By Babajide Komolafe
Have you heard the buzz about Nigeria’s new tax laws? If your first reaction is to sigh and flip the page, you’re not alone. For many Nigerians, taxes feel distant, complicated, and sometimes unfair. But this time, the changes are too important to ignore because they touch almost every aspect of our economic lives—from how much small businesses pay, to what happens to VAT on your everyday purchases, and even how government agencies are held accountable.
In a bold move to modernise Nigeria’s tax system, the Federal Government has introduced three major tax laws. Together, they aim to simplify taxation, plug revenue leakages, reduce inequality, and align Nigeria with global best practices.
The three laws are:
The Nigeria Tax Act (NTA) – which defines who pays what, and how much
The Nigeria Tax Administration Act (NTAA) – which explains how taxes will be collected, monitored, and enforced?
The Nigeria Revenue Service (Establishment) Act (NRSEA) – which creates a new, more powerful tax authority to oversee the system. Think of it this way: the NTA sets the rules of the game, the NTAA explains how the game is played, and the NRSEA appoints the referee.
Let’s break it all down in plain language
Nigeria Tax Act (NTA): Who Pays What, and How Much?
At the heart of the reforms is the Nigeria Tax Act (NTA), which replaces a patchwork of outdated tax laws with a single, more coherent framework. Its goal is simple: fairness, clarity, and balance.
Small Businesses Finally Get Breathing Space
For years, small businesses have complained that Nigeria’s tax system punishes them before they can even grow. The NTA attempts to fix this.
Under the new law, companies earning N50 million or less annually are exempt from certain taxes, including Company Income Tax.
This is a significant increase from previous thresholds and a major relief for micro, small, and medium-sized enterprises (MSMEs).
For a small fashion designer, retailer, or tech startup struggling with rent, electricity, and logistics, this exemption could mean the difference between survival and shutdown. The idea is clear: help small businesses grow first, tax them later.
Big Companies Are Expected to Pay Their Fair Share
While small businesses get relief, large corporations face stricter obligations.
One major change is the increase in Capital Gains Tax to 30%, aligning it with the corporate income tax rate. This means profits from selling assets—like shares, land, or businesses will now attract higher taxes. Even more significant is the introduction of a 15% minimum tax for multinational companies. This rule targets aggressive tax planning strategies that allow big firms to report little or no profit in Nigeria despite strong local operations.
In simple terms, even if a multinational uses accounting tricks to reduce its taxable profit, it must still pay at least 15%. This aligns Nigeria with global efforts to curb profit shifting and tax avoidance.
A Fairer Deal for Individuals
For individual taxpayers, the NTA introduces a more progressive income tax system.
If you earn ¦ 800,000 or less per year, you are now completely exempt from personal income tax. That’s good news for low-income earners and many workers in the informal sector.
On the other hand, high-income earners will pay more, with the top personal income tax rate rising to 25%. The principle is simple: those who earn more should contribute more.
This shift aims to reduce inequality while protecting vulnerable Nigerians.
New Levies and Foreign Income Rule
The Act introduces a 4% Development Levy, which consolidates older levies such as the Tertiary Education Tax. Instead of multiple deductions, there is now a single, clearer charge aimed at national development.
Another important addition is the Controlled Foreign Company (CFC) rule. This allows Nigeria to tax profits made by foreign subsidiaries of Nigerian companies—even if the profits are not brought back home.The goal? To prevent companies from hiding income abroad just to avoid taxes.
Value Added Tax. VAT Becomes More Practical
VAT has long been a headache for businesses, but the NTA makes key improvements.
Businesses can now recover VAT paid on services and fixed assets, reducing hidden costs. At the same time, essential goods such as basic food items and medical products are zero-rated, meaning no VAT is charged.
For consumers, this could translate into lower prices. For businesses, it simplifies compliance.
The NTA tries to strike a balance—supporting small businesses, demanding fairness from large corporations, and making taxation more equitable for individuals.
Nigeria Tax Administration Act (NTAA): How Taxes Will Be Collected and Tracked
If the NTA explains what you owe, the Nigeria Tax Administration Act (NTAA) explains how the government ensures taxes are actually paid.
Everyone Must Have a Tax ID
The NTAA makes it mandatory for all taxpayers to register and obtain a Taxpayer Identification Number (TIN). Without a TIN, doing business with the government—or even some private firms—becomes impossible.
This helps authorities track taxpayers and reduces identity confusion and evasion.
Digital Tax Is No Longer Optional
One of the biggest shifts is the move to full digital tax administration.
Businesses must now use e-invoicing, reporting transactions electronically in real time. VAT filings also become fully digital.
This reduces paperwork, speeds up processing, and makes it harder to underreport income.
New VAT Sharing Formula
VAT revenue sharing has changed significantly: Federal Government: 10%; States: 55%;
Local Governments: 35%.
This is a major win for states and local governments, giving them more resources to fund schools, hospitals, and local infrastructure.
Tougher Penalties for Non-Compliance
The NTAA introduces stiffer penalties to encourage compliance. For example, awarding a contract to a vendor without a TIN now attracts a N5 million fine.
There are also penalties for failing to disclose tax planning schemes or delaying tax payments.
Quicker Dispute Resolution
Tax disputes can now be resolved within 90 days. If the tax authority fails to respond within that period, the taxpayer’s objection is automatically upheld.This provision protects taxpayers from endless delays.
Even Government Agencies Must Comply
Perhaps most importantly, government agencies are no longer above the law. The Accountant-General can now deduct unpaid taxes directly from agency budgets.
The NTAA focuses on transparency, technology, and enforcement—rewarding honesty and punishing evasion.
Nigeria Revenue Service (Establishment) Act (NRSEA): Meet the New Tax Boss
The final piece of the puzzle is the Nigeria Revenue Service (Establishment) Act (NRSEA).
Under this law, the Federal Inland Revenue Service (FIRS) becomes the Nigeria Revenue Service (NRS)—a stronger, more autonomous institution.
A More Powerful, Better-Funded Agency
The NRS will receive 4% of total non-oil revenue collected, giving it the financial independence needed to invest in technology, training, and enforcement.
Digital Single Window for Trade
One of the most exciting innovations is the National Single Window Portal, a digital platform for trade documentation.
Importers and exporters can submit documents online, reducing delays, corruption, and revenue leakage.
Global Cooperation
The NRS can now work more effectively with foreign tax authorities under double taxation agreements, ensuring Nigerian businesses abroad pay fair taxes without being taxed twice.
The NRSEA modernises tax administration, strengthens enforcement, and promotes efficiency.
Final Takeaway
Taken together, Nigeria’s new tax laws signal a shift toward fairness, transparency, and digital efficiency. Small businesses gain relief, big companies face accountability, and individuals benefit from a more progressive system.
Taxes may never be exciting but if these reforms work as intended, they could help build a stronger, fairer Nigeria for everyone.
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