The Nigerian 2025 Tax Reform Acts: Legal Review and Implications for Stakeholders

Introduction

On June 26–27, 2025, President Bola Ahmed Tinubu signed into law four transformative tax reform bills aimed at overhauling Nigeria’s complex, fragmented, and inefficient tax regime. The new statutes—the Nigeria Tax Act (NTA), Tax Administration Act (NTAA), Nigeria Revenue Service Act (NRSA), and Joint Revenue Board Act (JRBA)—form the cornerstone of the Federal Government’s Medium-Term Fiscal Framework and Tax Policy Agenda 2023–2026. Collectively referred to as the 2025 Tax Reform Acts, they are expected to take effect on 1 January 2026, unless otherwise specified.

This article examines the legal underpinnings, structural changes, substantive provisions, and likely implications of these tax reforms on taxpayers, businesses, state governments, and the Nigerian economy.

1. Legal Foundation and Policy Objectives

The 2025 Tax Reform Acts were enacted pursuant to Sections 4, 58, and 59 of the Constitution of the Federal Republic of Nigeria 1999 (as amended), which empower the National Assembly to make laws for the peace, order, and good governance of the federation. These Acts consolidate and repeal more than 50 existing tax statutes and regulations.

Their overarching objectives include:

• Simplification and codification of Nigeria’s tax laws;
• Enhancement of tax equity and efficiency;
• Promotion of voluntary compliance;
• Expansion of the tax base;
• Achievement of a tax-to-GDP ratio of 18% by 2026.

2. Key Legislative Reforms

a. Nigeria Tax Act (NTA)

The NTA is a unified statute consolidating corporate tax, personal income tax, value-added tax, capital gains tax, and withholding tax provisions. Among its highlights:

• Small Business Relief:
  Turnover threshold for small companies increased from ₦25 million to ₦100 million. Section 56 redefines a small company as one with an annual turnover not exceeding ₦100 million and fixed assets not exceeding ₦250 million. Such companies are exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy.
• Capital Gains Tax (CGT): Under Section 22 (First Schedule), CGT is increased from 10% to 30% for corporate entities, aligning with the standard CIT rate. Individuals will now be taxed under a progressive CGT regime.
• Top-up tax imposed on multinationals with effective tax rates (ETR) below 15%.
• Development Levy of 4% replaces multiple earmarked sectoral levies.
• Stamp Duties:
  Section 136 imposes duties on long-term debt financing arrangements exceeding 12 months.
• Surcharge on Fossil Fuels:
  Section 158 introduces a 5% environmental surcharge on fossil-fuel-based products to incentivize green alternatives.
• Digital Assets and Indirect Transfers:
  Clause 119 provides for the taxation of digital assets and virtual currencies, while Clauses 167–185 govern indirect transfers of Nigerian assets by non-resident entities and introduce anti-avoidance rules.
• Compensation for Loss of Employment:
  Clause 186 exempts from tax any compensation not exceeding ₦50 million paid for loss of employment or personal injury.

b. Tax Administration Act (NTAA)

The NTAA introduces a uniform, technology-driven framework for assessment, filing, and payment of taxes:

• Mandatory Taxpayer Identification Number (TIN) and electronic filing for all entities.
• Monthly remittances and real-time invoice matching system.
• Administrative penalties codified for non-filing, non-remittance, and obstruction of tax officials.
• Creation of a central Unified Digital Tax Portal.
• TIN and Digital Reporting:
  Clauses 7–9 mandate the issuance of a Taxpayer Identification Number (TIN) to all taxpayers and require notification of changes in taxpayer details within 30 days. Clause 23 introduces mandatory deployment of an Electronic Fiscal System (EFS) for e-invoicing and e-filing.
• Revenue Sharing Formula:
  Clause 22 establishes a new VAT revenue allocation formula:
• 10% to the Federal Government
• 55% to the states and FCT
• 35% to Local Government Councils
  This clause also incorporates derivation-based incentives and performance metrics.
• Transaction Threshold Reporting:
  Clause 28 obligates banks and financial institutions to report individual transactions above ₦25 million and corporate transactions above ₦100 million monthly.
• Anti-Avoidance and Penalties:
  Clause 29 incorporates the “principal purpose test” for disregarding tax-motivated transactions lacking commercial substance.
  Clause 95 imposes penalties of ₦50,000 for late filing in the first month and ₦25,000 for each subsequent month.
  Clause 106 mandates a ₦5 million penalty on any government agency transacting with a supplier lacking valid TIN.

c. Nigeria Revenue Service Act (NRSA)

The NRSA establishes the Nigeria Revenue Service (NRS) as a more independent and professionally run body to replace the Federal Inland Revenue Service (FIRS). Key changes include:

• Enhanced autonomy akin to the CBN model;
• Competitive recruitment and performance-based contracts;
• Statutory reporting to the National Assembly and Fiscal Responsibility Commission.
• The Board composition, powers, and staffing are set out in Parts II–IV of the NRSA.

d. Joint Revenue Board Act (JRBA)

This Act addresses federal-state coordination, dispute resolution, and taxpayer rights:

• Establishes the Joint Tax Board Council (JTBC);
• Introduces the office of a Tax Ombudsman to protect taxpayer rights;
• Creates a Tax Appeal Tribunal (TAT) with powers similar to administrative courts;

The Third Schedule provides for a restructured Tax Appeal Tribunal.
Appeals must be lodged within 30 days (Order III Rule 6 of the TAT Rules), and appellants must deposit 50% of the assessed tax in dispute.
This deposit rule remains controversial, particularly under Section 36 of the Constitution concerning access to justice and fair hearing.

