2025 TAX ACTS: WHAT YOU NEED TO KNOW

2025 TAX ACTS: WHAT YOU NEED TO KNOW – The President assented to the four tax bills recently, which were previously drafted by the
Presidential Committee on Tax Reforms. The bills presented to the National Assembly, which
are now Acts, include the Nigeria Tax Act 2025, which repeals existing tax laws (Finance Act,
Company Income Tax Act, Personal Income Tax Act, and Value Added Tax Act). The Act does
not affect the Deduct at Source WHT regulation.
The Nigeria Revenue Service (Establishment) Act 2025, which aims to replace the Federal
Inland Revenue Service (FIRS) and fairly reflect the structural function of revenue collection for
the federation; the Joint Revenue Board (Establishment) Act, which aims to give an
institutional framework for the harmonization of revenue administration in the country; and the
Nigeria Tax Administration Act to guide the assessment, collection, and accounting for
revenue due to the federal, state, and local governments.

2025 TAX ACTS: WHAT YOU NEED TO KNOW

1. Reduced Company Income Tax: In the bid to increase productivity and encourage
corporate bodies amidst rising inflation and the naira losing against the USD, the Act
reduces the CIT from 30% to 25% and removes the minimum tax for companies with
adjusted losses at the end of the financial year.
2. Capital Allowance can now be claimed on intangible assets: Digital intangible assets
now make up a chunk of companies’ non-current assets. The First Schedule of the NTA
includes the capital expenditure (qualifying software expenditure) incurred on the
acquisition of software or other such capital outlays on electronic applications.

3. Introduction of 15% Minimum Effective Tax Rate: Aligning with the global minimum
tax principle, a 15% ETR is introduced for companies with an aggregate revenue of
N20bn (this is subject to changes) or companies that are a part of a multinational
enterprise, i.e., if a qualifying company estimates its tax liability in an assessment year,
and it falls below 15% of accessible profit, then a “top-up” tax will be included. This is in
tandem with OECD’s Pillar 2.
4. Revised Personal Income Tax Rate: The fourth schedule of the NTA taxes the net
income (net allowable deductions as stated in section 30 of the NTA) of earners below
800k at 0%. Apparently, workers earning minimum wage might still pay PIT if their net
income exceeds 800k, as this act reduces the tax burden on low-income earners. The
revised progressive rate means individuals earning up to N50m annually will pay up to
25% tax.
5. Introduction of a Tax Ombudsman: The new tax regime will see the birth of an ombud
who will act as an arbiter between the tax authority and the taxpayer. This is in tandem

with global best practices on tax justice; it will ultimately reduce the friction between both
parties.
6. Small Business Redefined: Section 203 of the NTA defines “small business” as a
business that earns gross turnover of N50,000,000.00 or less per annum with total fixed
assets not exceeding N250,000,000.00, provided that any business providing
professional services shall not be classified as a small business.
7. Introduction of Development Levy: Companies, other than small businesses, will pay
a levy of 4% of their assessable profits (i.e., tax profits before deducting tax depreciation
and capital allowances and losses). The Development Levy merges the Tertiary
Education Tax (TET), the Information Technology Levy (IT), the National Agency for
Science and Engineering Infrastructure (NASENI) levy, and the Police Trust Fund (PTF)
levy.
8. Introduction of a Unified Tax ID: The Nigeria Tax Administration Act, 2024 reintroduces
Tax IDs, which will be unified, for residents who derive income from Nigeria,
non-residents who supply taxable supplies into Nigeria. These IDs shall be issued upon
request by NRS, but on information available to NRS, it may register an individual for a
Tax ID, then notify the person afterward.
9. Increased penalties for non-compliance: The new laws increase the penalty for failure
to file returns to NGN100,000 (previously NGN50,000) in the first month and NGN50,000
(previously NGN25,000) for every month the failure continues; introduction of new
penalties such as a penalty of NGN5 million for awarding contracts to individuals or
entities that are not registered for tax.
10. Repealing of Pioneer Status Incentives: The Acts replace the “pioneer” tax holiday
incentive with an “Economic Development Incentive” (or EDI). This incentive introduces
a tax credit of 5% per annum for 5 years on qualifying capital expenditure purchased by
eligible companies in priority sectors within 5 years, effective from the production date. If
a company has unused tax credits or qualifying capital expenses, it can carry them
forward for another 5 years. Any credits still unused after this timeline will expire.
11. Removal of Consolidated Relief Allowance: The famous CRA that was introduced in
previous legislation has been replaced with a rent relief of 20% of gross salary (capped
at 500k); as controversial as it seems, the revised progressive tax rate offsets any
negative effects on low-income earners who enjoyed CRA.
12. Introduction of Penalty for a Taxable Person: Section 100 of the Tax Administration
Act introduces an administrative penalty of N50,000 for the first month and N25,000 for
subsequent months for taxable persons who refuse to register for a tax ID.
13. Stricter tax compliance regulation for NGOs: The new Act intensifies the regulations
on NGOs, section 11 of the Tax Administration Act mandating all companies, including

those granted exemption from incorporation must file an annual return. NGOs are also
mandated by section 51 of the Tax Administrative Act to deduct at the source a WHT on
service invoices, with penalty implications if not complied with. But still exempt from
capital gain taxes on gains on disposal of chargeable assets, provided the assets were
purchased for the approved activity of the organization.
14. Increased Compensation for Personal Injury: The Act increased the tax-exempted
amount for loss of office employment from N10,000,000 to N50,000,000, and in case the
sum exceeds the 50 million threshold, the excess will be considered a chargeable gain
and the tax accrued on it should be deducted by the payer and remitted within the time
frame specific to PAYE. This is done in relation to the current economic reality of the
country and social welfare.
15. Taxation of Companies in Free Zone Areas: The second schedule of the Nigeria Tax
Act still exempts the total production of an “export processing zone entity,” i.e., the
companies approved and licensed under the Nigeria Export Processing Zone Act.
Provided they only sell 25% of their total production within the country, but if the sales
within the country exceed 25% on assessment, the entirety of the domestic sales will be
taxed. This 25% maximum domestic sale benchmark is to be reduced to 0% by 2028.
Unless the president publishes in a gazette an order extending this term beyond 2028,
but it cannot extend beyond 2036.

The essence of Nigeria’s 2024 Tax Reform Acts is to simplify the tax system, enhance equity,
and boost economic growth. By exempting low-income earners and small businesses from
taxes, zero-rating VAT on essentials, reducing corporate tax rates, and streamlining
administration, the acts aim to create a fairer, more efficient, and globally competitive tax
framework, effective implementation of these reforms would be bumpy i the first years, but in the
long run increases the Nation’s Tax-Gdp ratio.

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