26

BY MAHMOUD ADESINA OLUBORI and ABUBAKR SUMAYYAH OYINKANSOLA

Introduction

Taxation dates to ancient civilizations, beginning in Mesopotamia where tributes were paid in crops and livestock to support rulers and temples. In Ancient Egypt, taxes funded monumental projects and were collected by scribes, while Greece introduced levies for war financing. The Roman Empire institutionalized structured taxation, including land, customs, and poll taxes, advancing administrative efficiency. In Africa, pre-colonial systems relied on communal tributes and royal dues. In Nigeria, modern taxation evolved under British colonial rule through ordinances such as the Native Revenue Proclamation (1906), later expanding into income and profit-based taxes. Post-independence, Nigeria developed constitutional and statutory tax frameworks, progressively reforming administration and revenue rights across government tiers.

Prof, M.T. Abdulrazaq (S.A.N) defines tax as: “An enforced contribution of money, extracted pursuant to legislative authority.”

On June 26, 2025, President Bola Ahmed Tinubu signed four landmark tax reform bills into law, signaling a decisive institutional shift in Nigeria’s fiscal governance. Central to these reforms are the Nigeria Revenue Service Act (NRSA) the Joint Revenue Board Act (JRBA), the Nigeria Tax Administration Act (NTAA), the Nigeria Tax Act (NTA). which together redesign revenue administration, intergovernmental tax coordination, and taxpayer safeguards. Nigeria’s tax system has historically faced persistent inefficiencies: low compliance rates, overlapping tax authority across government tiers, weak enforcement against evasion, and a deficit of public trust driven by corruption and poor service delivery.

The Nigeria Revenue Service Act replaces the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service (NRS), granting it expanded autonomy, budgetary incentives, and modern enforcement powers, The Nigeria Tax Administration Act (NTAA) modernizes tax administration by embedding digital infrastructure, unified compliance protocols, risk based audits, and transparent assessment systems to reduce administrative leakages. The Nigeria Tax Act (NTA) consolidates fragmented tax statutes into a single harmonized code, eliminating overlaps, standardizing tax bases across tiers, and clarifying revenue rights and obligations. Complementing this, the Joint Revenue Board Act creates three institutions, the Joint Revenue Board (JRB), the Tax Appeal Tribunal (TAT), and the Office of the Tax Ombud (OTO) to harmonize tax rules, resolve disputes swiftly, and institutionalize taxpayer protection. These laws are designed not merely to raise revenue, but to reform the architecture of revenue governance itself, embedding cooperation, accountability, and administrative efficiency

The Nigeria Tax Act (NTA), 2025: A Unified Fiscal Code

The NTA 2025 is the cornerstone of the reform, repealing and consolidating legacy laws such as the Companies Income Tax Act (CITA), Personal Income Tax Act (PITA), Capital Gains Tax Act (CGTA), and the Value Added Tax Act, among others. This consolidation aims to reduce fragmentation, eliminate jurisdictional overlaps, and promote consistency in the application of tax laws.

Corporate and Business Income Taxation

The NTA introduces several significant changes to the corporate tax landscape, focusing on broadening the tax base while providing relief for small businesses:

Feature	Old regime (Pre-2025)	New Regime (NTA 2025)	Key changes
Small Company Exemption	Turnover ≤ ₦25 million (0% CIT)	Turnover ≤ ₦100 million and Fixed Assets ≤ ₦250 million (0% CIT)	Significant increase in threshold to support SMEs.
Corporate Income Tax (CIT)	30% (for large companies)	30% (for large companies)	Rate maintained, but base is broadened.
Development Levy (DL)	Separate levies (TET, IT Levy, NASENI, PTF)	Consolidated into a 4% levy on assessable profits	Simplification and consolidation of multiple sectoral levies
Minimum Effective Tax Rate (ETR)	Not applicable	15% of Net Income	Aligns with global tax reforms (Pillar Two) for MNEs (turnover ≥ €750m) and large domestic companies (turnover ≥ ₦50bn)
Anti-Base Erosion	Limited application	Introduction of Controlled Foreign Company (CFC) rules	Counters profit shifting by taxing undistributed passive income of low-taxed foreign affiliates

The introduction of the 15% Minimum Effective Tax Rate is a critical measure, ensuring that large multinational and domestic entities pay a minimum level of tax. Where a foreign subsidiary pays tax below this threshold, the Nigerian parent company is liable to pay a top-up tax, thereby protecting Nigeria’s tax base.

