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On June 26, 2025, Bola Tinubu, Nigeria’s president, signed into law a series of tax reform bills that will take effect on January 1, 2026.
The move comes amid growing debate about Nigeria’s fiscal sustainability and the need to reduce dependence on oil revenues.
The new framework represents one of the most ambitious attempts at reforming Nigeria’s tax system in decades.
According to Tinubu, these reforms aim to reduce overreliance on oil, broaden the tax base, and make taxation fairer for individuals and businesses.
The reforms in the Income Tax Reform Act, Corporate Tax Act, Value Added Tax (Amendment) Act, and the Fiscal Responsibility (Amendment) Act are part of a broader plan to modernise and improve Nigeria’s tax system.
While low-income earners and small businesses benefit from exemptions, high-income individuals and multinational corporations will likely pay more.
After observing the conflicting discussions about the new taxes online, DUBAWA decided to publish this explainer to help Nigerians better understand the key aspects of the policy.
Here are five key things you need to know about the new tax reforms:
- Low-income earners are now exempt from income tax.
Under the new Income Tax Reform Act, individuals earning N800,000 or less annually will no longer pay income tax. For those earning above that threshold, taxes will be applied progressively, starting at 15% and rising to 25% for those making over N50 million per year.
The popular Consolidated Relief Allowance (CRA), which previously reduced taxable income, has been abolished. The CRA was a form of tax relief that allowed employees to deduct a portion of their income, usually N200,000 or 1% of gross income, plus 20% of the income before calculating their taxable earnings. It was designed to reduce the amount of income subject to taxation, effectively lowering how much workers paid.
Instead, a housing-based deduction has been introduced, allowing taxpayers who rent homes to deduct 20% of annual rent or up to N500,000, whichever is lower. This shift aims to make tax reliefs more equitable and focused on real-life needs, such as housing.
- Severance payments, digital earnings and residency rules are now covered
Under the new law, severance payments given to employees when they lose their jobs due to layoffs, restructuring, or retirement also receive tax relief.
Previously, only payments up to N10 million were exempt from tax, meaning anything above that amount was taxable.
With the new reform, the tax-base threshold has been raised to N50 million, allowing individuals who receive larger severance or retirement packages to keep more of their money. This adjustment provides a softer financial landing for those transitioning out of employment.
In addition, income from digital platforms, such as YouTube, TikTok, or other social media earnings, will now be taxed. The same applies to cryptocurrency transactions, grants, and prizes, all of which are now explicitly included in the tax net.
Previously, these sources of income were not well-regulated under Nigerian tax law. With the new framework, influencers, digital creators, and remote workers who earn online are now required to declare and pay taxes on their income.
Lastly, the residency rules have also been updated, meaning that Nigerians with strong economic or family ties in the country can be treated as tax residents even if they live abroad. Similarly, foreigners who earn income in Nigeria will also be taxed on their local earnings.
- Small businesses get exemptions, but big corporations will pay more
Businesses are also affected by the upcoming tax reforms, which introduce a combination of reliefs and new obligations for businesses.
Small companies with an annual turnover below N100 million and assets worth less than N250 million will be exempt from corporate income tax, capital gains tax, and a new development levy.
Larger corporations, however, will face stricter compliance measures, including adopting a 15% global minimum tax, in line with international standards. This means multinational corporations can no longer shift profits abroad to avoid paying taxes in Nigeria.
New rules have also been introduced for the petroleum, mining, and gaming sectors to ensure greater transparency and accountability in how companies declare profits and pay taxes. For instance, oil and gas companies must now file detailed production and royalty reports to prevent underreporting. At the same time, mining firms must disclose the actual value of extracted minerals and pay taxes accordingly.
The gaming and betting industry has grown rapidly online and will now face stricter monitoring to ensure operators are properly licensed and remit taxes on winnings and profits.
Additionally, Free Trade Zones (FTZs), which are designated areas where businesses can operate with reduced customs duties and tax incentives to encourage exports, will now have to meet specific export performance targets to retain their tax benefits. In other words, companies in these zones must prove they are producing for export rather than serving the domestic market while enjoying tax breaks.
- VAT remains at 7.5%, but more essentials are exempted
Value-added tax (VAT) remains at 7.5% despite earlier proposals to increase it. However, the list of zero-rated or exempted items has been expanded to include essentials such as food, healthcare, and education.
The government says this adjustment is intended to protect vulnerable Nigerians from sudden increases in the prices of essential goods and services, commonly known as inflationary shocks.
Businesses must comply with stricter invoicing and digital reporting standards to reduce fraud and improve transparency in VAT collection.
- Nigeria’s tax administration is getting a major overhaul
The Federal Inland Revenue Service (FIRS) will be replaced by the Nigeria Revenue Service (NRS), a new agency with broader powers to collect tax and non-tax revenues.
A Joint Revenue Board has also been created to harmonise the activities of federal, state, and local tax bodies to reduce multiple taxation.
Furthermore, a Tax Ombudsman and an expanded Tax Appeal Tribunal have been established to strengthen taxpayer protection and ensure fair dispute resolution.
The Tax Ombudsman will serve as an independent office investigating complaints from taxpayers who believe they have been unfairly treated by tax authorities. It acts as a mediator between citizens and the revenue agency, helping to resolve issues such as wrongful assessments, refund delays, or administrative errors.
The Tax Appeal Tribunal, on the other hand, has been expanded to handle a broader range of tax-related cases more efficiently, providing a faster and less costly alternative to going to court.
These institutions are designed to make Nigeria’s tax system more transparent, accountable, and responsive to the public.
