With the full rollout of the Nigeria Tax Act 2025 (effective January 1, 2026), the country’s tax landscape has undergone a major overhaul. These reforms bring sweeping changes that affect individuals, SMEs, large businesses, and investors alike. Below is a fully validated, detailed breakdown of 25 essential changes under the new law with clear explanations of what each means in practice.
25 Confirmed Tax Changes (with Details & Implications)
1. Unified National Tax Framework
Several separate tax laws — including company income tax, personal income tax, VAT, capital gains tax and others have been replaced by a single consolidated tax framework, simplifying compliance and eliminating overlapping regimes.
2. Establishment of the Nigeria Revenue Service (NRS) as Sole Federal Tax Authority
The NRS now centrally administers all federally levied taxes, replacing multiple agencies and bringing consistency in tax collection and enforcement.
3. Mandatory Digital Tax Filing & E-Invoicing
Taxpayers must now adopt e-invoicing and electronic filing for VAT, CIT, CGT and other obligations — manual paper-based records will no longer meet compliance standards.
4. Increase in “Small Company” Exemption Threshold
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Official gazetted text defines small companies eligible for 0% tax if they have annual turnover of ₦50 million or less and fixed assets not exceeding ₦250 million (excluding professional-service firms).
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Some commentary and earlier reports mention a ₦100 million threshold — this appears in the context of transitional or interpretive guidance.
Because of this discrepancy, the ₦50 million threshold remains the legally safer benchmark, but businesses should monitor further clarifications from NRS.
5. Full Tax Exemption for Qualifying Small Companies
Eligible small businesses are exempted from Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the new 4% Development Levy.
6. Introduction of a 4% Development Levy for Larger Companies
Large and medium companies (i.e., non-small companies) will pay a flat 4% levy on assessable profits in lieu of several overlapping sector levies (e.g. education fund levy, IT levy, etc.).
7. Harmonised Capital Gains Tax Rules
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For companies: CGT is now aligned with the standard corporate income tax rate (i.e. CGT rises from previous 10% to 30%).
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For disposals of shares or certain assets by individuals, exemptions apply under defined thresholds (e.g. small-scale disposals, personal homes, limited second-hand vehicle sales etc.) under the reform reliefs. ()
8. Expanded Tax Reliefs for Low-Income Earners
Employees earning up to ₦800,000 per year are fully exempt from PAYE. Additional deductions such as pension, housing fund, health insurance, and rent relief are preserved to reduce taxable income.
9. Rent Relief & Allowances Clarified
Taxpayers can now deduct 20% of annual rent (capped at ₦500,000), while pension, NHF, and approved health-insurance contributions remain deductible, providing meaningful relief for middle-income earners.
10. VAT & Consumption Tax Reforms
Essential goods and services including basic food items, educational materials, healthcare, rent, and public transport — enjoy VAT exemption or zero-rating under the new law, easing consumer burden.
11. Digital / Virtual Asset Taxation & Broader Tax Base
The reform expands the taxable base to include profits from digital, virtual, and non-traditional economic activities (e.g. online trading, digital assets), ensuring modern economic activities are captured under the law.
12. Tax Incentives for Exporters & Agricultural Businesses
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Export profits are exempt when foreign-exchange proceeds are legally repatriated.
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Agricultural enterprises (crop, livestock, dairy) enjoy up to five years of corporate tax holiday under the reform, encouraging investment in food production and rural economy.
13. Withholding Tax Relief for Small Businesses
Qualifying small companies and eligible SMEs are exempt from withholding tax deductions on income and supplier payments — reducing cashflow burdens and compliance complexity.
14. New Minimum Effective Tax Rate (ETR) for Large / Multinational Firms
Firms with very large turnovers or that belong to multinational groups are subject to a 15% minimum global effective tax rate to prevent profit shifting and ensure fair tax contributions.
15. Stricter Penalties for Late Returns & Improved Enforcement
The reform strengthens enforcement powers of the NRS, and introduces stiffer monthly penalties for late filings, boosting compliance urgency.
