As 2026 begins, the Federal Government is implementing a transformative tax reform package. These changes are not merely administrative; they represent a fundamental shift toward a more digitized, transparent, and equitable revenue system aimed at reducing Nigeria’s budget deficit and diversifying the economy away from oil.
1. Progressive Personal Income Tax (PIT) Adjustments:
The new law introduces a more “progresive” structure for individual earners.
(a) High Earners: Individuals earning above certain thresholds (often cited around ₦50 million annually) may see a gradual increase in their effective tax rate, potentially reaching up to 25% for the highest bracket.
(b) Low Earners: The reform seeks to provide relief for low-income earners by expanding the “tax-exempt” threshold, ensuring that those at the bottom of the economic ladder retain more of their take-home pay to combat inflation.
2. The Rise of the “Naira-Denominated” Tax System:
A major highlight of the 2025 reforms is the requirement for businesses to prioritize the Naira for tax transactions.
(a) Even if a company earns in foreign currency, the government is moving toward a system where taxes are assessed and paid in the local currency to stabilize the Naira and simplify accounting for the Federal Inland Revenue Service (FIRS).
3. Overhaul of Corporate Income Tax (CIT):
To encourage industrial growth while ensuring fairness
(a) Small Businesses: Companies with an annual turnover below a specific threshold (e.g., ₦25 million) may continue to enjoy 0% CIT, but they must still file returns to remain compliant.
(b) Mid-to-Large Entities: The corporate tax rate is being streamlined. There is a push to eventually reduce the standard CIT rate from 30% to 25% over the next two years, provided compliance improves across the board.
4. Digital Assets and “Social Media” Taxation:
The law explicitly categorizes Digital Assets (including cryptocurrencies and NFTs) under the tax net.
(a) Capital Gains Tax: Profits made from the disposal of digital assets are now subject to a 10% Capital Gains Tax.
(b) Content Creators: Influencers, YouTubers, and streamers are now legally required to declare income from foreign platforms (like Google or Meta) as taxable “Exported Services,” though certain incentives may apply to encourage digital exports.
5. Stringent Withholding Tax (WHT) Exemptions:
The new Withholding Tax Regulations (2024), which take full effect in January, offer a breather for small players:
(a) Exemptions: Many small-scale transactions and specific sectors like agriculture and manufacturing have been granted lower WHT rates or total exemptions to boost their cash flow.
(b) Reduction of Rates: In some instances, WHT has been reduced from 10% to 5% for certain services to reduce the “double taxation” burden on Nigerian consultants.
6. Implementation of the “Tax Identification” Linkage:
The integration of NIN, BVN, and TIN is no longer optional.
(a) Starting January 2025, it will be increasingly difficult to operate a high-volume corporate bank account or clear goods at the ports without a verified and active Tax Identification Number. The system is designed to automatically flag “high-net-worth” individuals whose lifestyles do not match their declared tax returns.
7. Strategic Advice for 2025:
(a) Employees: Review your payslip for “Consolidated Relief Allowance” changes.
(b) SME Owners: Automate your book keeping; the FIRS will rely heavily on e-invoicing.
(c) Freelancers: Separate your personal and business bank accounts to simplify tax audits.
(d) Investors: Keep records of the “cost price” of assets to accurately calculate Capital Gains Tax.
The tax law is the boldest move in decades to fix Nigeria’s revenue crisis. While the burden of compliance is increasing, the law also introduces the “Ombudsman” office to protect taxpayers from harassment by overzealous officials. As a citizen, your part of the bargain is compliance; the government’s part is the transparent utilization of these funds for the common good.
