Key Highlights Of The New Tax Laws In Nigeria Part 1: What Businesses Need To Know

On June 26, 2025, the President of Nigeria signed into law four major tax reform bills namely The Nigeria Tax Act; The Nigeria Tax Administration Act; The Nigeria Revenue Service Act, and The Joint Revenue Board Act

 

These new laws represent a significant shift in the country’s tax framework and aim to simplify compliance, improve revenue generation, and align Nigeria with global best practices. Below are the key changes and benefits businesses should take note of:

1. Higher Threshold for Small Companies:

The definition of “small companies” has been expanded. To qualify, a company must now have: annual turnover below ₦100 million (up from ₦25 million), and total fixed assets not exceeding ₦250 million

2. Tax Exemptions for Small Companies:

Small companies are now fully exempt from: Companies Income Tax (CIT), Capital Gains Tax (CGT) and the newly introduced Development Levy

3. Introduction of the Development Levy:

Section 59 of the Nigeria Tax Act introduces a Development Levy of 4% applicable to all companies except small companies and non-resident companies. This levy consolidates taxes such as the Tertiary Education Tax, Information Technology Levy National Agency for Science and Engineering Infrastructure (NASENI) Levy and the Police Trust Fund Levy

5. Capital Gains Tax Increased:

Capital Gains Tax has been raised from 10% to 30%, aligning it with the Companies Income Tax rate.

6. Minimum Effective Tax Rate (ETR):

Companies with ₦50 billion or more in annual revenue, that are in a multinational group with global turnover of €750 million or more, are now required to pay a minimum effective tax rate (ETR) of 15% on their Net Income (profit before tax, excluding franked investment income and unrealised gains or losses). Free Zone companies that are not part of multinational groups remain exempt on export income. Where a subsidiary pays less than 15% tax in another country, the Nigerian parent company must pay a top-up tax to meet the 15% ETR.

7. Introduction of the Economic Development Incentive:

This new incentive replaces the pioneer tax holiday. Eligible companies now enjoy a 5% annual tax credit on qualifying capital expenditures which is valid for 5 years from the start of production. This is a renewable for an additional 5 year period. Unused credits are not transferable. Priority sectors includes refining of crude oil/gas, fertilizer, power, gas utilization, mining and manufacturing.

8. Taxation of Free Zone Businesses:

Companies operating in Export Processing Zones (EPZs) enjoy tax exemption on their profits if all sales are export-related or involve inputs for export, or not more than 25% of their sales go to Nigeria’s customs territory, or their inputs are sold to oil and gas sector industries. If sales exceed this limit or are not to the oil and gas industry, those profits become taxable. However, effective 1 January 2028, all sales to the customs territory will be taxable, no matter the percentage.

9. Expanded VAT Exemption List:

More essential goods and services are now exempt from VAT, including:

Basic food items; Medical and pharmaceutical products; Books and educational materials; Electricity services; Tuition fees; Medical services and equipment; Exports (except oil and gas).

10. Creation of the Tax Ombuds Office:

A new Tax Ombuds Office will serve as an independent dispute resolution body between taxpayers and tax authorities, enhancing fairness, equity, transparency and accountability in tax administration.

13. Tougher Penalties for Tax Non-Compliance
    Under the new tax laws, penalties have been significantly increased. Failure to file tax returns now attracts a fine of ₦100,000 in the first month, and ₦50,000 for every additional month of default. In addition, a ₦5 million penalty applies to anyone who awards a contract to a business or individual not registered for tax.
14. Renaming of the Tax Authority:

The Federal Inland Revenue Service (FIRS) has been renamed to the Nigeria Revenue Service (NRS) to better reflect its expanded national responsibilities.

The new tax laws mark a bold step in restructuring Nigeria’s tax regime to improve compliance, promote fairness, and boost national development. While there are clear benefits, companies must also be aware of their new responsibilities

 

Berkeley Legal is a dedicated leading full-service top business law firm in Nigeria. We provide comprehensive and sophisticated range of specialized and personalized legal services that are designed to meet the various needs of a highly diversified local and international businesses.

 If you would like to know more about the Key Highlights of the New Tax Laws, please contact info@berkeleylp.com

The information provided in this article is for general informational purposes only and does not constitute legal advice.