If you run a business in Nigeria, you have probably heard the words “new tax law” floating around. But between the political debates, the court cases, and the technical jargon, it has been hard to know what actually changed.
Here is what you need to know:
President Bola Tinubu signed four major tax reform bills into law on June 26, 2025. After a six-month transition period, they became fully operational on January 1, 2026.
The government has called this the most significant overhaul of Nigeria’s tax system in decades—consolidating more than a dozen old tax laws into a single unified framework. President Tinubu described the old colonial-era tax laws as having “impoverished Nigerians through fragmentation, multiplicity, and inconsistencies.”
But what does this mean for you—the business owner in Lagos who just wants to know how much to pay, when, and to whom?
Let us break it down in plain English.
The Four Laws – Simplified
The reforms are built on four interconnected Acts:
| Act | What it does |
|---|---|
| Nigeria Tax Act (NTA), 2025 | The main tax code replaces old CIT, PIT, and VAT Acts. |
| Nigeria Tax Administration Act, 2025 | Standardizes filing, assessment, and enforcement across all taxes. |
| Nigeria Revenue Service (Establishment) Act, 2025 | FIRS is now the Nigeria Revenue Service (NRS) with a broader mandate. |
| Joint Revenue Board (Establishment) Act, 2025 | Coordinates tax administration across federal, state, and local levels. |
The most important takeaway: FIRS no longer exists. From January 2026, it is now the Nigeria Revenue Service (NRS). The NRS is responsible for all federal government revenue—not just taxes, but non-tax revenue too
What Actually Changed for Your Business
1. Small businesses now pay less (or nothing)
If your annual turnover is below N50 million and your fixed assets are below N250 million, you are classified as a “small company” and remain exempt from the Companies Income Tax. The government has also raised the exemption threshold for the new Development Levy, giving smaller businesses room to breathe.
What this means for you: If your business is still small, you can focus on growing—not on complex corporate tax filings.
2. Personal income tax is now more progressive
The new tax bands shield low-income earners:
- ₦0 – ₦800,000 per year: 0% tax (up from previous lower thresholds)
- Minimum wage earners are completely excluded from income tax
- Higher earners face higher marginal rates
What this means for you: If you pay yourself a modest salary, you may owe little or nothing in personal income tax. If you are a high earner, expect to pay more.
3. VAT stays at 7.5%—for now
The government initially planned to raise VAT to 12.5% by 2026, but parliament pushed back. The rate remains 7.5%. However, there is now a broader push to remove VAT from essential goods.
What this means for you: No sudden VAT increase to worry about. But businesses can now recover input VAT on services and capital assets—a valuable change for companies with significant expenses.
4. Cash tax collection is banned—completely.
One of the most practical changes: No tax authority can collect cash from you anymore. The government has also banned roadblocks for tax enforcement.
What this means for you: If anyone comes to your business demanding cash for tax, they are breaking the law. All payments must go through formal, technology-driven channels
5. New taxes on retained earnings (for larger companies)
This one is important for growing businesses. Under Section 10 of the NTA, tax authorities can now treat undistributed profits as if they had been paid to shareholders—meaning those retained earnings can be taxed even if no dividend was declared.
What this means for you: If your company is holding large reserves instead of paying dividends, you may face a tax bill. You need to plan your dividend and reinvestment strategy carefully.
6. A new Development Levy
The reforms introduced a Development Levy, which applies alongside existing taxes. Small businesses are exempt, but larger companies should factor this into their tax planning.
What Has Not Changed
- You still need a Tax Identification Number (TIN) linked to your bank account
- The government cannot debit your account without a court order
- Filing deadlines remain largely the same
The Controversy You Should Know About
There has been public debate about discrepancies between the versions of the bills passed by the National Assembly and the gazetted versions. Some lawmakers have called for investigations, and the Nigeria Economic Summit Group (NESG) has recommended amendments to align definitions of “small businesses” across different laws.
Minister of State for Finance, Taiwo Oyedele, has acknowledged that corrections are underway. The government has insisted that the gazetted law is the final authority
What this means for you: Do not wait for perfect clarity. Use the gazetted laws as your guide, and work with a tax professional (like us) to stay compliant.
Your Next Move
Tax compliance in Nigeria just became simpler, but also more data-driven. The NRS is now using technology to track revenue across the system. That means fewer excuses for errors and less room for “informal” arrangements.
The businesses that thrive under the new regime will be those that:
- Register properly and maintain clean records
- Understand which exemptions apply to them
- Work with advisors who keep up with the changes
We help Lagos businesses navigate the new tax landscape—from registration to filing to strategic planning.
Ready to get compliant – without the headache?
We help Lagos businesses understand the new tax law, file correctly, and pay only what they owe—nothing more.
