Things to Know About Nigeria’s New Tax Laws

President Bola Tinubu has signed four major tax reform bills into law, marking a milestone in Nigeria’s fiscal modernization efforts (punchng.com).

1. VAT Rate Stays, But with Wider Impact
While the Value Added Tax (VAT) remains at 7.5%, its coverage is now expanded. Essential services and goods—such as food, education, healthcare, public transport, residential rent, and exports—are now zero-rated. This aims to cushion inflation and reduce everyday living costs (punchng.com).

2. New VAT Distribution Model
The VAT revenue formula has been revised:

• 30% based on consumption (not contribution)
• 50% shared equally among states
• 20% distributed by population
  These changes are designed to increase state revenues and combat tax evasion (punchng.com, reuters.com).

3. Four Landmark Acts Explained

• Nigeria Tax Act: Merges over 50 overlapping taxes into one simplified code.
• Tax Administration Act: Standardizes tax collection across federal, state, and local levels.
• Nigeria Revenue Service Act: Establishes the independent Nigeria Revenue Service to replace FIRS.
• Joint Revenue Board Act: Improves federal-state coordination with new mechanisms like a Tax Ombudsman and Appeal Tribunal (punchng.com).

4. Main Goals of the Reforms

• Simplification: Less red tape for small businesses and informal traders.
• Efficiency: Aims to raise Nigeria’s tax-to-GDP ratio from 10% to 18% by 2026.
• Relief for Households: Low-income earners and small businesses benefit from essential tax exemptions.
• Increased Public Funding: More reliable revenue streams for healthcare, education, and infrastructure (punchng.com).

5. Who Wins and Who Pays More

• Low-income earners: Income up to ₦1 million with ₦200,000 rent rebate; pays no PAYE.
• Small businesses (<₦50 million turnover): Exempted from company income tax and simplified filing.
• Large firms and wealthy individuals: Corporate tax drops from 30% to 27.5%, eventually 25%; VAT credits available.
• Luxury consumers and high earners: Increased VAT on high‑end goods and new capital gains tax (punchng.com).

6. Why These Reforms Matter
Nigeria’s old tax system was bogged down by complexity and duplication, harming compliance and fueling inefficiency. The reforms aim to build trust, reduce poverty, and stimulate growth by simplifying the fiscal landscape and encouraging investment .

7. Implementation Timeline and Support
The laws will come into effect on January 1, 2026, allowing agencies and citizens six months to prepare and adapt (punchng.com).

Nigeria’s Tax Revolution: VAT Stays at 7.5% with Major Reforms Coming in 2026

Source: punch newspaper