The Nigerian Tax Act 2025 introduces the most far-reaching restructuring of Nigeria’s tax system in decades. Effective from 1 January 2026, the Act consolidates multiple tax statutes, recalibrates tax burdens through explicit income and turnover thresholds, expands exemptions for low-income earners and small businesses, and strengthens compliance for high-income individuals, large corporates, and multinational enterprises. This article provides a detailed, figures-based analysis of the Act as it affects individuals, employees, professionals, informal sector participants, companies, investors, and digital economy operators.

Nigeria’s pre-2026 tax framework was fragmented, with overlapping obligations, multiple levies, and inconsistent thresholds. The Nigerian Tax Act 2025 (“the Act”) responds by introducing uniform classifications, explicit exemptions, harmonised rates, and digital administration, thereby improving clarity, equity, and compliance.

The Act replaces the Federal Inland Revenue Service with the Nigeria Revenue Service (NRS). The NRS now has statutory authority over:

• Companies Income Tax
• Value Added Tax
• Capital Gains Tax (corporate)
• Development Levy
• International tax enforcement

All individuals and entities must obtain a UTIN. Failure to do so restricts access to:

• Bank accounts
• Business registration and renewal
• Property registration
• Government contracts

The Act introduces a complete exemption from Personal Income Tax for individuals earning ₦800,000 or less per annum (approximately ₦66,667 per month).

• Effect: Persons within this bracket pay ₦0 personal income tax, regardless of employment status.

For individuals earning above ₦800,000 annually, PIT applies progressively as follows:

Annual Chargeable Income (₦)                   Tax Rate

First ₦800,000                                          0%

Next ₦1,200,000                                       15%

Next ₦3,000,000                                       20%

Next ₦5,000,000                                       23%

Above ₦10,000,000                                   25%

This structure shifts the tax burden upward, ensuring higher earners contribute proportionately more.

The Act replaces fragmented reliefs with capped deductions, including:

• Housing/Rent Relief: up to ₦200,000 per annum
• Pension Contributions: fully deductible
• Statutory social security contributions: deductible in full

RESIDENCY RULES:

• Tax residents: taxed on worldwide income
• Non-residents: taxed only on Nigeria-sourced income
• Employment income is taxable only if duties are performed in Nigeria, except where treaty relief applies.

Self-employed persons, consultants, freelancers, artisans, and traders must register for UTIN regardless of income level.

Where annual turnover is ₦25 million or less, presumptive tax applies, based on:

• Sector benchmarks, or
• Fixed percentage of turnover (as prescribed by regulation)

This replaces complex income assessments and reduces compliance costs.

The Act introduces clear numerical thresholds:

Category              Annual Turnover  Gross Assets

Small Company    ≤ ₦100 million     ≤ ₦250 million

Medium Company ₦100m – ₦500m  ₦250m – ₦1bn

Large Company     > ₦500 million     > ₦1 billion

Small companies are fully exempt from:

• Companies Income Tax (CIT)
• Capital Gains Tax (CGT)
• Development Levy

• Tax payable: ₦0 on profits and asset disposals.

Applicable taxes include:

• Companies Income Tax: 25% of assessable profits
• Development Levy: 4% of assessable profits

The 4% Development Levy replaces multiple prior levies (education, technology, training, and industrial levies).

• Example:

A company with assessable profit of ₦100 million pays:

• CIT: ₦25 million
• Development Levy: ₦4 million

CGT remains 10% on chargeable gains, subject to exemptions for principal residences and approved assets.

• CGT aligned with CIT at 25%
• Applies to:
  • Share disposals
  • Indirect offshore transfers where Nigerian assets constitute ≥50% of underlying value.

Multinational groups with consolidated global turnover exceeding €750 million are subject to a minimum effective tax rate of 15%.

Where Nigerian taxes fall below 15%, a top-up tax applies.

MANDATORY RULES:

• Annual transfer pricing filings
• Country-by-country reporting
• Disclosure of related-party transactions

VALUE ADDED TAX (VAT):

• VAT rate remains 7.5%
• Expanded to include:
  • Digital services
  • Streaming platforms
  • Cloud computing
  • Online advertising
  • Foreign digital suppliers to Nigerian users

Businesses with annual turnover below ₦25 million are exempt from VAT registration and filing.

Input VAT is now recoverable on:

• Goods
• Services
• Fixed assets
• Capital expenditure

Zero-rated items include:

• Basic food items
• Medical services and drugs
• Educational materials
• Electricity and renewable energy equipment

DIGITAL COMPLIANCE AND ENFORCEMENT

Mandatory:

• E-invoicing
• Real-time VAT reporting
• Electronic filing and payment

Non-compliance attracts:

• Administrative penalties
• Interest on unpaid taxes
• Restriction of business operations

Tax disputes are handled through:

• The Tax Ombudsman
• The Tax Appeal Tribunal, with expanded jurisdiction and expedited procedures.

PRACTICAL IMPACT SUMMARY

Group                                   Net Effect

Low-income earners                Total PIT exemption

Middle-income earners             Reduced effective tax

High-income earners                Higher marginal rates

SMEs                                     Broad tax exemptions

Large companies                                       Lower CIT but broader base

Multinationals                                           Minimum tax enforcement

The Nigerian Tax Act 2025 replaces uncertainty with quantifiable thresholds, redistributes the tax burden in favour of vulnerable earners and SMEs, and strengthens compliance for high-value economic actors. Its success will depend on enforcement capacity, taxpayer education, and digital infrastructure, but its structure marks a decisive shift toward equity, simplicity, and sustainability in Nigeria’s tax system. equity, simplicity, and sustainability in Nigeria’s tax system.