Personal Income Tax (PIT) and Social Equity

The NTA 2025 introduces a more progressive Personal Income Tax regime, with tax rates ranging from 0% to 25%. A key reform is the increase in the tax-exempt threshold for individuals earning ₦800,000 or less annually.

A notable provision aimed at easing the cost of living is the Rent Relief Allowance. This allows for a deduction of 20% of annual rent paid, capped at ₦500,000, to ease the housing burden for employees and low-income earners. Furthermore, the tax exemption threshold for compensation for loss of employment has been significantly increased from ₦10 million to ₦50 million.

Value Added Tax (VAT) and Digital Economy

The VAT rate remains at 7.5%, but the Nigeria Tax Act substantially revises the scope and mechanics of the tax to capture the digital economy and rationalize exemptions

• Digital Services Taxation: Non-resident suppliers of digital and virtual services are now required to register and remit VAT, effectively bringing e-commerce and digital services into the tax net.

• Input VAT Recovery: The scope of recoverable input VAT has been broadened to include VAT incurred on services and fixed assets, aligning Nigeria with globally recognized VAT principles and reducing the cascading tax burden.

• Zero-Rated and Exempt Supplies: The list of zero-rated items has been expanded to include essential goods and services such as basic food items, medical and pharmaceutical products, educational materials, electricity generation and transmission services, and electric vehicles. This allows businesses supplying these items to recover input VAT, which was previously not possible for exempt supplies.

Capital Gains Tax (CGT) on Digital Assets

In a move to modernize the tax code for the digital age, the NTA explicitly applies Capital Gains Tax to the disposal of digital and virtual assets, including cryptocurrencies, tokens, and digital property. This clarifies the tax treatment of these assets, which were previously in a regulatory grey area. For companies, the Capital Gains Tax rate has been increased from 10% to 30% to align with the CIT rate, reducing tax arbitrage opportunities. Economic Development Incentive (EDI)

The Nigeria Tax Act replaces the complex and often criticized Pioneer Status Incentive (PSI) with the new Economic Development Incentive (EDI). The EDI introduces a targeted, performance based incentive: a tax credit of 5% per annum for five years on Qualifying Capital Expenditure (QCE). This shift from a blanket tax holiday to a performance-linked tax credit is intended to stimulate actual capital investment and economic activity.

The Nigeria Tax Administration Act (NTAA), 2025: Enhancing Compliance and Oversight

The NTAA 2025 focuses on streamlining tax administration, enhancing compliance, and providing a robust framework for dispute resolution. It complements the NTA by providing the procedural and enforcement mechanisms necessary for the new tax regime.

Institutional and Administrative Reforms

The NTAA works in tandem with the NRSA and JRBA to create a modernized administrative structure:

Act	Key function	Impact on administration
NRSA 2025	Establishes the Nigeria Revenue Service (NRS)	Replaces FIRS, with a mandate to collect and account for all federal revenues, aiming for greater efficiency and autonomy
JRBA 2025	Establishes the Joint Revenue Board (JRB)	Apex coordinating entity for tax policy and administration across federal, state, and local levels, promoting harmonization and resolving jurisdictional conflicts
NTAA 2025	Codifies administrative Procedures	Provides the legal framework for registration, returns, assessment, enforcement, and dispute resolution for all taxes under the NTA

Compliance and Digitalization Mandates

A major thrust of the NTAA is the digitalization of tax compliance to minimize leakages and improve efficiency.

