The 2025 Nigerian Tax Reform Acts: What They Mean for Businesses

Published by Outliers Professionals Ltd | August 2025

On June 26, 2025, the Federal Government signed into law four major legislations that together reshape Nigeria’s tax system. These are:

Introduction

  1. Nigeria Tax Act (NTA)
  2. Tax Administration Act (TAA)
  3. Nigeria Revenue Service Act (NRSA)
  4. Joint Revenue Board Act (JRBA)

Although these Acts were passed in mid-2025, their provisions only take effect from January 1, 2026. This means the year 2025 serves as a transition period, allowing businesses and individuals to understand the new rules, adjust their systems, and plan ahead.

From 2026 onwards, companies and individuals will begin to feel the full impact of the reforms — ranging from new corporate tax rates and levies to updated VAT rules, digital asset taxation, and changes to personal income tax.

Key Highlights of the Reform

1. Corporate Income Tax (CIT) and Development Levy

  • A Development Levy of 4% on assessable profits has been introduced, raising the effective tax burden for companies.
  • Small businesses — those with turnover of ₦100 million or less and fixed assets not exceeding ₦250 million — are exempt from CIT, CGT, and the new levy.
  • Importantly, CIT will gradually reduce over time:
    • 30% in 2024 (old rate before the reform)
    • 27.5% in 2025 (transition year)
    • 25% from 2026 onwards

Insight:
The year 2025 is a transition year because, while the new Acts were signed in June 2025, they only take legal effect from January 1, 2026. This means that profits assessed in the Year of Assessment 2025 (based on 2024 results) will still reflect a partial reduction to 27.5%, but the full relief of 25% only applies from the Year of Assessment 2026 (based on 2025 profits).

In practice, 2025 gives businesses time to prepare — updating systems, forecasting tax liabilities, and restructuring where necessary — before the new 25% baseline CIT rate and the Development Levy are fully operational in 2026.

2. Capital Gains Tax (CGT)

  • Rate: CGT remains at 10%, but reforms have expanded its scope and tightened compliance.
  • Broader Asset Coverage: Digital assets (e.g., cryptocurrency, tokenized securities) and intellectual property are now explicitly subject to CGT.
  • Roll-Over Reliefs: Available when gains are reinvested in qualifying Nigerian assets within 12 months, encouraging local reinvestment.
  • Exemptions Updated: Gains from the sale of a private residence remain exempt if occupied for at least three years; however, stricter rules now apply for multiple-property claims.

Insight:
The updated CGT framework officially applies from January 1, 2026. Taxpayers and corporates should use the remainder of 2025 to:

  • Reassess portfolios for potential CGT exposure (especially digital assets).
  • Update accounting systems to track acquisition costs, holding periods, and disposal proceeds.
  • Educate staff and clients on documentation required to support roll-over relief claims.

This preparation ensures smooth compliance when the broadened CGT rules take effect in 2026.

3. Value Added Tax (VAT)

  • Input VAT can now be claimed on a broader range of expenses, including overheads and capital assets.
  • Businesses can carry forward unused VAT credits for up to five years.
  • Invoices must now meet stricter requirements before VAT credits are allowed.

Insight:
Although the VAT reforms were passed in 2025, they take effect from January 1, 2026. This gives businesses the second half of 2025 to update invoicing systems, train staff, and clean up records. From 2026, failure to issue compliant invoices or properly document input VAT could mean lost credits and higher effective costs.

4. Digital Economy and Emerging Income Sources

The reforms bring greater clarity and tax obligations to the digital and tech-driven economy.

Key updates include:

  • Digital Service Tax (DST): Non-resident digital companies earning significant revenue from Nigerian users will be subject to tax, even without a physical presence.
  • Cryptocurrency & Virtual Assets: Income and gains from cryptocurrency transactions and other digital assets are now explicitly taxable.
  • Gig & Freelance Economy: Earnings from online platforms and freelance services are brought into the tax net.
  • Royalty & Streaming Income: Revenues from streaming, gaming, and intellectual property monetized digitally are subject to Nigerian taxation where the user base is local.

Insight:
With effect from January 2026, digital income reporting will be mandatory. Businesses operating in e-commerce, fintech, or digital services must update their tax reporting systems to capture these streams. Freelancers and individuals should also prepare for increased scrutiny as platforms may be required to share income data with tax authorities.

