In June 2025, President Bola Ahmed Tinubu signed four landmark tax reform bills into law, ushering in the most sweeping overhaul of Nigeria’s tax system in decades. The new laws, which take effect from 1 January 2026, are designed to simplify taxes, boost government revenue and curb widespread evasion.

“This reform signals Nigeria’s readiness for modern economic growth and international investment,” Tinubu declared said.

The reforms stemmed from a 2023 Presidential Committee on Fiscal Policy and Tax Reforms, chaired by PwC tax expert Taiwo Oyedele and comprising more than 80 members. Their mandate was to simplify Nigeria’s tax framework, merge overlapping collections, reduce leakages and raise the country’s tax-to-GDP ratio to at least 18%, up from one of the lowest levels in Africa.

Despite resistance from powerful quarters, including the Northern Elders Forum, 19 northern governors and even the National Economic Council, Tinubu refused to withdraw the bills. Parliament passed them with amendments after heated debates and a flurry of misinformation.

The Four New Laws

1. Nigeria Tax Act: Consolidates multiple old tax laws, scrapping over 50 overlapping taxes.
2. Tax Administration Act: Harmonises collection rules at federal, state and local levels to cut confusion.
3. Nigeria Revenue Service Act: Replaces the Federal Inland Revenue Service with an independent National Revenue Service to oversee tax and revenue management.
4. Joint Revenue Board Act: Creates a tax ombud and tribunal to resolve disputes and strengthen coordination.

Key Changes and What They Mean
Personal Income Tax:

• Individuals earning up to ₦800,000 ($523) yearly, including those on the ₦70,000 minimum wage, are exempt.
• A new progressive system applies: 0% for low earners, rising gradually to 25% for those earning above ₦50 million yearly.
• This shifts the burden toward high-income earners while easing pressure on the poor.
  Corporate Income Tax:
• Small companies (turnover ₦50m or less, with assets under ₦250m) pay 0%.
• All other companies pay 30% income tax plus a new 4% development levy, replacing multiple sectoral levies like the Tertiary Education Tax and NITDA levy.
• Professional service firms cannot claim small company status.

Corporate Income Tax:

• Small companies (turnover ₦50m or less, with assets under ₦250m) pay 0%.
• All other companies pay 30% income tax plus a new 4% development levy, replacing multiple sectoral levies like the Tertiary Education Tax and NITDA levy.
• Professional service firms cannot claim small company status.

Digital Assets:
Cryptocurrencies, NFTs, utility tokens and other digital assets are now recognised as taxable property. This is as a result of Nigeria’s growing crypto market, estimated at $400 million by 2024.

VAT Reform:

• The 7.5% rate remains, but the exemption list has grown to include essentials such as basic food, medicines, tuition and electricity.
• A new sharing formula allocates 10% to the federal government, 55% to states and 35% to local governments.
• Distribution is now based 50% equally, 20% by population and 30% by consumption — a major shift that could reshape state revenues.

Mandatory Tax IDs and Returns:

• All individuals must register and file annual returns.
• Tax IDs are required to open or operate bank accounts.
• Employers must file returns for staff by 31 January, while employees must declare income from all sources.

Foreign Companies:

• Broader definitions mean more foreign firms will be taxed on Nigerian operations, with a new minimum tax tied to earnings before interest and tax.

Penalties and Oversight:

• Stiffer fines for non-compliance: ₦100,000 for late filing in the first month, ₦50,000 for each additional month.
• Contracts cannot be awarded to unregistered taxpayers.
• Offences such as falsifying tax documents or failing to remit collections can now attract jail terms.
• Banks must report accounts with monthly transactions above ₦25m (individuals) or ₦100m (corporates).

Controversy and Pushback
Northern leaders were among the most vocal critics. Borno governor Babagana Zulum claimed, wrongly, that only Lagos would benefit and that agencies such as Tetfund, Naseni and NITDA would be scrapped by 2029. The Northern Governors Forum also opposed the VAT formula, fearing reduced allocations for their states.
Fact-checkers have since debunked much of the misinformation. For example, claims that everyone earning above ₦800,000 yearly would pay 20% tax were proven false. The new system is progressive, with rates ranging from 0% to 25%.

Myths vs Facts about the new Tax Laws
Myth 1: Everyone earning above ₦800,000 a year will now pay 20% tax.
Fact: False. The new system is progressive. People earning ₦800,000 or less are exempt. Rates start at 0% and rise gradually, with only those earning above ₦50 million paying 25%.
Myth 2: Lagos is the only state that will benefit from the VAT reforms.

Fact: All states benefit. The new VAT sharing formula gives states a larger slice (55%) and local governments 35%, while the federal government gets just 10%. Population and consumption will influence how funds are shared, not location alone.
Myth 3: TETFUND, NASENI and NITDA will be scrapped in 2029.

Fact: These agencies are not being scrapped. What has changed is that their funding will now come from the consolidated pool of taxes, instead of multiple levies on companies.
Myth 4: Small businesses will be crushed by the new corporate tax.

Fact: Small companies with turnover of ₦50m or less remain exempt from corporate income tax. Larger companies pay 30% plus a 4% development levy, but the system eliminates overlapping taxes.
Myth 5: The new laws will punish poor Nigerians.

Fact: Quite the opposite. Low-income earners and essential goods such as food, medicines and tuition are VAT-exempt. The reforms shift the tax burden towards high-income earners and larger companies.

Nigeria’s new tax laws mark a bold attempt to modernise a notoriously complex and inefficient system. They aim to simplify compliance, expand the tax net, and raise much-needed revenue for development. But as experts agree, their success will depend less on what is written in the law and more on how faithfully it is implemented. For now, Nigerians, individuals, businesses and states alike must brace for a very different tax landscape from January 2026.