• VAT Fiscalisation and E-invoicing: The Act codifies rules for mandatory VAT fiscalisation and e-invoicing for businesses. This requires companies to implement a system deployed by the tax authority for the real-time collection and reporting of VAT transactions, positioning Nigeria as an early adopter of this technology in Africa.

• Returns for Virtual Assets Service Providers (VASPs): The NTAA mandates specific returns for VASPs, reflecting the NTA’s move to tax digital assets and ensuring compliance from the rapidly growing virtual economy.

• Prohibited Tax Avoidance Arrangements: The Act includes provisions to tackle aggressive tax planning, allowing the NRS to challenge arrangements that are primarily designed to obtain a tax benefit, aligning with global anti avoidance principles.

Dispute Resolution and Taxpayer Protection

The reform package significantly strengthens mechanisms for dispute resolution and taxpayer protection, which are crucial for building public trust and encouraging voluntary compliance.

• Tax Appeal Tribunal (TAT): The JREA establishes the TAT to ensure that disputes arising from tax assessments and enforcement are resolved swiftly, professionally, and independently. The Tribunal has jurisdiction over disputes under any federal or state tax legislation, with appeals on points of law proceeding to the Federal High Court.

• Office of the Tax Ombud: The JREA also establishes the Office of the Tax Ombud, an independent body tasked with receiving, investigating, and resolving complaints about administrative malpractice, delay, or unfair treatment by revenue agencies. While the Ombud cannot interpret tax laws or override assessments, it can recommend corrective action and escalate unresolved issues, serving as a vital safeguard for taxpayer rights.

Policy Shifts and Economic Implications

The 2025 Tax Reform Acts represent a fundamental shift in Nigeria’s fiscal philosophy, moving towards “Taxing the Fruits, Not the Seed”. The implications for the Nigerian economy is profound:

Stimulating Small and Medium Enterprises (SMEs)

The significant increase in the small company exemption threshold from ₦25 million to ₦100 million, coupled with the consolidation of multiple levies into a single 4% Development Levy, is expected to reduce the compliance burden and free up capital for SMEs. This is a direct measure to stimulate growth in the non-oil sector, which is vital for economic diversification.

Attracting Capital Investment

The replacement of the PSI with the EDI signals a move towards a more transparent and performance-based incentive regime. By offering a tax credit on QCE, the EDI directly rewards companies for making tangible investments, rather than simply granting a blanket tax holiday. This targeted approach is designed to ensure that tax incentives translate into real economic activity and job creation.

Global Tax Alignment and International Trade

The adoption of the 15% Minimum ETR and the introduction of CFC rules are clear steps towards aligning Nigeria’s tax system with the OECD’s Base Erosion and Profit Shifting (BEPS) framework, particularly Pillar Two. This alignment is crucial for maintaining Nigeria’s standing in the global economy and for effectively taxing multinational enterprises operating within its jurisdiction. Furthermore, the explicit taxation of digital assets and the requirement for non-resident suppliers to remit VAT ensure that Nigeria can effectively tax the modern, digital economy.

Addressing Socio-Economic Concerns

The introduction of the Rent Relief Allowance under the PIT is a direct policy response to the high cost of living, particularly housing, in major Nigerian cities. By providing a tax deduction for rent, the government aims to provide tangible relief to low-income and middle-class earners, promoting a more equitable distribution of the tax burden.

The Nigeria Revenue Service Act (NRSA)

Federal Inland Revenue Service to Nigeria Revenue Service: A New Identity and Purpose

The NRSA transforms the Federal Inland Revenue Service (FIRS) into the Nigeria Revenue Service (NRS), a change that is both symbolic and substantive. The previous name implied a federal only focus, despite the agency’s practice of collecting shared revenues. The Nigeria Revenue Service name more accurately reflects its role as a national revenue authority serving all levels of government.

