All you need to know about the Updated Nigerian Tax Reform Bill

On June 26, 2025, President Bola Ahmed Tinubu signed into law four major tax reform bills, collectively called the Updated Nigerian Tax Reform Bill. This landmark legislation is designed to modernise Nigeria’s tax system, make it more transparent, and ensure businesses and individuals contribute fairly to the country’s development. The four laws include:

• Nigeria Tax Act (NTA)
• Nigeria Tax Administration Act (NTAA)
• Nigeria Revenue Service Act (NRSA)
• Joint Revenue Board Act (JRBA)

These laws, effective as of January 1, 2026, aim to simplify taxation, encourage business growth, increase government revenue, and enhance overall tax compliance. In simple terms, the government seeks to ensure that more people and businesses pay taxes correctly, while also providing relief where necessary.

To prepare adequately for 2026, you need to understand the tax updates and changes, what they mean, and how each relates to you. Let’s examine the top 10 changes you need to know and what you should do.

Top Changes to the TAX Reform Bills that You Need To Know

1. Small Companies Get a Tax Break

One of the most significant changes in the updated Nigerian tax reform bill is the relief provided to small companies. Small businesses, defined as companies with annual gross turnovers of NGN100 million or less and total fixed assets below NGN250 million, are now exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy.

This means small business owners can keep more of their earnings and reinvest them in growth, hiring, or new equipment. So, imagine you own a small bakery in Lagos with annual sales of NGN80 million. Previously, part of your profits would have been paid in taxes, limiting how much you could reinvest. Now, under the new law, you are exempt from paying CIT, CGT, and the Development Levy. This means you could use the saved money to purchase a new oven, hire additional staff, or open a new branch, thereby helping your business grow faster.

Previously, the exemption threshold was only NGN25 million. Increasing it to NGN100 million means more small businesses benefit, making this a huge win for entrepreneurship in Nigeria.

2. Capital Gains Tax (CGT) Gets a Makeover

Another key update is the change to Capital Gains Tax (CGT).

• For companies, the CGT rate has increased from 10% to 30%, aligning it with the Companies Income Tax rate.
• For individuals, CGT is now based on the income tax bracket to which they belong.

CGT also now applies to indirect transfers of shares, including sales done through offshore holding companies. This closes a loophole that allowed profits to be moved abroad without paying Nigerian taxes.

So, for instance, if a real estate company sells a building for a profit of NGN50 million, it now pays 30% CGT instead of 10%. Similarly, if an investor sells shares in a Nigerian company through an offshore company and makes NGN140 million, the government now collects CGT on this transaction, which it previously could not.

The exemption threshold for share sales has also increased from NGN100 million to NGN150 million over 12 months, provided that gains don’t exceed NGN10 million, which makes it fairer for ordinary investors.

3. Introduction of the Development Levy

The Development Levy is a new 4% tax on assessable profits for companies, introduced under the Updated Nigerian Tax Reform Bill.

It merges several existing levies into one simple payment, including:

• Tertiary Education Tax (TET)
• Information Technology Levy (IT)
• National Agency for Science and Engineering Infrastructure (NASENI) levy
• Police Trust Fund (PTF) levy

For example, suppose your company earns NGN10 million in profits per year. Instead of paying multiple smaller levies separately, you now pay NGN 400,000 as a single Development Levy. This simplifies tax compliance and reduces administrative burdens, which makes it easier for businesses to plan their budgets.

4. Minimum Effective Tax Rate (ETR) for Large Multinationals

The Updated Nigerian Tax Reform Bill introduces a minimum effective tax rate (ETR) of 15% for multinational companies. This ensures that big corporations pay their fair share, preventing them from making very low tax payments despite huge profits.

For instance, a multinational oil company earns NGN100 billion in net profits. Under this new rule, it must pay at least NGN 15 billion in taxes, ensuring the government captures a fair share of revenue.

However, companies operating in Free Zones exporting products abroad may be exempt, provided they are not part of a multinational group. This rule ensures that tax incentives for exports are maintained while large corporations contribute fairly.

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5. Personal Income Tax (PIT) Becomes More Progressive

The Updated Nigerian Tax Reform Bill makes Personal Income Tax (PIT) fairer and easier to understand:

• Individuals earning NGN 800,000 or less per year are exempt from tax.
• Higher-income earners pay up to 25%, depending on income.
• Compensation for loss of employment or injury now enjoys a higher exemption threshold of NGN50 million (previously NGN10 million).

So, if your annual income is NGN700,000, you won’t pay any personal income tax. If your annual salary is NGN2 million, you may fall into a higher tax bracket and pay a tax rate of 20%. Similarly, if someone receives compensation of NGN30 million after losing a job, they are fully exempt from tax, whereas previously only NGN10 million would have been exempt from tax.

