President Bola Tinubu has insisted that the new tax laws will go ahead as planned from January 1, 2026, despite calls for a delay and some public controversy.
Changes focus on fairness and revenue reform
Officials say the tax reforms are intended to make the system more equitable, targeting higher earners while protecting lower-income workers.
Relief for lower earners under new regime
Under the reforms, people earning up to ₦100,000 per month may not pay personal income tax, reflecting part of the restructuring.
The reforms are part of a broader overhaul of Nigeria’s tax system and will affect various taxes and tax administration rules starting January 1, 2026.
Here’s a clear summary of what the new Nigerian tax laws effective from January 1, 2026 mean for individuals and businesses under the revised system:
For Individuals
Progressive Personal Income Tax (PIT)
A more progressive tax structure replaces the old regime.
Individuals earning ₦800,000 or less per year are exempt from personal income tax.
Higher earners are taxed at graduated rates up to 25% on income above certain thresholds.
Residency & Worldwide Income
Nigerian residents can be taxed on global income, not just income earned in Nigeria.
Residency is based on factors like days lived in country and ties to Nigeria.
Rent Relief
The old consolidated relief allowance has been replaced with a rent relief benefit, letting taxpayers deduct a portion of rent (capped at a specified amount) from taxable income.
Digital and Compliance Rules
Individuals must have a Tax Identification Number (TIN) and adhere to stricter filing and documentation rules.
For Businesses
Corporate Taxes
Small companies (turnover ≤ ₦100 million and asset limits) are now fully exempt from corporate income tax (CIT), capital gains tax (CGT), and the new development levy.
Larger companies face a standard 25% corporate tax rate from 2026.
New Development Levy
A 4% levy on assessable profits replaces multiple older levies (like Tertiary Education Tax) to simplify compliance.
Capital Gains Tax Changes
CGT for companies increases and now aligns with CIT (e.g., roughly 30% for many corporate disposals).
Minimum Effective Tax Rate (ETR)
Multinational and large companies must pay a minimum 15% effective tax on profits to discourage profit shifting.
New Tax Authority
The Federal Inland Revenue Service becomes the Nigeria Revenue Service (NRS) with expanded autonomy and digital powers.
Digital Compliance
E-invoicing, real-time VAT reporting, and electronic filing are mandatory.
VAT input recovery is improved, helping businesses recoup VAT on services and assets.
Enforcement & Penalties
The tax system introduces stiffer penalties for non-compliance and clearer dispute resolution procedures.
Key Impacts in Simple Terms
Lower taxes for many low-income earners no tax up to a certain income level.
Simpler taxes for small businesses with exemptions on key levies.
Higher responsibilities for larger corporations with new levies and global income rules.
More digital and transparent tax administration across the board.
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