Key Provisions and Powers

The Nigeria Revenue Service Act introduces significant reforms such as:

1. Enhanced Autonomy

   – Establishes an independent governing board.

   – Reduces undue political interference, allowing the NRS to make operational decisions more effectively.

2. Revenue Retention Mechanism

   – The Nigeria Revenue Service is empowered to retain 4% of all non-oil revenue collected to fund its operations (e.g., personnel, technology, infrastructure).

   – This incentivizes performance and operational efficiency.

3. Stronger Enforcement Powers

   – Confers authority for joint audits with state and local tax authorities.

   – Facilitates information sharing and modern investigative tools to identify and pursue tax evasion.

4. International Tax Cooperation

   – Authorizes collaboration with international tax authorities to address cross-border tax evasion a critical development in an increasingly global tax environment.

Impact on Revenue Administration

These measures are designed to expand Nigeria’s revenue base, foster compliance, enhance enforcement, and streamline operations. The Nigeria Revenue Service is now better positioned to pursue revenue from both formal and informal sectors, making tax avoidance more difficult and reducing leakages.

The Joint Revenue Board Act (JRBA)

The Joint Revenue Board Act introduces three new institutions critical to improving fiscal coordination and taxpayer rights:

1. Joint Revenue Board (JRB)

2. Tax Appeal Tribunal (TAT)

3. Office of the Tax Ombud (OTO)

Joint Revenue Board (JRB): Harmonizing Tax Administration

The JRB addresses longstanding jurisdictional conflicts by:

– Harmonizing Tax Policies across federal, state, and local governments to reduce duplication and overlap.

– Coordinating Revenue Collection and closing gaps that allowed taxpayers to exploit inconsistent enforcement.

– Sharing Tax Information through structured mechanisms, improving transparency and compliance.

Tax Appeal Tribunal (TAT): Faster, Fairer Dispute Resolution

The TAT is designed to:

– Provide specialized expertise in tax law, ensuring more informed decisions.

– Use streamlined procedures that significantly reduce the time and cost of resolving disputes.

– Offer accessible justice for taxpayers especially SMEs and individuals without the resources to engage in protracted litigation.

Office of the Tax Ombud (OTO): Safeguarding Taxpayer Rights

The Tax Ombud is an independent watchdog with authority to:

– Investigate complaints against tax authorities.

– Ensure fair treatment, due process, and accountability in interactions between taxpayers and revenue agencies.

– Identify systemic problems and recommend administrative reforms.

This office represents a critical shift toward taxpayer empowerment and protection, addressing the power imbalance that previously existed between citizens and tax authorities.

HOW NIGERIA REVENUE SERVICE ACT AND JOINT REVENUE BOARD ACT WORK TOGETHER

Though both Nigeria Revenue Service Act and Joint Revenue Board Act are separate laws, the Nigeria Revenue Service Act and Joint Revenue Board Act form a complementary tax reform ecosystem:

– The Nigeria Revenue Service Act strengthens the revenue collection agency, equipping it with autonomy, incentives, and enforcement capabilities.

– The Joint Revenue Board Act enhances cooperation, fairness, and dispute resolution, ensuring the system does not become purely punitive or burdensome.

FEDERAL-STATE COORDINATION MECHANISMS

A leading example of their synergy is the coordination of audits and revenue collection:

For a company operating in multiple states (e.g., Lagos, Kano, Ibadan, Delta, Cross River), the Nigeria Revenue Service can now collaborate with state tax authorities via the Joint Revenue Board to conduct a single joint audit, eliminating repetitive assessments and reducing compliance friction.

CHECKS AND BALANCES

The architecture of the reforms balances enforcement with accountability:

– The Nigeria Revenue Service’s strengthened powers are checked by:

   – The Tax Appeal Tribunal for disputing assessments.

   – The Office of The Ombud for challenging unfair administrative conduct.

This balance is critical to building public trust and encouraging voluntary compliance.

