Revenue Service and the Office of the Tax Ombudsman, the foundation laid by these laws sets Nigeria on a promising path toward fiscal sustainability and economic prosperity.
By placing taxpayers at the center of fiscal governance and promoting a business-friendly environment, Nigeria is now poised to harness the full potential of its economy creating jobs, empowering small businesses, and attracting vital investments in the years ahead.
