Nigeria’s tax system underwent a major legislative restructuring with the enactment of the Nigeria Tax Act, 2025.

The Act, which is Act No. 7 of 2025, commenced on 1 January 2026 and provides a unified statutory framework governing taxation in Nigeria. It replaced several major tax statutes, including the Companies Income Tax Act, Personal Income Tax Act, Capital Gains Tax Act and Value Added Tax Act.

The legislation covers taxation of individuals, companies, businesses, transactions, petroleum operations, capital gains, value added tax, development levy, tax incentives and other matters.

It is therefore essential for lawyers, accountants, business owners, employers, investors and taxpayers to understand the structure and important provisions of the new regime.

This article highlights 20 important provisions and practical principles under the Nigeria Tax Act, 2025.

1. The Nigeria Tax Act creates a unified tax framework

The central objective of the Act is to provide a unified fiscal legislation governing taxation in Nigeria.

Under section 1, the Act establishes this unified framework, while section 2 provides for its application throughout Nigeria to persons required to comply with the tax laws.

The significance is substantial because several formerly separate federal tax statutes have now been consolidated into one principal tax legislation.

2. The Act commenced on 1 January 2026

The Nigeria Tax Act was enacted in 2025 but became operative on 1 January 2026.

The commencement provision is contained in section 203, which also provides for the citation of the legislation as the Nigeria Tax Act, 2025.

This distinction is important when determining whether a transaction, income stream, assessment or tax liability falls under the old or new regime.

3. The Nigeria Revenue Service has exclusive responsibility for specified federal taxes

Under section 3, the Nigeria Revenue Service has exclusive responsibility for administering specified taxes, including taxes on companies and certain categories of individuals.

The provision covers, among other matters:

• companies;
• members of the Nigerian Armed Forces and Police Force in specified circumstances;
• officers of the Nigerian Foreign Service;
• non-resident persons deriving income or profits from Nigeria in specified circumstances;
• development levy;
• value added tax;
• petroleum-related taxes; and
• other taxes assigned to the Service under the Act.

The provision is particularly important when determining which tax authority has jurisdiction over a particular taxpayer.

4. Tax applies to income, profits and gains within the statutory framework

The Act imposes tax on specified income, profits and gains.

The framework covers income of:

• companies;
• individuals;
• families;
• trustees;
• estates; and
• other persons falling within the statutory definition of taxable persons.

The practical consequence is that taxpayers should identify the nature and source of income before determining the appropriate tax treatment.

5. Individuals are taxed under a new progressive rate structure

One of the most significant changes under the new tax regime is the revised personal income-tax structure.

Under section 58 and the Fourth Schedule, chargeable income is taxed progressively as follows:

The rates apply progressively to the relevant portions of chargeable income rather than applying one rate to the taxpayer’s entire income.

An individual earning the statutory minimum wage is treated differently under the Act.

6. The first ₦800,000 of taxable income is taxed at zero per cent

The new personal income-tax structure introduces a 0% rate on the first ₦800,000 of taxable income.

This does not mean that every person earning more than ₦800,000 pays tax on the entire amount. The tax is progressive, meaning that the applicable rate applies only to the portion falling within each band.

For example, a taxpayer with ₦3 million of chargeable income does not pay 15% on the entire ₦3 million.

The first ₦800,000 is taxed at 0%, while the next ₦2.2 million falls into the 15% band.

7. Personal reliefs and deductions affect taxable income

The amount ultimately subjected to the personal income-tax rates is not necessarily the taxpayer’s gross income.

The Act provides for deductions, reliefs and exemptions in determining chargeable income.

Section 30 is therefore important when calculating an individual’s taxable income.

Relevant deductions may include qualifying pension contributions, National Housing Fund contributions, National Health Insurance Scheme contributions, life assurance premiums, interest on qualifying owner-occupied housing loans and the statutory rent relief, subject to the conditions prescribed by the Act.

Consequently, a taxpayer should not calculate personal income tax merely by applying the relevant rate to gross salary or gross receipts.

8. Companies are subject to a 30% corporate income-tax rate

Under section 56, a small company is subject to company income tax at 0%, while other companies are subject to a 30% rate from commencement of the Act.

The Act also provides for a possible reduction of the 30% rate to 25% from a date determined by presidential order following the statutory process.

The distinction between a small company and other companies is therefore important when calculating corporate tax.

9. Small companies receive important tax treatment

The Nigeria Tax Act gives qualifying small companies a preferential tax position.

In particular, section 56 provides for a 0% company income-tax rate for a small company.

However, businesses should not assume that every small business automatically qualifies.

The statutory definition and conditions applicable to a small company must be examined before claiming the benefit.

10. Large companies may be subject to a 15% minimum effective tax

The Act introduces a significant rule for certain large companies and members of large multinational groups.

Under section 57, where the effective tax rate of a qualifying company is below 15%, the company may be required to pay additional tax to bring its effective tax rate up to 15%.

