This edition of Tax Alexa will attempt to simplify how the Tax Act, which took effect in January, directly impacts on individuals and small scale businesses in Nigeria.
What is ‘Significant Economic Presence’?
A non-resident is deemed to have a significant economic presence if they transmit signals, sounds, messages, images or data to Nigeria for activities such as e-commerce, digital content, online advertising, cloud computing, etc and profit is attributable to such activities (Section 17 (9)(b))
What is the tax treatment of digital or virtual assets?
Profits or gains from transaction in digital or virtual assets (crypto currencies, etc) are taxable under the Act (Section 4(1)(j))
What is the tax rate for individuals?
Individual income tax rates are specified in the Fourth Schedule and apply to chargeable income after allowable deductions (Section 58)
How is employment income defined?
Employment income includes salaries, wages, allowances, bonuses, benefit-in-kind, and other perquisite (Section 58).
What are the tax rates for companies?
Small companies are taxed at zero percent. Other companies are taxed at 30 percent, subject to a proposed reduction to 25 percent by presidential order. However, there is a minimum effective tax rate of 15% for certain large companies (Section 56-57).
What is Development Levy?
A four percent development levy on assessable profits of companies (excluding small and non-resident companies) which harmonises various earmarked taxes under the old law. Proceeds are allocated to funds such as Tertiary Education Trust Fund, Nigerian Education Loan, Cybersecurity Fund, etc (Section 59)
What is the tax treatment of benefits-in-kind?
Benefits-in-kind are valued at 5% of the employer’s acquisition cost or market value, or the annual rent/hire cost and are taxable in the hands of the employees (Section 14).
What incentives are available for priority sectors?
Priority sectors listed in the Tenth Schedule may qualify for Economic Development Tax incentives, including tax credit and exemptions for up to five years (Section 166 – 184)
What VAT supplies are zero-rated?
Zero-rated supplies include basic food items, medical and pharmaceutical products, educational materials, agricultural equipments and exported goods and services (except oil and gas) (Sections 186 – 187)
How are stamp duties applied?
Stamp duties are imposed on instruments such as bills of exchange, conveyances on sale, leases, share capital, loan capital and marketable securities. Rates are specified in the Eighth Schedule (Sections 124-143)
How are petroleum operations taxed?
Petroleum operations are subject to Hydrocarbon Tax (for upstream crude oil operations), income tax under Chapte Two and Royalties (as per Seventh Schedule) (Sections 65 – 89)
How are mining operations taxed?
Mining operations are subject to income tax under Chapter Two, with specific deductions for environmental and rehabilitation funds, and royalties as per the Eighth Schedule (Section 64)
What is the surcharge on fossil fuels?
A 5% surcharge is imposed on chargeable fossil fuel products supplied or produced in Nigeria, with exemption for clean energy, household kerosene, cooking gas and CNG (Section 159-162). The charge will only come into effect subject to an order published in the Gazette by the Finance Minister.
What are the compliance requirements for partnerships?
Partnerships must register with the tax authorities and file returns. Partnerships are taxed separately on their share of profit (Sections 11, 15)
What is the penalty for non-compliance with partnership registration?
Failure to register partnership particulars may result in tax authorities assessing tax as it deems just and reasonable (Section 15)
Can losses be carried forward?
Yes, losses can be carried forward and deducted from future profits subject to certain conditions and limitations (e.g. Sections 27, 70, 97)
Tax reforms will modernise, boost economy – G24 chief
Director of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, Iyabo Masha, has said the new tax laws will support Nigeria’s transition into a modern and more efficient economy.
Masha, who is the first African to occupy the position since the establishment of the G- 24 over five decades ago, spoke at a press conference in Abuja ahead of the meeting of the group.
She explained that tax and domestic resource mobilisation remained central to development, stressing that Nigeria’s reform drive could deepen formalisation and strengthen public finances over time.
“Tax and domestic resource mobilisation are fundamental to economic development,” she said, noting that taxation enables governments to provide infrastructure, education, healthcare, and maintain law and order.
According to her, governments generally finance development through taxation, borrowing, or asset sales, but “out of all of these, taxation is the most efficient one that leads to the least macroeconomic destabilisation”.
