By: Usman Bashir Abubakar

The Nigerian fiscal landscape is undergoing one of the most significant transformations since the nation’s return to democratic governance, an overhaul which many experts are now analyzing for its broad implications on individuals and corporations. This monumental shift was formally instituted on June 26, 2025, when President Bola Ahmed Tinubu signed four landmark bills into law. These legislations collectively repeal over a dozen existing tax statutes and consolidate them into a unified, modernized framework, with implementation scheduled to begin on January 1, 2026.

The core of this reform is anchored upon four distinct legislative pillars. These include The Nigeria Tax Act (NTA), which serves as a unified fiscal code, integrating key taxes such as the Company Income Tax (CIT), Personal Income Tax (PIT), Value Added Tax (VAT), and Capital Gains Tax (CGT). Complementing this is The Nigeria Tax Administration Act (NTAA), a statute aimed at standardizing tax administration practices across all three tiers of government—federal, state, and local—and mandating the use of a Tax Identification Number (TIN) for all taxable persons. Institutionally, the reform introduces The Nigeria Revenue Service (Establishment) Act (NRSEA), which rebrands the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS). Critically, the NRS is empowered to collect all revenues accruing to the Federation, thereby divesting revenue collection duties from other agencies, including the Nigerian Customs Service and the Nigerian Maritime Administration and Safety Agency (NIMASA). Finally, the framework is completed by The Joint Revenue Board (Establishment) Act (JRBEA), which establishes a Joint Revenue Board to harmonize taxes nationwide and, notably, creates a dedicated Tax Ombud to protect the rights of taxpayers.

For the individual Nigerian citizen, the legislation introduces structural adjustments to the Personal Income Tax (PIT) regime. On the positive side, a new tax-free baseline has been established, which completely exempts individuals earning the national minimum wage or an annual income of up to ₦800,000 from PIT. Furthermore, the tax exemption threshold for compensation received for loss of employment has been dramatically increased from ₦10 million to a substantial ₦50 million, offering a more robust financial cushion. However, these reliefs are coupled with a significant trade-off: the popular Consolidated Relief Allowance (CRA), a blanket deduction previously enjoyed by many, has been abolished. In its place, the Act introduces a specific Rent Relief allowance, capped at ₦500,000 or 20% of annual rent. Furthermore, a progressive tax structure has been enhanced, introducing a higher top rate of 25% specifically for high-net-worth individuals earning above ₦50 million per year.

The legislation’s impact on the corporate sector creates clear categories of “winners and losers.” Small businesses, defined as those with an annual turnover of ₦50 million or less, are unequivocally positioned as winners. They are now exempt from Companies Income Tax (CIT), the new Development Levy, and the obligation to charge VAT. A critical exception, however, applies to professional services such as law firms, medical practices, and consultancies, which are explicitly excluded from this turnover-based exemption and remain liable for tax regardless of their size. For large corporations, the reform introduces a new Development Levy of 4% on assessable profits, which replaces a multiplicity of existing earmarked taxes like the Tertiary Education Tax and the Police Trust Fund. Furthermore, the government is moving to align with global standards by introducing a minimum effective tax rate (ETR) of 15% for large multinationals with a turnover of ₦50 billion or more, a measure intended to curb the pervasive practice of base erosion and profit shifting. In a move that signals the end of long-standing fiscal incentives, the tax holiday enjoyed by entities operating within Export Processing Zones (EPZ) is scheduled to end on January 1, 2028, after which profits derived from sales into the customs territory will become fully taxable.

Perhaps the most contested provision of the reform is the restructuring of the Value Added Tax (VAT) sharing formula. The previous system was often criticized for being inequitable, as VAT remittance was based on a company’s “Headquarters” location (frequently Lagos), thereby penalizing states where the actual consumption occurred.

This derivation formula became a point of contention, particularly with the Northern Governors’ Forum. The initial bill proposed a significant horizontal distribution shift, allocating 60% of the VAT revenue meant for states and local governments based on the principle of derivation, calculated specifically on the place of consumption. The new framework introduces a derivation model rooted in the place of consumption. This logical shift dictates that if a customer in Kano State purchases a product, the VAT revenue from that transaction should be remitted to Kano, irrespective of where the vendor’s headquarters is situated. 

The implementation of the entire reform is, however, shadowed by a significant legal uncertainty. A major constitutional point of order was raised in December 2025 by Rep. Abdussamad Dasuki, alleging that the gazetted copy of the law—the official, published version—contains material discrepancies compared to the version actually passed by the National Assembly.

“What was passed on this floor is not what is gazetted,” Rep. Dasuki stated. “I was here, I gave my vote and it was counted, and I’m seeing something completely different.”

If these allegations of a discrepancy are substantiated, it could potentially lead to the nullification of specific provisions, or even the entire Act, setting the stage for a wave of complex litigation reminiscent of the high-profile Rivers State v. FIRS VAT case. The operational timeline for the key components is phased: Personal Income Tax changes commence on January 1, 2026; Corporate Tax changes are slated for April 1, 2026; the new Nigeria Revenue Service (NRS) is expected to be fully operational by July 1, 2026; and the complete rollout of the digital tax system is scheduled for October 1, 2026. This comprehensive reform represents a definitive governmental move to stabilize Nigeria’s revenue stream away from its traditional reliance on oil. The ultimate success of the “Tax Reset” will largely depend on the new Nigeria Revenue Service’s capability to leverage technology for stringent enforcement and, more immediately, the judicial resolution of the constitutional challenges currently surrounding the gazetted text.