On June 26, 2025, President Bola Ahmed Tinubu signed four new tax laws that will completely change how taxes work in Nigeria. We give an explanation of these laws and the most important changes that apply to most Nigerians.
Why Did Nigeria Need New Tax Laws?
Nigeria had different tax laws scattered everywhere, some dating back over 60 years. This created massive confusion for both taxpayers and tax collectors. An important goal was to unite all these laws into a single and simple framework.
Also, Nigeria only collects around 10% of its GDP in taxes, while most African countries collect 16-18% and in Europe, this reaches up to 40%. This means the country is missing out on billions of naira that could potentially fund better roads, hospitals and schools and is instead having to solely depend on oil money and borrowing.
The Four New Laws
1. Nigeria Tax Act (NTA) – This is one big tax rulebook instead of nine different ones scattered around. Everything about taxes is now in one place.
2. Nigeria Tax Administration Act (NTAA) – This ensures federal, state and local governments all follow the same rules when collecting taxes.
3. Nigeria Revenue Service Act (NRSA) – This creates a new, more efficient tax collection agency called the Nigeria Revenue Service (NRS) to replace the old Federal Inland Revenue Service.
4. Joint Revenue Board Act (JRBA) – This creates a Tax Ombudsman (like a referee) to help when you have problems with tax authorities, plus better courts for tax disputes.
1. Regular Nigerians Might Not Pay Income Tax Anymore
The biggest change reflected in these laws is that if you earn ₦800,000 or less per year, you pay zero income tax. That’s about ₦67,000 per month. For context, this covers millions of Nigerian workers who were previously struggling with tax payments.
2. Rent Relief for Everyone
Even if you earn more than ₦800,000, you can now deduct ₦200,000 for rent from your taxable income. Let’s say you earn ₦1 million yearly:
- Your income: ₦1,000,000
- Minus rent relief: ₦200,000
- Taxable income: ₦800,000
- Tax you pay: ₦0 (because you’re now under the exemption limit!)
What If You Earn More?
For higher earners, there’s a new progressive tax system. The more you earn, the higher percentage you pay, but it’s fairer than before. The maximum rate is 25% for the highest earners.
3. Small Business Get A Tax Holiday
If your business makes ₦100 million or less per year (up from ₦25 million before), you pay zero corporate tax. You also don’t pay capital gains tax or the new development levy.
To put this in perspective: A small restaurant, barbershop, or retail shop making ₦8 million monthly would be completely exempt from corporate taxes.
4. Bigger Businesses Pay Less Too
For larger companies, corporate tax rates drop from 30% to 27.5% in 2025, then to 25% afterward. This makes Nigeria more attractive for investment.
5. Businesses Can Now Get More Money Back
The new system lets businesses recover VAT on almost everything they buy, including services and equipment. Previously, many businesses lost money because they couldn’t recover VAT on certain purchases.
6. No VAT on Essential Items
Basic necessities like food, medicine, educational materials and electricity generation are now zero-rated for VAT. This means no VAT on these items.
7. Digital Services Now Pay VAT
When you pay for Netflix, Amazon, or other foreign digital services, they’ll now pay VAT in Nigeria. This creates a level playing field with local companies.
8. Capital Gains Tax Goes Up
If you make money from selling assets like stocks or property, the tax rate increases significantly:
- Companies: From 10% to 30%
- Individuals: You’ll pay your regular income tax rate on these gains
However, if you sell shares worth less than ₦150 million in a year and your gains are under ₦10 million, you’re still exempt.
9. Stricter Penalties
The government is getting serious about tax compliance. Not filing your tax returns can cost you ₦100,000 in the first month and ₦50,000 each month after that.
10. Technology Changes
Businesses will now need to use government-approved electronic invoicing systems. While this might seem complicated, it’s designed to make tax collection more transparent and fair.
11. Tax Ombudsman – Your Tax Advocate
There’s now an independent office that helps when you have problems with tax authorities. Think of it as having a referee when there’s a dispute.
12. Better Tax Courts
New specialized courts will now handle tax disputes more fairly and quickly.
13. More Money for States and Local Governments
States and local governments will get a bigger share of VAT revenue:
- Federal government: Gets 10% (down from 15%)
- States: Get 55% (up from 50%)
- Local governments: Get 35% (up from 35%)
Importantly, 30% of what states get will be based on how much their people consume, not just where VAT is collected. This helps states with large populations get fairer shares.
When Do These Changes Take Effect?
The new laws are expected to start on January 1, 2026. That gives everyone time to prepare and understand the changes.
What Should You Do Now?
If you’re an Individual, calculate if you fall under the new ₦800,000 exemption. Keep records of your rent payments for the ₦200,000 relief and if you have any investments, understand the new capital gains rules.
If you own a small business, check if you qualify for the small business exemption (₦100 million turnover). Also, understand the new VAT recovery rules and prepare for electronic invoicing requirements.
If you work for a large company, your company will need to adapt to new corporate tax rates. So be sure to understand the new development levy and prepare for stricter compliance requirements.
The Bottom Line
These new tax laws are designed to create a fairer system where:
- Low-income earners pay less or nothing
- Small businesses get significant relief
- The wealthy and large corporations pay their fair share
- Everyone has better protection from unfair treatment
The goal is to increase government revenue without burdening ordinary Nigerians, while making the system more modern and efficient.
Success depends on how well these laws are implemented and how much trust is built between taxpayers and tax authorities. The new taxpayer protection mechanisms show that the government understands that fair treatment is essential for voluntary compliance.
While change can be uncomfortable, these reforms are designed to create a more equitable system that supports Nigeria’s economic growth while protecting ordinary citizens and small businesses.
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