16 New Changes in Nigeria’s 2025 Tax Reform Explained

Nigeria’s new tax reform, signed into law on June 26, 2025, introduces several changes set to take effect from January 1, 2026. These new tax reforms cover everything from small business tax exemptions to VAT adjustments, personal income tax updates, and the introduction of digital asset taxation.

These changes in Nigeria’s new tax reform aims to boost revenue, simplify compliance, digitize the tax system, and make the system fairer for low-income earners and small businesses.

In this blog we explained the four tax bills passed into law alongside the most important changes, comparing in the new tax reform. 

Four New Tax Bill in Nigeria’s Tax Reforms

The following four bills received presidential assent:

• Nigeria Tax Act (NTA) – This law brings all the scattered tax rules together into one place, so it’s easier for everyone to comply. It also updates outdated tax rules.
  
• Nigeria Tax Administration Act (NTAA) – This act makes tax filing and payments more digital and uniform across the country. Whether you’re paying to the federal, state, or local government, the process is now more modernized.
  
• Nigeria Revenue Service (Establishment) Act (NRSA) – Replaces Federal Inland Revenue Service (FIRS) with a more autonomous, multi‑revenue National Revenue Service (NRS). The NRS will have more independence and broader powers to collect all types of taxes (not just federal ones).
  
• Joint Revenue Board (Establishment) Act (JRBA) – This sets up a national board to help tax agencies work together, and also creates two important new offices:

1. Tax Appeal Tribunal: to settle tax disputes fairly
2. Tax Ombudsman: to help taxpayers resolve complaints

16 New Changes to Tax Reforms in Nigeria

1. Increased Exemption for Small Companies in New Tax Reform

Before:
Previously, only companies with annual turnover of ₦25 million or less were considered “small” and eligible for major tax reliefs. These businesses were often still burdened with paperwork and tax compliance complexity, despite earning very little.

What Changed:
Now, the threshold for “small company” status has been quadrupled to ₦100 million in turnover and includes businesses with up to ₦250 million in fixed assets. These small companies are now exempt from:

• Companies Income Tax (CIT)
• Capital Gains Tax (CGT)
• The new 4% Development Levy

This makes it easier for small and growing businesses to operate tax-free and focus on growth rather than tax compliance.

2. Increased Capital Gains Tax (CGT) for Companies

Before:
When a company sold land, shares, buildings, or equipment and made a profit, it only paid 10% tax on the capital gain regardless of how big the gain was.

What Changed:
Capital gains made by companies are now taxed at 30%, the same as the Companies Income Tax (CIT) rate. This means:

• Tax on profit from selling an asset is now three times higher than before.
• Individuals still pay CGT based on new PIT bands (see point #8).

It aligns CGT with corporate income tax to prevent companies from shifting profits into asset sales to pay lower tax.

3. CGT on Indirect Share Transfers Now Applies

Before:
Foreign investors could sell their shares in Nigerian companies through offshore holding companies and avoid paying tax in Nigeria which was a huge loophole.

What Changed:
If you sell Nigerian shares, even indirectly via a foreign company the capital gains are still taxable in Nigeria, as long as:

• Sale proceeds exceed ₦150 million in a 12-month period
• Capital gain is more than ₦10 million

This amendment closes a tax loophole and ensures that foreign investors contribute fairly when they profit from Nigeria.

4. New 4% Development Levy for Large Companies

Before:
Companies had to pay multiple small levies which made tax compliance confusing and complicated e.g:

• Tertiary Education Tax
• National Agency for Science and Engineering Infrastructure (NASENI) Levy
• Police Trust Fund Levy
• IT Development Levy

What Changed:
All those levies are now replaced by 4% Development Levy charged on a company’s assessable profit (the profit before tax adjustments). Small companies and non-residents are exempt from this levy.

5. Minimum 15% Effective Tax Rate (ETR)

Before:
Some big companies paid little to no tax by using deductions, losses, or clever tax planning even while earning billions in revenue.

What Changed:
If your company earns ₦50 billion+ annually, or is part of a global group with €750 million+ turnover, then you must pay a minimum effective tax rate (ETR) of 15% on net income.  The minimum effective tax rule does not apply to Free Zone companies on their exports out of Nigeria, provided that such companies are not part of multinational groups. The Nigerian parent company of a multinational group will have to pay a top up tax where its subsidiaries have paid taxes below the minimum 15% ETR. 

6. Offshore Subsidiary Profits Are Now Taxable (CFC Rules)

Before:
If a Nigerian company owned a foreign subsidiary, it could leave the profits abroad and avoid tax in Nigeria even if the money was not reinvested.

