Nigeria’s 2025 Tax Law: Know Your Rights
Nigeria’s 2025 Tax Revolution
A Comprehensive Guide to Your Pocket, Your Business, and Your Rights
1. Personal Income Tax: Relief for the Low Earners
The most significant change for the average worker is the new zero-tax threshold. If you earn ₦800,000 or less per year (approx. ₦66,667 per month), you are now completely exempt from paying Personal Income Tax.- Progressive Rates: For those earning more, the next ₦2.2 million is taxed at 15%, scaling up to 25% for top earners making over ₦50 million annually.
- Rent Relief: You can now deduct the lower of ₦500,000 or 20% of your annual rent from your taxable income, provided you declare your rent accurately.
- Minimum Wage Protection: Most citizens earning the national minimum wage will effectively pay zero income tax.
2. VAT: Cheaper Basics, New Digital Costs
While the standard VAT rate remains at 7.5%, the government has drastically changed what is taxed to help combat inflation.The “Zero-Rated” List (0% VAT)
You should not be charged VAT on these essential items:- Basic Foods: Bread, milk, cereals, cooking oil, fruits, vegetables, and raw meat.
- Health & Education: All medical services, pharmaceutical products, and educational materials (books/tuition).
- Energy: Electricity supplied to the national grid, cooking gas (LPG), and compressed natural gas (CNG).
The New Digital Reality
Urban consumers should note that streaming services and digital content subscriptions (like Netflix or Spotify) are now officially subject to VAT to modernize the tax base.3. Support for Small Businesses
The reforms create a “peace to operate” environment for small enterprises.- CIT Exemption: Small companies with a turnover of ₦50 million or less are exempt from Company Income Tax.
- Minimum Effective Tax: To ensure fairness, mega-corporations with a turnover of ₦20 billion or more must pay a minimum effective tax rate of 15%.
- Development Levy: A unified 4% levy on profits replaces multiple old levies, with 10% of that going to a Defence and Security Infrastructure Fund.
4. The 5% Fossil Fuel Surcharge
A more controversial addition is a 5% surcharge on the retail price of fossil fuel products (petrol and diesel). While household kerosene and cooking gas are exempt, critics warn this surcharge could increase transport and food costs across the country.5. Modern Enforcement: The Digital Shift
The government is moving to a fully digital system administered by the new National Revenue Service (NRS).- Unified Tax ID (UTIN): Every taxpayer will eventually need a single ID number for federal, state, and local taxes.
- Direct Recovery: The NRS now has the power to appoint banks or fintech firms to recover unpaid taxes directly from a taxpayer’s bank account.
- E-Invoicing: Digital invoicing will become mandatory to reduce physical “settlements” and corruption.
6. The “Red Flags”: Expert Concerns
Despite the benefits, experts highlight several flaws that may impact ordinary Nigerians:- The Digital Divide: Many market traders and rural farmers lack the internet access or literacy required for new e-filing systems.
- Transparency Issues: Serious allegations have surfaced that the final “gazetted” version of the law differs from what the National Assembly actually passed.
- The Trust Gap: Many citizens are hesitant to pay more when they do not see immediate improvements in roads, electricity, or security.
Summary Table
| Who Are You? | Expected Impact |
|---|---|
| Low Earner (<₦800k/yr) | Pay 0% Personal Income Tax. |
| Renters | Deduct up to ₦500,000 from taxable income. |
| Small Shop Owners | 0% Company Income Tax if sales under ₦50m. |
| Market Shoppers | 0% VAT on basic food, medicine, and books. |
| Drivers / Transporters | 5% Surcharge on petrol and diesel. |
