Nigeria is undergoing one of the most significant transformations of its tax system in decades. As of January 1, 2026, a suite of comprehensive tax reform laws — collectively known as the Tax Reform Acts — took effect, replacing fragmented and outdated tax statutes with a modernized framework aimed at fairness, efficiency, and economic growth. These changes have sparked national debate, with both optimism and criticism emerging across sectors of society.
This article explains what the new tax laws are, their key provisions, who they affect, the benefits and concerns, and what Nigerians should know as the reforms begin implementation.
Why Nigeria Undertook Tax Reform
For years, Nigeria’s tax system was widely considered overly complex, inefficient, and a deterrent to investment. There were more than 60 different taxes and levies across federal, state, and local levels, many of which overlapped or caused confusion for taxpayers and investors. Tax compliance was difficult, and revenue collection was often suboptimal when compared with Nigeria’s economic size and population.
In response, the Federal Government embarked on a deep overhaul of the tax framework to:
- Simplify tax laws
- Consolidate overlapping taxes
- Broaden the tax base
- Improve compliance and enforcement
- Attract investment and strengthen economic competitiveness
- Ensure fairness in how taxes are levied and collected (UUBO)
To achieve these objectives, President Bola Ahmed Tinubu signed four key Tax Reform Bills into law on June 26, 2025. These include:
- The Nigeria Tax Act (NTA)
- The Nigeria Tax Administration Act (NTAA)
- The Nigeria Revenue Service (Establishment) Act
- The Joint Revenue Board (Establishment) Act (UUBO)
Collectively, these laws replace much of the old tax framework and reshape how individuals and businesses are taxed in Nigeria.
How the New Tax Reform System Works
At its core, the 2026 tax reform establishes a unified and modern tax regime designed to be simpler and fairer for taxpayers. Some key features include:
1. Consolidation of Multiple Tax Laws
The Nigeria Tax Act repeals or consolidates several older laws, including:
- Personal Income Tax Act
- Companies Income Tax Act
- Capital Gains Tax Act
- Value Added Tax Act
- Stamp Duties Act
- Petroleum Profits Tax Act
- Others with overlapping provisions (EY Global Tax News)
This consolidation eliminates ambiguity and ensures one primary statute guides most tax issues.
2. Broad Structural Reforms
The reforms include changes to how taxes are computed, who pays them, and how revenue is collected. Notable changes include:
- New minimum effective tax rates for large companies
- Controlled Foreign Company (CFC) rules for foreign profits
- Stronger enforcement of transfer pricing and digital economy taxes
- Introduction of a Top-Up Tax to align with global tax standards (EY Global Tax News)
These measures reflect international tax practices, reducing tax avoidance and ensuring Nigeria remains competitive globally.
3. Unified Tax Authority
The Federal Inland Revenue Service (FIRS) has been transformed into the Nigeria Revenue Service (NRS), with a broader mandate to administer federal, state, and certain local taxes under standardized procedures. Standardizing tax administration is expected to reduce corruption and increase efficiency. (Tribune Online)
A National Tax Policy Implementation Committee was established to oversee the rollout of these reforms, coordinate public education, and consult stakeholders nationwide. (Nairametrics)
Key Changes for Individuals
One of the most impactful aspects of the new tax system is how individuals will be taxed. Major changes include:
1. Progressive Personal Income Tax Structure
Under the new law, Nigeria adopts a more progressive tax regime based on income brackets. Individuals earning ₦800,000 or less annually are completely exempt from personal income tax. Above that, tax rates progressively increase, with the top bracket taxed at 25%. The brackets now are:
| Income Bracket (₦) | Tax Rate (%) |
|---|---|
| 0–800,000 | 0 |
| 800,001–3,000,000 | 15 |
| 3,000,001–12,000,000 | 18 |
| 12,000,001–25,000,000 | 21 |
| 25,000,001–50,000,000 | 23 |
| Above 50,000,000 | 25 |
This progressive structure is intended to lessen the tax burden on lower earners while ensuring higher earners contribute a fairer share.
2. New Reliefs and Allowances
- The Consolidated Relief Allowance (CRA) has been abolished and replaced with a Rent Relief allowance — the lower of ₦500,000 or 20% of annual rent paid. (Mercans Global Payroll & PEO)
- Compensation for loss of employment is now exempt up to ₦50 million — a significant increase from ₦10 million previously. (Mercans Global Payroll & PEO)
These adjustments help taxpayers keep more of their income while balancing revenue needs.
