Nigeria Tax Reform Provides Relief For Low Income Workers

President Bola Tinubu has reassured Nigerians that the newly introduced tax laws will not impose additional burdens on existing taxpayers, but instead provide relief for low-income workers. This assurance was given during the President’s address on Nigeria’s 65th Independence Day anniversary.

The tax-to-GDP ratio has increased to 13.5 percent from less than 10 percent, and is expected to rise further when the new tax law takes effect in January 2026. According to President Tinubu, the primary goal of the tax law is to expand the tax base, provide relief to low-income earners, and build a stronger economy.

The new tax laws, set to take effect in January 2026, aim to consolidate and simplify existing tax statutes, including the Companies Income Tax Act, the Personal Income Tax Act, the Value Added Tax Act, and the Capital Gains Tax Act. This consolidation is intended to reduce ambiguity, eradicate duplication, and address the long-standing issue of multiple taxes among different levels of government.

Key features of the new tax laws include relief for individuals and small businesses. Workers earning less than N800,000 annually will be exempt from personal income tax, while companies with an annual turnover of up to N100 million and total fixed assets not exceeding N250 million will be exempt from Company Income Tax, Capital Gains Tax, and the new Development Levy.

The new regime also removes Value-Added Tax on essential goods and services, such as basic food items, educational books and tuition, and shared road transport services. Additionally, the laws introduce a four percent Development Levy, which replaces several smaller sundry levies, and broaden the tax base to include profits from digital and virtual assets.

The Pioneer Status Incentive regime has been replaced with the Economic Development Tax Incentive, providing tax benefits for a longer duration for businesses in qualifying sectors. Companies in the agricultural sector will be exempt from income tax for their first five years of operation, and profits from goods exported from Nigeria will be exempt from income tax, provided the proceeds are repatriated through official channels.

The establishment of the Nigeria Revenue Service as the sole body responsible for collecting federally chargeable taxes aims to unify the previously fragmented system. The Nigeria Tax Administration Act introduces a unified procedural framework for tax administration, and an Office of the Tax Ombudsman has been created to resolve complaints and disputes between taxpayers and tax authorities.

These developments are significant as they mark a major overhaul of Nigeria’s tax system, aiming to promote economic growth, reduce inequality, and increase government revenue. As the new tax laws take effect, it is expected that they will have a profound impact on the country’s economy and its citizens.