Masha observed that developing countries often recorded weak tax mobilisation, “in some cases as low as seven per cent of GDP”, compared to others that generate “25, 30 per cent of GDP”.
Speaking on Nigeria’s reforms, the group director added that in her previous role, she had examined the country’s tax framework and found it “very fragmented”, with inadequate implementation contributing to low revenue mobilisation.
The PUNCH
What your taxes do
Focus: Modernisation of Terminal 1 MMIA, Lagos
The complete modernisation of Terminal 1 at Murtala Muhammed International Airport in Lagos is a major project approved by Nigeria's Federal Executive Council in July 2025. It aims to overhaul the nearly 50-year facility to meet global standards while minimising disruptions through phased construction.
Project Cost:
N712,258,565,482.18 (For MMIA Terminal 1 rehabilitation, along with expansion to Terminal 2, roads, apron, and bridges).
Timeline
Twenty-two months, with work set to accelerate following the full closure of Terminal 1.
A temporary 8,000 m² departure hall (90% complete as of early 2026) will handle up to 1,500 peak-hour passengers during closure, while arrivals shift to Terminal 2.
Scope
Terminal 1 will be stripped to its concrete core, reinforced, and rebuilt with modern systems including HVAC, plumbing, electrical, mechanical, security, and baggage handling. The project also covers Terminal 2 expansion (15,000 m² added), apron enlargement for wide-body aircraft, new ring roads, skywalk to car park, connection building between terminals, and landscape redesign.
Contractor
China Civil Engineering Construction Corporation holds the contract, supervised by the Federal Ministry of Aviation and FAAN's Engineering Services Directorate.
Key facilities
Upgrades feature a glass curtain wall façade, reconfigured passenger flow with separated departures/arrivals, e-passport gates, fast check-in, smart HVAC/lighting, enhanced lounges, CCTV, retail zones with cultural elements, accessible restrooms/baby-care, and a dedicated transit area.
VAT on banking fees not introduced by Tax Act, says NRS
Nigeria Revenue Service has described as misleading media reports claiming that Value Added Tax has been newly introduced on banking services, fees, commissions or electronic money transfers, stating that this claim is incorrect.
In a statement recently to correct this narrative, the NRS said fees and charges had been applied to banking transactions before the enactment of the Tax Act 2025.
The statement reads, “VAT has always applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s long-established VAT regime.
“The Nigeria Tax Act did not introduce VAT on banking charges nor did it impose any new tax obligations on customers in this regard.”
The NRS urged members of the public to disregard rumours on tax-related matters and rely exclusively on official communications emanating from the Service for accurate, authoritative and up-to-date tax information.
Unified tax system will lift Abuja IGR, curb leakages – Forum
The Federal Government and the Federal Capital Territory Administration have unveiled plans to unify Abuja’s tax regime, a reform expected to significantly raise the Internally Generated Revenue, plug leakages and improve the ease of doing business in the nation’s capital.
At a stakeholders’ forum on harmonising revenue systems, officials of the Nigeria Revenue Service and the FCT Internal Revenue Service outlined a coordinated roadmap to eliminate tax duplication, informal levies and manual collection channels which have weakened compliance and reduced government earnings.
In the new arrangement, revenue collection will be streamlined through integrated digital platforms, enabling real-time tracking of payments, stronger audits and more transparent reporting.
Authorities believe the unified database will broaden the tax net by capturing businesses and individuals previously operating outside the formal system.
This is planned to boost the FCT fiscal capacity without necessarily introducing new taxes.
Officials also argue that harmonisation will lower the cost of doing business by removing multiple charges and illegal roadblocks that discourage enterprise growth.
Q & S: Do taxpayers need to re-register or obtain new Tax Identification Number?
No. All existing taxpayer registrations, TINs, and records issued under FIRS remain valid and will migrate seamlessly to NRS systems.
Taxable Line: We are not proposing a tax increase. We are making a tax adjustment so that the wealthiest pay a little more, so we do not need to cut funding for education or health – Luiz Inácio Lula da Silva (Brazil president, 2025)
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