5. Personal Income Tax (PIT)

  • New progressive tax bands introduced, ranging from 0% to 25%, easing the burden on lower earners.
  • The definition of tax residency has been broadened to include individuals with strong family or economic ties to Nigeria.
  • Updated reliefs include:
    • Rent relief of up to 20% of annual rent, capped at ₦500,000.
    • Loss-of-office compensation exempt up to ₦50 million.
    • Employer-provided accommodation taxable at up to 20% of gross income; employer assets capped at 5% of cost.

Insight:
The new PIT bands and reliefs officially apply from January 1, 2026. Employers should use the remainder of 2025 to reconfigure payroll systems and assess which employees may now qualify as Nigerian tax residents under the broadened definition. This preparation ensures a smooth transition into 2026, when the new PIT framework becomes enforceable.

6. Foreign Companies and Controlled Foreign Corporations (CFCs)

New CFC rules have been introduced to prevent profit shifting and base erosion.

Key highlights include:

  • Attribution of Income: Passive income earned by foreign subsidiaries may now be attributed to the Nigerian parent/controlling entity for taxation purposes.
  • Top-up Tax: Where the foreign effective tax rate is lower than Nigeria’s minimum tax threshold, a top-up tax will apply to align with domestic tax obligations.
  • Scope: Applies to Nigerian-resident persons or entities holding significant ownership or control in offshore companies.

Insight:
Multinationals and Nigerian groups with offshore holdings should review existing structures for exposure to CFC and top-up tax rules. Early restructuring may mitigate unexpected tax liabilities when the regime becomes fully enforceable.

7. Tax Administration and Compliance

The reforms aim to simplify and digitize compliance obligations for individuals and businesses.

Key updates include:

  • Single Taxpayer Identification Number (TIN): A unified TIN introduced across all tax types and agencies, easing compliance and reducing duplication.
  • Electronic Filing & Payment Expansion: Broader adoption of e-filing platforms to improve efficiency and transparency.
  • Stricter Penalties: Higher fines and interest charges for late filings, understatements, or non-compliance.

Insight:
Businesses should revalidate their tax records under the new single TIN system and ensure timely alignment with digital compliance platforms. Training finance and tax staff will be essential to avoid penalties under the stricter enforcement framework.

8. Incentives and Exemptions

The incentive regime has been restructured to target strategic sectors and investments.

Key measures include:

  • Streamlined exemptions: Consolidation of overlapping reliefs to reduce abuse and improve clarity.
  • Sector-specific incentives: Enhanced tax holidays and credits for industries such as renewable energy, agriculture, and technology.

Insight:
Companies should reassess ongoing and planned projects to confirm eligibility for new incentives. Strategic investment decisions may be timed to benefit from sectoral exemptions and broadened relief frameworks.

Implications for Businesses

  • SMEs – Will benefit from broader exemptions but must be vigilant to ensure correct classification.
  • Large Corporates – Should prepare for higher effective tax rates while planning around the scheduled CIT reductions.
  • Multinationals – Must review structures for CFC and top-up tax exposure.
  • Exporters – Can take advantage of continuing export incentives, but documentation will be critical.
  • HR and Payroll Teams – Need to update systems to accommodate new PIT bands and residency rules.

What Businesses Should Do Now

  1. Review your tax obligations in light of new rates, reliefs, and penalties.
  2. Update accounting and ERP systems for expanded VAT, CIT, and CGT rules.
  3. Conduct tax planning for offshore subsidiaries to manage CFC and top-up tax risks.
  4. Train finance and HR teams to apply PIT changes correctly.
  5. Engage professional advisors to maximize reliefs and minimize compliance risks.

Conclusion

The four new Acts — NTA, TAA, NRSA, and JRBA — mark a decisive step towards a modern and harmonized tax system in Nigeria. While the reforms introduce tougher rules in some areas, they also reduce uncertainty and create new incentives for businesses that are well-prepared.

At Outliers Professionals Ltd, our mission is to help businesses navigate these changes with clarity and confidence. We provide tailored guidance to ensure you remain compliant, avoid penalties, and take full advantage of available reliefs.

Contact us today to understand how these reforms apply to your organization.