Quick summary: what changed and why it matters to Nigerians
The Nigeria Tax Act, 2025 (effective January 1, 2026), repeals or amends more than a dozen legacy laws, reshapes PAYE bands, rewrites VAT rules, and drags online commerce into the tax net. Sections 1 and 196 set the tone: one modern Act for everything tax-related. Whether you earn a salary, run an SME or bill foreign clients, you’ll feel the impact.
Who is affected: households, SMEs, large companies and remote workers
Salaried employees & PAYE
- New bands mean many workers will see a small change in net pay.
Small & medium enterprises (SMEs)
- Less paperwork, but tougher VAT audits.
Multinationals, startups, and international remote contractors
- Significant economic presence rules tighten the noose on untaxed digital income.
Change 1, Consolidation and simplification of tax rules
What exactly changed
Section 196 sweeps away the separate Personal Income Tax, Companies Income Tax, VAT Act and nine other statutes. One Act now covers income, transactions and instruments.
Practical impact
- One return instead of three for many businesses.
- Uniform definitions for “resident” and “income” reduce double-interpretation fights.
- Old tax circulars stay valid unless they clash with the new Act (Section 14 of the savings clause).
Immediate actions
• Map every existing filing to the new combined return.
• Update accounting software fields before 31 Dec 2025.
• Train staff on the new single-return format.
Change 2, New reliefs and exemptions
Details of employee and business reliefs
Section 58, plus the Fourth Schedule, introduces a 0% band on the first ₦800,000 of annual income, with revised progressive rates up to 25%. Section 186 lists goods now fully exempt from VAT, while Section 187 sets a 0% rate on staple food, books and some pharmaceutical supplies.
Who gains
- Workers earning around the minimum wage keep a larger slice of pay.
- Start-ups with Economic Development Incentive Status can unlock tax credits (Tenth Schedule).
- But luxury imports lose some old concessions.
How to claim
Employers must adjust PAYE tables from January payroll and retain proof of new bands. Businesses claim zero-rating on their VAT return with supporting invoices.
Change 3, VAT & indirect tax updates
New zero-rating and levies
Section 186-189 overhaul the exemption list. Input VAT refunds are now explicitly allowed when supplies are zero-rated (Section 19(4)).
Effect on prices and supply chains
Expect marginal drops on bread and textbooks, but streaming subscriptions may get pricier once foreign suppliers register to collect 7.5% VAT.
Compliance steps for retailers & online sellers
• Register for VAT or confirm the new automatic registration done by FIRS.
• Show VAT separately on POS receipts.
• Retain digital invoices as FIRS can request them for up to six years.
Change 4, Compliance, information reporting & enforcement
Digital reporting, e-invoicing, TIN updates
Stamp-duty payments can be denoted by electronic tagging under Section 125. Online platforms that handle payments for non-resident vendors must collect and remit VAT (Section 151-152).
Penalties and audit triggers
Artificial or fictitious transactions can be disregarded and reassessed (Section 191). Late e-invoice submission carries a daily fine that escalates after 30 days.
How to reduce audit risk
Keep reconciled ledgers, match e-invoices to bank statements, and update TIN details if business structure changes.
For expert advice on compliance and reporting, you can find Nigerian tax professionals for tailored support.
Change 5, International & cross-border rules
Treatment of foreign contracts, remote work and digital sales
An income earned abroad by a resident is taxable wherever it arises (Section 12). Non-resident digital businesses have a significant economic presence once they stream, store data or run ads targeted at Nigeria (Section 12(b)).
For more on changes to the revenue authorities and oversight, see the Nigeria Revenue Service (Establishment) Act, 2025.
Withholding tax, double taxation and diaspora transfers
Where withholding applies but the payer can’t calculate profits, 4 % of Nigerian-sourced turnover becomes the minimum tax (Section 14(8)).
Action steps for freelancers
• Confirm if your overseas client will withhold Nigerian tax.
• If not, self-remit quarterly to avoid penalties.
Practical checklist: what to finish before 1 Jan 2026
- Collect TIN, CAC and payroll records.
- Register for the new e-invoicing portal.
- Re-price products after VAT/zero-rating changes.
- Update payroll software with the new PAYE bands.
- Book a meeting with an accountant for a dry-run return.
Resources, deadlines & authoritative links
• Federal Inland Revenue Service updates: https://firs.gov.ng
• Nigeria Tax Act PDF: https://mytax.com.ng/tax-laws/nigeria-tax-act
• Nigerian Tax Insights | MyTax Blog , for news and explainers on the new rules
• PwC Nigeria summary note (June 2025).
• Channels TV explainer on VAT changes.
Common questions Nigerians ask
Will my salary be taxed more from Jan 2026?
Most low-to-middle earners pay slightly less because of the 0% band, while high earners see a mild rise.
Do small businesses need to re-register for VAT?
Existing TINs remain valid; FIRS auto-migrates records. Update your contact details online.
How do I claim the new reliefs?
Use revised PAYE tables or mark zero-rated supplies on your VAT return, and attach evidence.
Who enforces the new rules and what are the penalties?
FIRS handles income and VAT, while Joint State Boards enforce stamp duties. Penalties range from daily fines to asset forfeiture for willful default. To explore compliance support options, browse the Find Nigerian Tax Experts & Professionals page.