3. Residency Rules and Global Income
The new laws clarify tax residency: individuals are considered residents if they spend 183+ days in Nigeria or maintain significant ties. Residents may be taxed on global income, while non-residents only pay tax on Nigerian-sourced income. (Baker Tilly Nigeria)
Key Changes for Businesses
Businesses also face significant adjustments under the new system:
1. Corporate Income Tax and Small Business Relief
- Small companies with annual turnover ≤ ₦100 million and fixed assets ≤ ₦250 million are fully exempt from corporate tax, capital gains tax, and the new development levy. (Trending News)
- Larger corporations will pay corporate tax at revised rates, with mechanisms like the 15% minimum effective tax rate for companies earning large revenues or multinationals operating in Nigeria. (Nairametrics)
These thresholds aim to support SMEs while ensuring larger companies contribute appropriately.
2. Development Levy and Consolidation
The reforms merge several levies — including the Tertiary Education Tax, NITDA Levy, NASENI Levy, and Police Trust Fund Levy — into a single 4% Development Levy on assessable profits for medium and large businesses. This simplifies compliance and reduces unpredictable multiple charges previously imposed by different agencies. (Nairametrics)
3. VAT and Input Tax Reforms
While Value Added Tax (VAT) remains at 7.5%, key changes include:
- Zero-rating essentials like food, medicine, education, and transport to ease living costs. (Legit.ng – Nigeria news.)
- Businesses can now reclaim input VAT on services and fixed assets, which was previously limited. (The Nigerian Inquirer)
These measures are intended to improve business cash flow and reduce cascading tax impacts.
4. Changes in Capital Gains and Other Taxes
- Capital gains tax for companies increases from 10% to 30%. (Trending News)
- Broader asset categories — including digital assets and indirect share transfers — are now subject to tax. (Trending News)
These changes align Nigeria’s system with global tax practices and help tap revenue from emerging sectors.
Tax Compliance, Filing, and Penalties
Under the new system:
- All individuals and companies must file annual tax returns, even if no tax is owed. Companies must file by March 31, and individuals by June 30. (The Nigerian Inquirer)
- Late filing attracts a fine of ₦100,000 with additional monthly penalties. (The Nigerian Inquirer)
- Late payment leads to a penalty of 10% plus interest tied to the Central Bank’s policy rate. (The Nigerian Inquirer)
- Tax evasion can result in criminal charges and asset seizure (after due process). (The Nigerian Inquirer)
These enforcement measures are intended to enhance compliance and reduce tax evasion nationwide.
Controversies, Public Debate, and Implementation Challenges
While the government has proceeded with implementation on January 1, 2026, some challenges persist:
- Discrepancies between the versions passed by the National Assembly and the final gazetted texts have sparked controversy, prompting calls for pause or review by opposition figures and civic groups. (The Guardian Nigeria)
- Critics argue that many Nigerians are already under economic pressure and that increased tax burdens could provoke resistance, particularly among low-income earners. (Vanguard News)
- Civic groups have called on the government to address trust and transparency concerns before full rollout, stressing the need for clearer communication and stakeholder engagement. (The Guardian Nigeria)
Despite the debates, President Tinubu has reaffirmed that the reforms will proceed as scheduled, emphasizing their long-term importance to Nigeria’s fiscal health. (Arise News)
Benefits and Opportunities
Despite the controversies, many analysts argue that the tax reforms offer significant benefits:
1. Simplified System and Fairness
By consolidating outdated tax laws, the system becomes easier to navigate, reducing bureaucracy and potential for corruption. (Legit.ng – Nigeria news.)
2. Support for SMEs and Low-Income Earners
Tax exemptions for small businesses and low-income workers are designed to spur entrepreneurship and reduce inequality. (Legit.ng – Nigeria news.)
3. Increased Revenue for Development
A broader tax base and modern compliance mechanisms could boost government revenue, which is essential for funding public services and infrastructure. (EY Global Tax News)
4. Global Alignment
Adopting practices like minimum effective tax rates and digital taxation aligns Nigeria with global standards, increasing investor confidence. (EY Global Tax News)
Conclusion
The 2026 tax reforms in Nigeria are a watershed moment in the country’s fiscal history. These changes aim to simplify an outdated system, promote fairness, encourage investment, and increase public revenue. For individuals and businesses alike, understanding how these laws operate is critical — not only to comply but also to take advantage of new allowances, exemptions, and reliefs.
As Nigeria enters this new tax era, the full impact of the reforms will unfold over time. What is clear is that these laws represent a significant shift toward a modern, predictable, and revenue-efficient tax system capable of supporting national development goals.