16. Simplified Corporate Tax Structure — No “Medium Company” Category
Taxpayers are now classified as either “small (exempt)” or “standard (taxable)”, eliminating the ambiguous medium-status category and simplifying compliance classification.
New rules cover indirect share transfers, offshore holdings, and asset sale gains. Gains from share transfers above some thresholds now attract CGT, increasing accountability and closing loopholes.
18. VAT Refunds on Capital Investments & Production Inputs
Manufacturers and producers are entitled to VAT refunds on eligible capital equipment and input overheads — encouraging industrial investment and reducing cost of production.
19. Stronger Protection for Pension, Retirement and Gratuity Income
Pensions, retirement benefits and compensation payments (up to a specified threshold) remain tax-exempt under the reform providing financial security for retirees and workers.
20. Expanded Reliefs for Low-Income & Vulnerable Groups
The law includes a range of reliefs and exemptions aimed at supporting low-income earners, small-scale investors, informal workers, and sectors with limited resources.
21. Clearer Tax Residency, Global Income Rules & Offshore Profit Controls
Tax residency criteria and rules on foreign income, controlled foreign company (CFC) profits, and global income reporting are now formalised to capture cross-border income properly.
22. Reliefs on Stamp Duties, Transfer Levies & Transaction Charges
Minor financial transactions, salary payments, low-value transfers and certain documentation transfers are exempt from stamp duty thereby reducing administrative and cost burdens for everyday transactions.
23. Incentives for Job Creation & Wage Increases
Employers who hire staff and raise wages or provide transport subsidies for low-income workers get additional deductions, promoting employment and formalization of work.
24. Support for Startups, Tech, Renewable Energy and Agriculture
Startups, agricultural ventures, tech firms, and renewable-energy businesses benefit from tax holidays, incentives, and reduced levy burdens, encouraging innovation and diversification. ()
25. Improved Transparency, Audit-Friendliness & Digital Record-Keeping
Because of mandatory digital accounting, e-invoicing and electronic reporting, businesses now have clear, audit-ready records that improve compliance reliability and reduce risk of dispute.
What the Changes Mean for You
For Employees and Salaried Workers
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Low earners (₦800,000/year or less) now pay zero income tax.
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Rent, pension, housing and health contributions reduce taxable income meaningfully.
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Payroll deductions and allowances are simplified and more transparent.
For Small Businesses and Startups
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True small firms (≤ ₦50 million turnover) could pay zero corporate tax, no development levy, and avoid minor taxes.
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Simplified digital accounting and e-invoicing requirements reduce compliance overheads.
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Exporters, agric-businesses, and tech-startups enjoy long-term incentives.
For Medium & Large Firms
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Tax computations now follow unified rules.
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Need for digital accounting systems and compliance automation is now essential.
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Capital gains, share transfers and offshore investments are more strictly regulated.
How to Prepare Ahead
Individuals:
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Register or update your Tax Identification Number (TIN)
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Digitize payslips, rent receipts, pension & NHF contributions, and insurance records
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Keep accurate records of any asset sale, gifts or inheritances
Businesses & SMEs:
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Use compliant accounting software and migrate to e-invoicing platforms
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Keep business and personal accounts strictly separate
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Update registration status (CAC, corporate documents)
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Review asset disposal, export plans, payroll structure, and supplier payment methods
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If turnover is near ₦50 million, carefully assess compliance or consider formalization
Conclusion
Nigeria’s 2026 Tax Law is ambitious and far-reaching. It offers unprecedented reliefs, incentives, and simplifications especially for low-income earners, SMEs, startups, and exporters. But with the benefits comes a new era of mandatory digitization, strict compliance, and audit readiness.
Companies and individuals that adopt proper accounting systems, digital record-keeping and timely reporting stand to gain than those who cling to manual records who may face penalties, audit risks, or missed reliefs.
The message is clear:
Modern tax compliance in 2026 requires digital discipline. Embrace automation or be left behind.
