Nigeria's new tax laws effective January 2026

Key Highlights of the 2026 Tax Reforms

1. Implementation Timeline & New Tax Authority

1. The reforms were signed into law on June 26, 2025, and will come into effect January 1, 2026, providing a six-month window for awareness campaigns and system updates .
2. The Federal Inland Revenue Service (FIRS) is being rebranded and restructuring as the Nigeria Revenue Service (NRS), with expanded powers covering both tax and non‑tax revenue streams .
   

2. VAT (Value-Added Tax) Adjustments

1. The current VAT rate of 7.5% will remain but is poised to gradually increase to 12.5% by 2026 and potentially 15% by 2030, aligning with ECOWAS standards .
2. Exemptions will shield essential goods and services—food, healthcare, education, housing, transportation, and accommodation from VAT .
3. The VAT revenue-sharing formula is also being overhauled: a proposed shift from population-based allocation to 60% derivation, 20% population, and 20% equality—a change that has sparked pushback from northern states .
   

3. Corporate Income Tax & Development Levy

1. Corporate Tax (CIT) is being reduced: small businesses (turnover ≤ ₦50M) are exempt; standard rate drops from 30% to 27.5% in 2025, then to 25% from 2026 ().
2. A Development Levy (4% in 2025–26, tapering to 2% by 2030) replaces previous education and IT taxes, funding TETFUND and the Student Education Loan Fund .
   

4. Personal Income Tax & SME Support

1. Income tax exemptions are being expanded: individuals earning below ₦800,000–₦1,000,000 annually will be exempt .
2. Over 90% of micro, small, and nano enterprises will be relieved of CIT, VAT, and PAYE obligations .
3. Over one-third of workers will be fully exempt from PAYE .
   

5. Tax Administration & Governance

1. Tax administration is being centralized and digitized, with the formation of a Joint Revenue Board, Tax Appeal Tribunal, and Tax Ombudsman to improve efficiency, transparency, and taxpayer rights .
2. The reforms aim to simplify taxes, eliminate overlaps, close loopholes, and enhance accountability within a harmonised framework .

Stakeholder Reactions & Debates

1. Northern states have voiced concerns over the VAT formula shift, fearing it favors southern states and deepens regional inequality .
2. Advocates argue the changes are pro‑poor and equitable, benefiting low-income individuals and SMEs by removing burdens on essentials and enabling small businesses to thrive .

Why January 2026?

1. Aligns with global tax reform best practices and Nigeria’s fiscal year .
   

What You Should Know & Prepare

Stakeholder	Key Actions Needed
Individuals	Check if your income qualifies for exemption; adjust payroll withholdings ahead of 2026.
Small Businesses	Confirm eligibility for VAT/PAYE/CIT exemptions; register appropriately.
Corporations/MNEs	Update accounting systems for development levy and shifted CIT rates.
States & LGs	Plan for possible shifts in VAT revenue allocation; engage in ongoing consultations.
Tax Advisors	Prepare to assist clients with new codes, digital systems, and dispute resolution frameworks.

Conclusion

These reforms represent a sweeping overhaul aimed at streamlining taxes, boosting fairness, and modernizing systems. While they offer easing of tax burdens and SME support, they also introduce new levies and stir regional equity issues especially regarding VAT distribution.