The provision applies to specified multinational enterprise groups with an aggregate group turnover of at least the statutory threshold and to companies with aggregate turnover of ₦50 billion or more, subject to the provisions of the section.

This provision is particularly important for large corporate taxpayers and multinational groups.

11. The Act introduces a 4% development levy

One of the major structural changes is the introduction of the development levy.

Under section 59, a development levy of 4% is imposed on the assessable profits of companies chargeable to tax under Chapters Two and Three, except small companies and non-resident companies.

The revenue is distributed among specified institutions and funds, including:

• Tertiary Education Trust Fund;
• Nigerian Education Loan;
• National Information Technology Development Fund;
• National Agency for Science and Engineering Infrastructure;
• National Board for Technological Incubation;
• Defence and Security Infrastructure Fund; and
• National Cybersecurity Fund.

The development levy replaces several previously separate levies and taxes.

12. Capital gains are incorporated into the new tax framework

The Nigeria Tax Act consolidates the taxation of capital gains within the broader tax framework.

The former Capital Gains Tax Act was among the statutes repealed by the new legislation.

Accordingly, lawyers dealing with disposals of shares, real property, investments and other chargeable assets should now examine the relevant provisions of the Nigeria Tax Act rather than relying on the repealed Capital Gains Tax Act.

The applicable treatment depends on the nature of the asset, the taxpayer and the specific transaction.

13. Benefits-in-kind can have tax consequences

Employers frequently provide employees with benefits beyond cash salary.

Under section 14, benefits and perquisites provided by an employer may have tax consequences.

The provision deals with benefits including certain employer-provided assets and other taxable benefits.

Employers should therefore consider benefits-in-kind when determining employees’ taxable income and payroll obligations.

14. Tax treatment of employment income extends beyond basic salary

Taxable employment income can include more than an employee’s basic salary.

The Act’s framework recognises items such as:

• wages;
• salaries;
• fees;
• allowances;
• bonuses;
• compensation;
• premiums;
• benefits; and
• other qualifying perquisites.

Consequently, employers should conduct payroll calculations based on the statutory definition of taxable income rather than simply taxing basic salary.

15. Changes in accounting dates can affect tax computation

Section 23 addresses changes in accounting dates.

A change in the accounting date used by a taxpayer can affect the basis period used to determine assessable profits.

Businesses contemplating changes to their accounting periods should therefore consider the tax consequences before implementing the change.

The provision is particularly relevant to companies with complex financial reporting structures.

16. Tax exemptions remain available for qualifying persons and activities

The Nigeria Tax Act contains numerous exemptions.

For example, section 162 provides for specified income-tax exemptions, including certain profits or gains of qualifying friendly societies and other persons or organisations satisfying the statutory conditions.

An exemption should not be assumed merely because an organisation is described as a charity, foundation, association or non-profit organisation.

The precise statutory conditions must be satisfied.

17. Value Added Tax remains an important part of the new regime

The Nigeria Tax Act contains a comprehensive VAT framework.

Businesses supplying taxable goods and services must determine:

• whether they are taxable persons;
• whether their supplies are taxable;
• whether a transaction is exempt or zero-rated;
• the applicable VAT rate; and
• their registration, invoicing and compliance obligations.

The standard VAT rate remains 7.5% under the Act.

VAT treatment should therefore be determined transaction by transaction rather than simply by reference to the nature of the business.

18. Certain essential goods and services are zero-rated

The Act distinguishes between VAT-exempt supplies and zero-rated supplies.

Under section 186, specified taxable supplies are charged to VAT at 0%, subject to the relevant Schedule.

The provision includes categories such as:

• basic food items;
• medical and pharmaceutical products;
• educational books and materials; and
• other supplies specified by the Act.

The distinction matters because a zero-rated supply is not the same as an exempt supply for VAT purposes.

19. The Act contains extensive rules for tax incentives and special regimes

The Nigeria Tax Act contains provisions dealing with tax incentives, special industries and special economic arrangements.

These provisions interact with other legislation and schedules dealing with matters such as:

• export processing zones;
• free trade zones;
• approved enterprises;
• capital allowances;
• petroleum operations;
• specialised businesses; and
• investment incentives.

For example, the Second Schedule addresses export processing and free trade zone entities, while the First Schedule contains capital-allowance rules.

Businesses claiming an incentive should therefore identify the precise statutory provision and conditions supporting the claim.

20. The Act repeals several major former tax statutes

The Nigeria Tax Act represents a major consolidation exercise.

It repeals or replaces several previous tax laws, including the:

• Capital Gains Tax Act;
• Companies Income Tax Act;
• Personal Income Tax Act;
• Value Added Tax Act;
• Industrial Development (Income Tax Relief) Act; and
• certain other tax enactments and instruments.

This is one of the most important practical points for legal research.