What Changed:
Under the new Controlled Foreign Corporation (CFC) rules, such offshore profits can now be taxed in Nigeria if they are retained abroad without just cause or belong to a company controlled by Nigerian shareholders. This stops profit shifting and keeps Nigerian revenue from leaking to foreign tax havens.

7. Minimum 4% Tax for Non-Resident Companies

Before:
Foreign businesses operating in Nigeria could report little to no taxable profit by inflating expenses and still do business tax-free.

What Changed:
Now, any non-resident company earning income from Nigeria must pay a minimum of 4% of their Nigerian-sourced profit, regardless of what they report in the new tax reforms.

8. Personal Income Tax (PIT) Now Has New Rates

Before:
Tax brackets were outdated and did not protect low-income earners. For example, someone earning ₦300,000 annually already paid 7% tax.

What Changed:
New PIT rates make tax more progressive. Workers earning less than ₦800k annually will no longer pay tax.

Proposed Tax Band	Proposed Rate
Next N800,000	0%
Next N2,200,000	15%
Next N9,000,000	18%
Next N13,000,000	21%
Next N25,000,000	23%
Next N50,000,000	25%

9. New Rent Relief for Employees in New Tax Reforms

Before:
Under the previous tax regime, employees received a Consolidated Relief Allowance (CRA), a broad, automatic deduction calculated as a percentage of gross income plus a fixed amount. This allowance helped lower employees’ taxable income but didn’t account for specific personal expenses like rent, which is one of the biggest costs for most Nigerian workers.

However, the CRA was not tied to actual living expenses, so whether or not someone rented a home, they still got the same relief.

What Changed:
The CRA has now been scrapped and replaced with a more targeted rent relief, introduced under Section 30(vi) of the Nigeria Tax Act (NTA) 2025. With the new rent relief in Nigeria’s tax reform:

• Employees can deduct 20% of the annual rent they pay from their taxable income.
• There is a maximum cap of ₦500,000, and the relief is limited to the lower of the two (20% of rent or ₦500k).
• Employees must declare their actual rent amount, and the tax authority can ask for supporting documents like tenancy agreements or rent receipts to claim it.
• Homeowners or individuals who do not rent their primary residence are not eligible for this relief.

10. Pioneer Status Replaced with New Investment Tax Credit

Before:
Qualified “pioneer” companies in strategic sectors got 5-year tax holidays, often extended unfairly.

What Changed:
The old “pioneer status” has been replaced with a 5% Economic Development Incentive (EDI):

• For new capital investments in key sectors
• Credit applies for 5 years, renewable for 5 more
• Can be carried forward if not fully used

11. VAT Input Claims Now Include More Items

Before:
Businesses could only reclaim VAT paid on a narrow set of items, usually raw materials for production.

What Changed:
Input VAT can now be claimed on services, fixed assets, and capital purchases in Nigeria’s new tax reforms as long as they are used for taxable business activities.

12. Digital Filing & E-Invoicing Now Mandatory

Before:
Most tax processes were manual, slow, and paper-based.

What Changed:

• E-invoicing is now compulsory
• Monthly VAT returns and other filings must be done digitally
• Tax Identification Numbers (TINs) are mandatory

13. Digital Assets Are Now Taxable in New Tax Reforms

Before:
There were no clear rules on taxing profits from digital or virtual assets like cryptocurrency, NFTs, prizes, winnings, honoraria, grants, awards, profits and digital securities.

What Changed:
Profits from buying, selling, or exchanging digital assets are now clearly taxable under CGT and income tax rules.

14. Clearer Rules on Who Is a Nigerian Taxpayer

Before:
Tax residency rules were vague. Some people avoided tax by claiming non-residency, even while working or living in Nigeria.

What Changed:
A person is now considered a tax resident in Nigeria if:

• They live here for at least 183 days in a year
• Their employment, business, or family is in Nigeria

15. New Tax Ombudsman Established

Before:
Disputes between taxpayers and the tax authority were previously resolved internally, with limited transparency.

What Changed:
There is now an independent Tax Ombudsman to:

• Handle taxpayer complaints
• Ensure fair treatment
• Investigate tax abuse

This gives taxpayers a voice and holds authorities accountable.

16. Zero VAT on Essential Goods and Services

Before:
Only a few items were zero-rated; most essentials still attracted 7.5% VAT or were exempt with unclear benefits.

What Changed:
The Nigeria Tax Act 2025 now expands VAT zero-rating to include:

• Basic food items (rice, beans, etc.)
• Medical equipment and services
• Pharmaceuticals
• Educational books and school supplies
• Tuition fees
• Electricity generation & transmission
• Non-oil exports