Ahead of the January 1 2026 take-off of the new tax laws, the federal government has once again insisted that the new tax laws would enhance fiscal equity, protect taxpayers’ rights and ensure a level playing field for all.
Taiwo Oyedele, Chairman, Presidential Fiscal Policy and Tax Reforms Committee, also explained that contrary to the general perception that the government is introducing new taxes on the masses, many taxes have been repealed, reversed and suspended.
He listed the taxes to include 5% excise tax on airtime and data; Cybersecurity levy on money transfers; Carbon tax on single use plastics; Excise tax on imported vehicles; Import duties on food items, Agric and pharmaceuticals ; 4% import levy; FRCN charge on private companies and Expatriate employment levy.
In a recent presentation on the new tax laws, Oyedele expressed confidence that the new tax laws would stimulate growth without adding to inflation burden.
Daily Trust reports that President Bola Tinubu had signed into law the four new tax bills, describing the laws as pivotal to the success of the administration’s reforms and the country’s prosperity.
The bills are the Nigeria Tax Bill (Ease of Doing Business), which aims to consolidate Nigeria’s fragmented tax laws into a harmonised statute; the Nigeria Tax Administration Bill, which will establish a uniform legal and operational framework for tax administration across federal, state, and local governments.
Others are the Nigeria Revenue Service (Establishment) Bill, which repeals the current Federal Inland Revenue Service Act and creates a more autonomous and performance-driven national revenue agency- the Nigeria Revenue Service (NRS); and the Joint Revenue Board (Establishment) Bill, which provides for a formal governance structure to facilitate cooperation between revenue authorities at all levels of government.
At the signing ceremony at the State House, President Tinubu said that the new taxes presented a new lease of life to every Nigerian and future generation.
How the tax laws affect Nigerians
One of the main objectives of the new tax laws is to address tax evasion and bring all taxable Nigerians into the tax net.
According to Part 2 of the Nigeria Tax Administration Act which deals with registration, ‘Every taxable person shall register with the relevant tax authority and obtain a Taxpayer Identification (‘ Tax ID’) for the purpose of compliance with the obligations.’
Considering that some individuals and businesses have multiple Tax IDs, only one ID would be required for an individual thereby harmonising all the multiple IDs.
Again, Section 28 of the Act stipulates that Every person who has an obligation to deduct and remit tax under this Act or any other tax legislation shall render monthIy returns to the appropriate tax authority as specified in the regulation issued for that purpose.
Section 29 says: ‘Without prejudice to section 142 of this Act, every bank, insurance company) stockbroking firms or any other financial institution, shall prepare, with or without demand by the relevant tax authority, quarterly returns to the relevant tax authority specifying the names and addresses of -(a) new customers ; and (b) existing customers in the case of – an individual, all transactions where the cumulative transaction in a month amount to N25,000,000 or more, or
(b) a body corporate, all transactions where the cumulative transactions amount to NI 00,000,000 or more.’
What this implies is that an individual is subjected to tax if he has in excess of N25m at the end of the month and N100m for a corporate entity.
Section 30 also deals with disclosure of tax planning which mandates all transactions or financial agreements to be disclosed.
Section 30 says any person who enters or intends to enter into any transaction or agreement, referred to as a disclosable transaction or agreements whose principal purpose is a benefit which enables, or might be expected to enable, such a person to obtain a tax advantage, shall without notice or request,
provide to the relevant tax authority, information relating to that disclosable transaction or agreement.
(2) The relevant tax authority may make regulations specifying (a) the information to be provided by a person in relation to a disclosable transaction or agreement; (b) the form and manner of delivery of that information to the relevant tax authority; (c) the period of time within which the information referred to in subsection ( 1) shall be provided to the relevant tax authority; and (d) administrative penalties for non-disclosure, false disclosure, incomplete disclosure or late disclosure.
Tax harmonisation
The committee’s major assignment is the harmonisation of taxes. Many businesses and even individuals have often complained about multiple taxation. The multiplicity of taxes has made it extremely difficult for many businesses to break even.
According to the committee, the harmonisation of taxes also comes with modernisation. This, the committee said, brings about efficiency in the tax system.
However, Taiwo Oyedele clarifies that tracking the accounts of Nigerians doesn’t mean they are trying to tax them except those who earn a lot of money.
‘For example in the reporting to banks, it says if an individual earns N25m in a quarter, that is N100m a year, they should report the person to the government, what is wrong in doing that? They haven’t said you have evaded tax, they just said we want to know what you are doing. And it is not a new provision. In fact the current laws have lower thresholds. The poor people that say, ‘tax the rich people are now the ones fighting to say, why do you want to collect the data.’