• Revises the VAT revenue-sharing formula: 50% equally among states, 30% based on consumption, and 20% by population.

3. Legal and Constitutional Implications

The Acts attempt to harmonize the tax system in a federal structure, which may raise legal challenges:

• Jurisdictional Tension: States may contest aspects of the NTA and JRBA, particularly the centralisation of VAT, relying on the Supreme Court’s decision in AG Lagos State v. AG Federation (2021) where the Supreme Court emphasized the shared nature of VAT powers.

• Right to Property: The imposition of a 30% CGT, especially on unrealized gains or on indirect asset transfers (Clauses 167–185, NTA) and digital assets (Clause 119), may be challenged as unconstitutional under Section 44 of the 1999 Constitution (as amended).

• Access to Justice: The Tax Appeal Tribunal’s status may again come under scrutiny, particularly its composition and whether it exercises judicial power contrary to Section 6 of the Constitution. The 50% deposit requirement for TAT appeals under the Third Schedule to the JRBA may be deemed unconstitutional, restricting practical access to adjudication under Section 6(6)(b) and Section 36(1) of the Constitution.

4. Impact on Stakeholders

5. Enforcement and Transition

The Acts provide for a six-month transition period during which:

• Existing tax rates and processes remain valid;
• NRS will issue implementing regulations under delegated authority;
• Taxpayers must align with the new TIN and digital infrastructure.

It is expected that implementation guidelines, practice directions, and subsidiary legislation will be published in Q4 2025.

Conclusion

The 2025 Tax Reform Acts represent a bold legislative stride toward a fair, transparent, and growth-oriented tax system. Their legal ingenuity lies in harmonizing Nigeria’s disparate tax landscape while embracing digital modernization. However, their success will depend on the fidelity of implementation, judicial clarity on constitutional questions, and robust capacity development at both federal and state levels.

Taxpayers, practitioners, and policymakers must now begin preparing for compliance by reviewing internal systems, engaging with regulators, and educating stakeholders. If carefully executed, this reform will not only boost revenue but also build public trust in the Nigerian fiscal system.

KEY SECTIONS:

1. Nigeria Tax Act (NTA)

• Section 56: Defines “small company” for exemption—turnover ≤ ₦100 million and fixed assets ≤ ₦250 million, exempting them from CIT, CGT, and development levy
• Section 22 (1st Schedule): Capital Gains Tax increased from 10% to 30% for companies; individuals taxed under personal income brackets.
• Section 158: Introduces 5% surcharge on fossil-fuel products (non-renewable)
• Section 136: Imposes stamp duty on loan capital financing beyond 12 months
• Clauses 167–185: Establish Economic Development Tax Incentives for priority sectors
• Clause 186: Exemption of compensation for loss of employment/injury up to ₦50 million
• Clauses 167–185, and Clause 119: Introduce unilateral DTA relief and digital asset taxation.

2. Tax Administration Act (NTAA)

• Clause 7: NRS may issue TIN sua sponte to any non-registered person.
• Clause 8–9: Obligation to register TIN before bank accounts; notify changes within 30 days .
• Clause 22: VAT revenue sharing formula; 10% federal, 55% to states & FCT, 35% to locals; includes derivation requirements.
• Clause 23: Mandates deployment of Electronic Fiscal System (e-invoicing, EFS).
• Clauses 47, 95, 100: Administrative penalties—₦50,000 first month, ₦25k/month thereafter; withholding penalties at 40% of amount withheld.
• Clause 28: Banks, etc., must report transactions ≥ ₦100 million (corporates) or ≥ ₦25 million (individuals) monthly.
• Clause 29: Anti-avoidance rules with principal-purpose test for tax planning.
• Clause 106: Extra penalties if contract with unregistered person—₦5 million.

3. Nigeria Revenue Service Act (NRSA)

• Repeal of FIRS Act: Replaces the Federal Inland Revenue Service with the Nigeria Revenue Service, granting autonomy, performance-based tenure, and distinct oversight – with functions and structure elaborated throughout the Act.

4. Joint Revenue Board Act (JRBA)

• Establishes: Joint Tax Board Council (JTBC), Tax Ombudsman, and Tax Appeal Tribunal.
• Tax Appeal Tribunal Rules / Order III Rule 6: 50% deposit of disputed tax amount required to lodge appeal; subject of legal debate.
• Appeal timelines:
• VAT appeals: must be resolved by FIRS within 30 days per Section 20(3) of the VAT Act.
• TAT appeals: filed within 30 days per FIRS Act and TAT Rules