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What You Should Know About the New Tax Reform Laws in Nigeria
President Bola Tinubu has signed four new tax reform laws aimed at overhauling Nigeria’s outdated tax system.
These reforms are expected to make paying taxes simpler, fairer, and less burdensome for low-income earners and small businesses, while also boosting government revenue.
The announcement came as part of activities marking the second anniversary of Tinubu’s administration.
According to the president, the reforms are meant to protect struggling Nigerians, improve disposable income for workers, and make the tax system more efficient.
“The tax reforms will protect low-income households and support workers by expanding their disposable income,” Tinubu said in a public statement.
What are the new tax reform laws?
Here’s a breakdown of the four new tax reform laws in Nigeria:
- The Nigeria Tax Act:
This law combines several existing tax rules into one clearer document. It also gets rid of over 50 small, confusing taxes. The goal is to reduce overlap and make life easier for businesses by simplifying the system. - The Tax Administration Act:
This act sets common standards for how taxes are collected across all levels of government — federal, state, and local. - The Nigeria Revenue Service Act:
This law replaces the Federal Inland Revenue Service (FIRS) with a new, independent body called the Nigeria Revenue Service (NRS) to improve transparency and efficiency. - The Joint Revenue Board Act:
This act creates better coordination between different levels of government when it comes to tax collection. It also sets up a Tax Ombudsman and Tax Appeal Tribunal to help resolve tax-related complaints and disputes.
How will these laws help Nigerians?
The new tax reform laws in Nigeria are expected to bring major relief to everyday citizens, especially low-income earners and small businesses.
- No more income tax for low earners:
People who earn up to ₦1 million (about $650) per year will now get a rent relief of ₦200,000. This reduces their taxable income to ₦800,000, meaning they won’t have to pay personal income tax. - VAT exemption for basic goods and services:
Sellers of everyday essentials like food, rent, electricity, healthcare, baby items, and education will no longer be required to add Value Added Tax (VAT). This will help families spend less on basic needs. - Small businesses get tax relief:
Companies making less than ₦50 million a year will not have to pay company income tax anymore. They can also file simpler tax returns without needing to hire auditors. - Lower corporate tax for large companies:
Big businesses will enjoy lower corporate tax rates — from 30% currently to 27.5% in 2025, and then down to 25% in the following years. They can also reclaim VAT they pay on expenses and equipment, which helps reduce operating costs. - Tax benefits for non-profits:
Non-profit organizations, including charities, cooperatives, religious bodies, and educational groups, will enjoy tax incentives as long as they don’t earn money from commercial activities.
Who is most affected?
The biggest winners are low-income households. With tax relief and lower costs on essentials, the reforms aim to leave families with more money in their pockets.
Small businesses, especially in the informal sector, are also likely to benefit from a simpler system and lower taxes. These changes could encourage more businesses to register and comply with tax rules.
High-income earners and luxury consumers, however, might face higher taxes on expensive goods and services. There will also be a capital gains tax on large sales of shares and investments.
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Why were the changes necessary?
Nigeria’s tax system has long been seen as outdated, confusing, and unfair — especially to poor people. With a tax-to-GDP ratio of just over 10%, Nigeria collects less tax than most African countries, where the average is around 16–18%.
President Tinubu’s goal is to increase this ratio to 18% by 2026 without raising taxes on basic items or putting more pressure on struggling citizens.
By eliminating unnecessary taxes, promoting compliance, and simplifying the system, the government aims to generate more funds for essential services such as roads, schools, and hospitals, while reducing the country’s need to borrow money.
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