A tax lawyer should not automatically rely on the former Companies Income Tax Act, Personal Income Tax Act, Capital Gains Tax Act or Value Added Tax Act when advising on transactions governed by the new regime.

The current starting point should be the Nigeria Tax Act, 2025 and the other current tax legislation, particularly the Nigeria Tax Administration Act 2025, the Nigeria Revenue Service (Establishment) Act 2025 and the Joint Revenue Board of Nigeria (Establishment) Act 2025. NLC currently lists all four 2025 tax statutes as part of its in-force federal statute collection.

Nigeria Tax Act 2025 and the New Tax Administration Framework

The Nigeria Tax Act should not be confused with the Nigeria Tax Administration Act 2025.

The two Acts perform different functions.

The Nigeria Tax Act principally addresses the imposition and computation of taxes, while the Nigeria Tax Administration Act provides the broader framework for tax administration, including registration, returns, assessments, collection, enforcement, objections, appeals, offences and related administrative matters.

Similarly, the Nigeria Revenue Service (Establishment) Act 2025 establishes the Nigeria Revenue Service and defines its institutional framework.

For serious tax research, these statutes should be read together.

What the Nigeria Tax Act Means for Businesses

Businesses operating in Nigeria should review at least the following:

1. Corporate income tax

Determine whether the business qualifies as a small company or falls within the general corporate tax regime.

2. Development levy

Determine whether the company is subject to the 4% development levy.

3. Minimum effective tax

Large companies should determine whether the 15% minimum effective tax provisions apply.

4. VAT

Review all goods and services supplied and classify them correctly as taxable, exempt or zero-rated.

5. Employee taxation

Review payroll, benefits-in-kind and other employment-related payments.

6. Capital transactions

Review the tax consequences of disposals of shares, land, buildings and other chargeable assets.

7. Tax incentives

Review whether the business qualifies for any statutory incentive, exemption or special regime.

8. Records

Maintain adequate accounting and tax records to support declarations, deductions, exemptions and claims.

Frequently Asked Questions

What is the Nigeria Tax Act 2025?

The Nigeria Tax Act 2025 is a federal statute that provides a unified legislative framework for taxation in Nigeria. It commenced on 1 January 2026.

When did the Nigeria Tax Act 2025 take effect?

The Act took effect on 1 January 2026.

What Acts did the Nigeria Tax Act repeal?

Among the principal laws replaced or repealed are the former Companies Income Tax Act, Personal Income Tax Act, Capital Gains Tax Act, Value Added Tax Act and Industrial Development (Income Tax Relief) Act.

What is the company income-tax rate under the Nigeria Tax Act?

A qualifying small company is taxed at 0%, while other companies are subject to a 30% rate under section 56, subject to the statutory provision concerning a possible future reduction to 25%.

What is the new personal income-tax rate in Nigeria?

The rates range progressively from 0% to 25%, with the first ₦800,000 of chargeable income taxed at 0% and income above ₦50 million taxed at 25%.

What is the development levy?

The development levy is a 4% levy on assessable profits of companies within the statutory scope, excluding small companies and non-resident companies.

Is VAT still 7.5% in Nigeria?

Yes. The standard VAT rate remains 7.5%, subject to the specific exemptions and zero-rating provisions in the Act.

Are basic food items subject to VAT?

Specified basic food items are among the supplies subject to the zero-rating framework under section 186, subject to the statutory conditions and applicable Schedule.

Does the Nigeria Tax Act apply to individuals?

Yes. It contains extensive provisions governing the taxation of individual income.

Does the Nigeria Tax Act apply to companies?

Yes. It contains the principal framework for taxation of company profits and related corporate tax matters.

Conclusion

The Nigeria Tax Act 2025 represents one of the most significant changes to Nigeria’s tax legislation in recent years.

It consolidates major areas of taxation into a single principal statute and introduces important changes to individual taxation, corporate taxation, development levy, minimum effective tax, VAT, capital gains and tax incentives.

The Act must, however, be read together with the Nigeria Tax Administration Act 2025, the Nigeria Revenue Service (Establishment) Act 2025, the Joint Revenue Board of Nigeria (Establishment) Act 2025, applicable regulations and other current tax legislation.

For lawyers and tax professionals, the most important practical lesson is simple: do not begin a current Nigerian tax analysis with the repealed tax Acts. Start with the Nigeria Tax Act 2025 and the current tax-administration framework.

For detailed legal research, consult the Nigeria Tax Act, 2025 on Nigerian LawCompass and examine the individual statutory provisions, schedules and related tax legislation.

Legal Disclaimer: This article is provided strictly for information and educational purposes only. It is not intended to constitute, and should not be relied upon as, legal advice. The application of Nigerian tax law depends on the facts and circumstances of each case, the applicable legislation, regulations, tax administration rules, contractual arrangements and judicial decisions. Professional legal or tax advice should be obtained before making decisions concerning a particular taxpayer or transaction.