IMPACT ASSESSMENT

Now that we understand what these laws do, let’s examine their likely impact on different stakeholders and aspects of Nigerian society

REVENUE IMPLICATIONS

FEDERAL GOVERNMENT

– A likely increase in tax revenue through improved enforcement and compliance.

– The 4% retention provision enhances the Nigeria Revenue Service’s capacity but may reduce short-term funds flowing directly into the federation account.

STATE AND LOCAL GOVERNMENTS

– Enhanced revenue mobilization through better coordination and information sharing.

– Potential concerns over reduced autonomy due to harmonized tax policies.

TAX BASE EXPANSION

– Broader taxpayer inclusion due to enhanced enforcement and compliance mechanisms.

TAXPAYER IMPACT

BUSINESSES

– Bigger companies will face more rigorous enforcement, but clearer rules and faster dispute resolution will reduce uncertainty.

– SMEs may experience pressure to formalize and comply, which can be challenging but also beneficial in the long run for institutional legitimacy.

INDIVIDUALS

– Enforcement will likely extend into previously informal areas of economic activity.

– Taxpayers gain new protections through administrative redress mechanisms like the Tax Ombud.

ADMINISTRATIVE EFFICIENCY GAINS

– Reduced Duplication of effort across tiers of government.

– Improved Technology Adoption funded by retention mechanisms.

– Faster Dispute Resolution through specialized tribunals.

– Better Taxpayer Services spurred by accountability structures.

CHALLENGES AND TRANSITIONAL OUTLOOK

While the reforms are widely commended for their ambition and scope, their successful implementation is not without challenges.

• Transitional Period: The transition from a fragmented system to a unified code requires a significant adjustment period for both taxpayers and tax authorities. The Acts are expected to commence on January 1, 2026, and a smooth transition will require clear guidelines and extensive public sensitization from the Nigeria Revenue Service

• Implementation of Digital Systems: The mandatory VAT fiscalisation and e-invoicing system, while modern, poses a significant technological and financial hurdle for many small and medium-sized enterprises (SMEs). The Nigeria Revenue Service must ensure that the system is easily accessible, affordable, and seamlessly integrated to avoid imposing an undue compliance burden.

• Intergovernmental Coordination: The success of the Joint Revenue Board Act hinges on the political will and cooperation of all tiers of government federal, state, and local to harmonize tax practices and resolve jurisdictional disputes effectively.

• Complexity: Without public education and outreach, many taxpayers may still struggle to understand their obligations and rights as many are not well informed of the new tax laws

• Economic Realities: Concerns have been raised regarding the economic reality of the Rent Relief Allowance, with questions about the tax authority’s capacity to verify claims and the potential for abuse Similarly, the 5% surcharge on fossil fuel products, while aimed at funding renewable energy, could potentially impact consumer prices.

CONCLUSION

The Nigeria Revenue Service Act (NRSA), the Joint Revenue Board Act (JRBA) Nigeria Tax Administration Act (NTAA), and Nigeria Tax Act (NTA) represent one of the most impressive tax reform in Nigeria’s history. Together, they offer a blueprint for a more efficient, fair, and accountable tax system.

– Nigeria Revenue Service Act strengthens the revenue authority with autonomy, incentives, and enforcement tools.

– Joint Revenue Board Act introduces institutions that promote cooperation, equitable treatment, and dispute resolution.

– Nigeria Tax Administration Act modernizes tax administration with digital systems and compliance frameworks.

– Nigeria Tax Act consolidates and harmonizes tax laws to deliver a fairer, efficient, and accountable tax system

The potential benefits are significant: more revenue, better public services, improved compliance, and a more formal economy.

However, the success of these reforms will depend on implementation capacity, political will, stakeholder cooperation, and tangible improvements in public services without which public trust may falter, and compliance could remain weak.

These laws are not an endpoint but a strategic beginning toward a more functional and equitable tax system in Nigeria.

Contact: oluboriadesina@gmail.com and sumayyahabubakr@gmail.com