Nigeria’s tax system is set for a major overhaul following the signing of four landmark Tax Reform Bills into law by President Bola Tinubu on June 26, 2025. The new laws—the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act, and Joint Revenue Board (Establishment) Act—will take effect from January 1, 2026.
The reforms collapse more than 70 fragmented taxes into a streamlined and progressive framework to be administered largely by the rebranded Nigeria Revenue Service (NRS), formerly the Federal Inland Revenue Service. The goal is to simplify compliance, expand the tax base, curb evasion, and raise sustainable revenue without placing undue pressure on low-income earners.
However, misinformation circulating on social media has sparked anxiety, with claims that all bank transfers will be taxed or that bank accounts will be confiscated. These claims are false.
Why the reforms matter
Nigeria remains heavily dependent on oil, which contributes about 70 per cent of government revenue despite price volatility. With a tax-to-GDP ratio of just 13.5 per cent, the country borrowed about N11 trillion in 2025 and still struggled to fund key budget components. The reforms aim to reduce this dependence by boosting non-oil revenue and strengthening fiscal sustainability.
By eliminating overlapping levies—such as the Tertiary Education Tax and IT Levy, now unified under a 4.0 per cent Development Levy—and introducing taxation of digital assets, the government hopes to raise non-oil revenue to 40 per cent of GDP by 2030.
What changes for individuals
Personal Income Tax is now fully progressive. Nigerians earning N800,000 or less annually (about N66,000 monthly) are exempt from tax. Above this threshold, rates range from 15 per cent on income between N800,001 and N3 million to 25 per cent on earnings above N50 million.
This means a minimum-wage earner on N70,000 monthly will only pay tax on a small portion of income, while high earners contribute more. Taxable income now includes salaries, rent, interest, foreign exchange gains, bond premiums, and profits from digital assets such as cryptocurrency.
Contrary to online claims, bank transfers are not automatically taxed. Only unexplained inflows may be treated as income during tax assessment, while gifts, loans, and similar inflows can be declared as non-taxable with proper documentation.
Tax Identification Numbers (TINs) will be required from 2026 for new bank accounts and financial transactions, but this is for compliance, not confiscation.
What changes for businesses
Companies Income Tax now follows a tiered structure. Small businesses with annual turnover below N100 million and assets under N250 million are fully exempt. Medium-sized firms with turnover between N100 million and N1 billion will pay 15–20 per cent, while large companies with turnover above N1 billion will continue to pay 30 per cent.
A new 4.0 per cent Development Levy applies to medium and large companies, replacing multiple federal levies to ease compliance. Agricultural startups will enjoy a five-year tax holiday.
Value Added Tax remains at 7.5 per cent, with essentials such as food, medication, education, and transport zero-rated. Importantly, businesses can now recover input VAT on services and fixed assets.
Stamp duty and filing requirements
Stamp duty continues to apply to legal and financial documents. The former N50 electronic transfer levy has been formally classified as stamp duty, payable by the sender on transfers of N10,000 and above. Salary payments and transfers between accounts owned by the same person are exempt.
All taxpayers, including those exempt from payment, must file annual returns. Companies must file by March 31, while individuals have until June 30. Zero returns are required for exempt persons to demonstrate compliance.
Penalties and enforcement
The new laws introduce tougher penalties for non-compliance. Late filing attracts a N100,000 fine plus N50,000 for each month of default, while unpaid taxes incur a 10 per cent penalty plus interest at the Central Bank’s Monetary Policy Rate. Criminal prosecution applies only after due process.
While the NRS has access to financial data for assessment purposes, it cannot arbitrarily freeze or seize bank accounts without following legal procedures.
The bottom line
The new tax regime is designed to ease the burden on low-income earners and small businesses while ensuring wealthier individuals and larger firms contribute their fair share. Taxes remain a civic duty and a tool for accountability, enabling citizens to demand better governance in return.
As implementation approaches, experts say sustained public education by government agencies will be crucial to dispel myths, build trust, and ensure voluntary compliance with the new tax system.
