KEY HIGHLIGHTS OF FINANCE Act, 2025

The Finance Act, 2025 introduces key fiscal and regulatory changes aimed at boosting Nigeria’s economy, improving tax administration, and addressing emerging challenges. Below are the key highlights based on available reports and trends from previous years (exact details may vary pending official gazetting):

1. Tax Reforms & Revenue Generation

- Corporate Income Tax (CIT) Adjustments:

- Potential increase in CIT for certain sectors (e.g., banking, telecoms) to fund government projects.

- Higher CIT for Large Firms: Potential upward review of Corporate Income Tax (CIT)for high-revenue companies.

-Tax Incentives for SMEs: Reduced tax rates for small businesses to stimulate growth.

- VAT Modifications:

- Possible VAT rate adjustments (e.g., from 7.5% to 10% for luxury goods).

- Expansion of VAT-exempt items (e.g., basic food, education, healthcare).

- Increase in VAT Rate: Possible adjustment in the Value Added Tax (VAT) rate (currently 7.5%) to align with fiscal demands.

- Excise Duty Expansion: New or increased excise duties on luxury goods, tobacco, alcohol, and sugary beverages.

- Digital Tax Expansion:

- Withholding Tax (WHT) on digital transactions (e.g., streaming, e-commerce).

Digital Services Tax (DST): Formalization of taxes on non-resident digital companies (e.g., Netflix, Meta, Google).

- Taxation of crypto and fintech platforms to curb evasion.

2. Customs & Import Duty Changes

- Revised Import Tariffs:

- Higher duties on luxury imports (e.g., cars, electronics) to encourage local production.

- Revised Import Tariffs: Changes to duties on key commodities (e.g., food, vehicles, machinery) to protect local industries.

- Border Control Measures: Stricter enforcement to curb smuggling and boost customs revenue.

- Reduced tariffs on critical raw materials for manufacturing.

- Export Incentives:

- Tax breaks for exporters in non-oil sectors (agriculture, solid minerals).

3. Oil & Gas Sector Reforms

- Petroleum Industry Act (PIA) Adjustments:

- Streamlined tax regimes for upstream/downstream operators.

Petroleum Industry Act (PIA) Adjustments: Fine-tuning fiscal terms for upstream and downstream sectors.

- Incentives for gas development projects to reduce flaring.

- Tax Holidays for Gas Projects: Incentives for gas utilization and flare reduction projects.

- Energy Transition Levies:

- New carbon taxes or green energy incentives to align with climate goals.

4. Fiscal Federalism & Subnational Taxes

- State-Level Tax Autonomy:

- States may get more powers to collect property taxes and road levies.

- Intergovernmental Revenue Sharing:

- Potential review of federation allocation formulas (e.g., higher share for oil-producing states).

5. Anti-Evasion & Compliance Measures

- Stricter Penalties:

- Heavier fines for tax evasion and late filings.

- Tech-Driven Tax Collection:

- Mandatory use of FIRS’s digital platforms (e.g., e-invoicing, AI audits).

- BVN/TIN Linkage:

- Enforcement of Bank Verification Number (BVN) linkage to tax IDs for transparency.

6. Support for Local Industries

- Import Substitution Policies:

- Tax holidays for manufacturers in agro-processing, textiles, and renewable energy.

- Duty Waivers:

- Waivers on machinery imports for priority sectors.

7. Personal Income Tax (PIT) Updates

- Revised Tax Bands:

- Adjusted brackets to reflect inflation and wage increases.

- Remote Work Taxation:

- Revised tax bands to reflect inflation and wage growth.

- Clarification on taxing digital nomads and remote workers.

8. Anti-Tax Avoidance & Compliance

- Strengthened Transfer Pricing Rules: Tighter regulations on multinational profit shifting.

- Mandatory Tax Disclosure: Companies may be required to disclose more tax-related information publicly.

9. Support for Green Energy & ESG

- Tax Credits for Renewable Energy: Incentives for solar, wind, and electric vehicle (EV) investments.

- Carbon Tax Framework: Potential introduction of emission-related levies for heavy industries.

10. Financial Sector Measures

- Banking Sector Levies: Possible new charges on electronic transactions or foreign exchange dealings.

- Capital Gains Tax (CGT) Review: Adjustments to equity and property sales taxes.

Expected Impacts

Positive:

- Increased government revenue for infrastructure.

- Boost for local industries via protectionist policies.

- Formalization of the digital economy.

1. Government Revenue Boost: Higher taxes on luxury imports, digital services, and large corporates.
2. Business Climate: SMEs may benefit, while big firms face stricter compliance.
3. Consumer Prices: Potential inflation from higher VAT and excise duties.
4. Investor Sentiment: Clarity on oil/gas taxes may attract FDI, but stricter rules could deter some sectors.

Challenges:

- Higher compliance costs for businesses.

- Potential inflation from import duties on goods.

Next Steps

- Await official gazette for full details.

- Businesses should review tax strategies for compliance.