6. Economic Development Incentive (EDI) Replaces Pioneer Status

The EDI replaces the old “pioneer status” tax holiday, encouraging capital investment. Eligible companies receive a 5% tax credit per year for five years on qualifying capital expenditures, including machinery and equipment.

For example, a manufacturing company buys machinery worth NGN50 million. Under the EDI, it can deduct NGN 2.5 million from its tax bill each year for five years, thereby reducing the tax burden and encouraging investment in productivity. If the company cannot use the full credit in one year, it can carry it forward for up to five more years.

7. Clear Definition of Resident and Non-Resident Individuals

Previously, there was confusion about who counted as a tax resident. The updated Nigerian tax reform bill now clearly defines residents and non-residents:

• Residents: Taxed on worldwide income.
• Non-residents: Taxed only on Nigerian-sourced income.

This simply means that a Nigerian citizen working abroad but maintaining their home and family in Nigeria may now be taxed in Nigeria on their global income, ensuring fairness in taxation.

8. Establishment of the Tax Ombudsman Office

To support taxpayers, the Joint Revenue Board Act (JRBA) establishes the Tax Ombudsman Office. This office serves as an independent mediator between taxpayers and tax authorities, facilitating the resolution of disputes without requiring court intervention. For example, a business believes it was wrongly charged VAT on a shipment of medical equipment. The Ombudsman can investigate and correct the mistake. The goal is to ensure fair treatment for businesses.

9. VAT Adjustments: Zero Rating and Input VAT Recovery

The Updated Nigerian Tax Reform Bill expands zero-rated VAT to include essential goods and services such as:

• Basic food items
• Medical and pharmaceutical products
• Educational books and materials
• Electricity generation and transmission services
• Tuition fees

For example, a company that prints and sells textbooks can now sell them without charging VAT, while still recovering the VAT paid for the paper and printing services, which was previously not allowed. The VAT rate remains 7.5%, and businesses can now claim input VAT for all purchases linked to taxable goods and services.

10. Mandatory E-Invoicing and VAT Fiscalisation

All businesses in Nigeria are now required to adopt e-invoicing and comply with VAT fiscalization rules. This digital system ensures the accurate tracking of sales and VAT payments, and also helps reduce fraud, making audits simpler.

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Frequently Asked Questions (FAQs)

What are the four new tax laws in Nigeria?

The Updated Nigerian Tax Reform Bill introduces four key laws that overhaul Nigeria’s tax system:

1. Nigeria Tax Act (NTA) – This act governs all taxes in Nigeria, including Companies Income Tax, Personal Income Tax, and Capital Gains Tax. It establishes the rules for calculating, collecting, and enforcing taxes.
2. Nigeria Tax Administration Act (NTAA) – This law governs the administration of taxes, including taxpayer registration, audits, compliance, and penalties for non-compliance.
3. Nigeria Revenue Service Act (NRSA) – This act establishes and empowers the Federal Inland Revenue Service (FIRS) and other revenue services to collect taxes efficiently.
4. Joint Revenue Board Act (JRBA) – This law regulates tax administration between the federal, state, and local governments to ensure proper coordination and prevent overlaps.

What is the current personal income tax in Nigeria?

Under the Updated Nigerian Tax Reform Bill, Personal Income Tax (PIT) has become more progressive:

• Individuals earning NGN800,000 or less per year are now completely exempt from tax.
• Individuals earning more than NGN800,000 are taxed progressively, with rates going up to 25%, depending on the income bracket.

Who is exempted from paying personal income tax?

Only individuals earning NGN800,000 or less annually are exempt from PIT under the new law. This exemption ensures that low-income earners are not burdened with taxes and can use their earnings for daily living expenses or savings.

How much tax is deducted from an NGN100,000 monthly salary?

A salary of NGN100,000 per month adds up to NGN1,200,000 annually. According to the updated Nigerian tax reform bill, this amount falls slightly above the NGN800,000 exemption threshold. Therefore, the individual would pay tax only on the portion exceeding NGN800,000, at the applicable progressive rate.

What are the seven types of taxes in Nigeria?

Nigeria has several different types of taxes, but under the updated Nigerian tax reform bill, the primary seven are:

1. Companies Income Tax (CIT) – Tax on company profits.
2. Personal Income Tax (PIT) – Tax on individual income.
3. Value Added Tax (VAT) – Tax on goods and services, now set at 5%, with zero-rating for essential items.
4. Capital Gains Tax (CGT) – Tax on profits from selling assets or shares.
5. Stamp Duties – Tax on legal documents, contracts, or financial transactions.
6. Education Tax – Tax used to fund educational development.
7. Development Levy – A new 4% tax on assessable profits, replacing multiple smaller levies.

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By simplifying tax rules, providing exemptions for small companies, introducing progressive taxation, and leveraging digital systems, the updated Nigerian tax reform bill aims to create a fairer, more efficient, and growth-friendly tax environment in Nigeria.