VAT reform
One of the provisions of the tax reform is the Value Added Tax reform with the overhaul of Input Value Added Tax (VAT) credit claims-a persistent pain point for businesses operating in Nigeria.
Under the old regime, many companies struggled to reclaim legitimate VAT credits due to vague rules, bureaucratic delays and administrative bottlenecks. The result was higher operating costs, cash flow constraints and, in some cases, outright non-compliance.
The new framework introduces clearer rules and technology-driven systems that allow businesses to offset VAT paid on inputs against VAT charged on outputs with far greater efficiency. Automated documentation and verification significantly reduce disputes and processing times.
Mr. Taiwo Oyedele in a recent media briefing estimates that businesses could claim as much as N3.4 trillion in input VAT credits under the new law, based on 2024 VAT collections.
‘From January next year, input VAT will work almost like money coming back into your account,’ he explained, adding, ‘Input VAT on assets, overheads and services can now be claimed. Input VAT on inventory, which is currently the only allowable claim, will also continue.’
Capital Gain Tax
The Capital Gain Tax is one of the contentious areas of the tax laws which in recent times generated controversy.
The CGT was reportedly blamed for the recent slump in the Nigerian Exchange with investors withdrawing over N4 trillion in one day. However, the committee said all investors in the capital market are tax exempt. Oyedele disclosed that the entire capital gain tax collected by the FIRS in 2024 was N52bn and this was not from the capital market alone, saying the panic withdrawal of N4 trillion was not as a result of the CGT.
‘We are speaking with the foreign investors,’ he said, ‘What we are trying to do is to reduce investment risk for the investors,
Tax exemption for small businesses
One of the objectives of the tax reform law is to encourage formalisation of businesses. Considering that many businesses don’t formalise simply because of tax payment, the tax laws encourage formalisation while small businesses with annual turnover of N100m to N150m have been exempted.
Speaking further, Oyedele said, ‘Tax evasion in Nigeria is huge. We estimate it at 70 per cent. We call it the tax gap. So the tax gap is the difference between the tax you collect now and the tax you could be collecting now.
‘The sub-nationals will get more revenue because we feel that is the right thing to do. The most sustainable way for the government to generate revenue is to allow the economy to grow, whether it is small businesses, whether it is multinational and to encourage formalization. Nigeria has a huge informal sector. People are not formalizing. We complain about it but we don’t ask why they are not formalizing. One major factor why Nigerian businesses don’t formalise is tax.’
Reduction in corporate income tax
Corporate income tax (CIT) is a direct tax levied by national and sub-national governments on the net profits of corporations and similar legal entities. The new tax law has reduced CIT from 30% to 25 per cent. This is expected to enable businesses to ramp up their activities and employ more Nigerians.
According to the tax committee chairman, the five per cent reduction is huge and it is expected to be headline news. However, the CIT is zero per cent for small businesses, according to the new laws.
‘If you are a small business with annual turnover of less than N150m, your CIT is zero per cent. This is the biggest driver of formalization and we have seen it with people registering companies. Register a company and get zero tax. The thing with formalization is when businesses formalise they get more organised. That whole process brings some discipline and that discipline means you run the business better and you are better qualified for credit, you can attract investments and then the economy grows,’ Oyedele said.
Tax Ombud
Daily Trust further reports that one of the provisions in the new tax laws is the appointment of tax ombud, an Independent and impartial arbiter, ‘to conduct enquiries, institute legal proceedings on behalf of a taxpayer, and act as a watchdog against arbitrary tax policy.’
In addition, every company shall appoint a tax agent by designating a representative(s) to attend to its tax matters provided that a paid agent shall be accredited.
Withholding tax
Under the new laws, there are exemptions for manufacturers, small businesses, among others while there are lower rates and taxpayer issued credit notes.
Also providing an insight to the tax laws, presidential adviser on economic matters, Tope Fasua said, ‘Nigeria is not raising tax barriers; it is creating a stronger foundation for a modern, competitive economy. The reforms simplify taxes, safeguard vital incentives, align Nigeria with global standards, and protect ordinary Nigerians and investors alike. They close loopholes exploited by international corporations while maintaining incentives where they matter most. Investors, domestic and foreign, should see these reforms as a signal that Nigeria is serious about building a predictable, stable, investment-friendly environment and is open for business.’
Fasua speaking on the anxiety over the free trade zones, he said, ‘A careful reading of Section 60 and the Second Schedule of the NTA (Nigerian Tax Administration) reveals a policy designed to curb tax base erosion while sustaining incentives for genuine exporters.
The NTA maintains the core tax-exempt status of Free Trade Zone entities but imposes critical conditions to ensure these zones serve their primary economic purpose: generating foreign-exchange earnings through exports.’
Provided by SyndiGate Media Inc. (Syndigate.info).
