Simplified Tax Administration The establishment of the Nigeria Revenue Service (NRS) consolidates multiple tax-collecting bodies into a single agency. This streamlines the filing process, reduces redundant levies, and promotes administrative efficiency.
Relief for Low-Income Earners The reforms provide substantial relief to low-income individuals by exempting those earning up to ₦1 million annually (₦83,000 monthly) from Pay-As-You-Earn (PAYE) tax. Individuals earning up to ₦1.7 million per month enjoy reduced tax rates. Additionally, essential items—including food, healthcare, education, electricity, and public transport—are zero-rated for VAT.
Support for SMEs and Micro-Businesses The qualifying threshold for Small and Medium Enterprises (SMEs) has been raised from ₦25 million to ₦50 million in annual turnover. Businesses within this category are fully exempt from Company Income Tax (CIT), Value Added Tax (VAT), and Withholding Tax, thereby bolstering Nigeria’s entrepreneurial sector.
VAT Reform and Export Incentives Goods, services, and intellectual property exported from Nigeria are now zero-rated for VAT. The reforms also introduce clearer guidelines for claiming input VAT credits, helping to lower production costs and support export-driven growth.
Support for Remote Work and the Digital Economy Nigerians employed remotely by foreign companies (non-resident employers) are now exempt from Personal Income Tax (PIT), creating incentives for participation in the global digital workforce.
Strengthening Federalism and State Revenue Autonomy • New VAT Distribution Formula: VAT revenues will now be shared as follows—Federal Government: 10%, States: 55%, and Local Governments: 35%. This shift to a “place of consumption” model benefits consumption-heavy states and enhances their fiscal independence. • Expanded State Taxing Powers: States are now empowered to levy and collect taxes on Limited Liability Partnerships (LLPs), lotteries and gaming, and stamp duties. They also receive 5% of federally collected VAT. Bonds issued by states are now tax-exempt, encouraging infrastructure development and fiscal independence. • Creation of a Joint Revenue Board: A harmonized national tax administration and audit framework is now coordinated via a newly established Joint Revenue Board, improving collaboration and consistency across federal, state, and local tax authorities.
Transparency, Accountability, and Taxpayer Protection • Tax Ombudsman and Appeals Mechanism: A dedicated Office of the Tax Ombudsman and Tax Appeal Tribunals has been introduced to address taxpayer grievances within a streamlined 14-day window, helping to prevent arbitrary assessments and long-standing disputes. • Repeal of Nuisance Taxes and Introduction of Progressive Rates: Over 50 redundant or minor taxes have been eliminated. The tax structure has been reformed to be more progressive, ensuring that the burden on low-income earners is minimized. • Enhanced Transparency: Uniform tax laws and oversight by the Tax Ombudsman promote greater accountability across Ministries, Departments, and Agencies (MDAs), thereby fostering public trust in the system.
Economic Growth and Revenue Mobilization • Broadened Tax Base and Improved Compliance: Digital filing systems and a unified tax portal reduce the cost of compliance and incentivize businesses to formalize their operations. These efforts aim to expand Nigeria’s tax-to-GDP ratio beyond the current 10.8%. • Investment and Job Creation Incentives: The reforms include reduced CIT rates (from 30% to 25%), remote work tax exemptions, and export-related tax reliefs. These measures are designed to attract investment, stimulate business growth, and create employment. • Incentives for the Oil Sector: A new executive order grants up to 20% tax credits to oil companies that implement cost-saving measures, enhancing productivity in a key revenue-generating sector.
