Nigeria Tax Reform Bills 2024.

BY

Dr Kennedy Iwundu 

–  Associate Professor, Forensic Accounting, ICT University  Cameroon
–  Immediate Past Chairman,  The Chartered Institute of Taxation of Nigeria
(CITN) Abuja District
– Past Chairman/ Member board of Trustees, FCT Tax Practitioners Association.
– Board Member, Association of Chartered Systems Tax Professionals, USA
–  Managing Partner, Accounting Tools Consulting Services

Table of Contents

1. Learning Objectives                                                                  3
2. Introduction                                                                          4
3. Conceptual Framework of Taxation and Taxing Powers             5
4. Objectives of  the tax reform bills. 6
5. Tax Reform Bills                                                                     7

Nigerian Revenue Service Establishment bill 2024                7-9

.Joint Revenue Board Establishment Bill 2024                         9-10

Nigeria Tax Administration Bill 2024                                       10-13

Nigeria’s Tax Bill 2024                                                           10-29

5. Economic Stabilisation Bill(ESB) 2024                                      29-30
6. Conclusion and Recommendations                                         31-33

References

LEARNING OBJECTIVE

At the end of the presentation, participants are expected to know the following. :-

1. The significance of tax reform in Nigeria
2. The key structural changes facing tax agencies in Nigeria.

iii.  The key changes in the Nigeria’s tax laws

1. Impact of the tax reform bill in Nigerian economy.

• INTRODUCTION

The Nigerian senate has passed all four of president Bola Tinubu proposed tax reform bills, marking a significant overhaul of the country’s fiscal framework, these bills aim to modernize tax administration, enhance revenue collection and stimulate economic growth by promoting the ease of doing business. The introduction of President Bola Tinubu’s Tax Reform Bill has sparked widespread debates across Nigeria. This proposed legislation aims to overhaul the country’s tax collection and administration systems, presenting an opportunity to create a more equitable and efficient taxation model. At the heart of the bill are transformative provisions, such as revisions to the Value Added Tax (VAT) revenue-sharing formula and exemptions for small businesses and the average Nigerians. While these changes could potentially revitalize Nigeria’s economy, they also expose critical issues within the country’s federal structure, particularly the economic imbalances among regions (States and Local Governments).

The broader implication of the tax reform is the potential to redefine governance in Nigeria. By decentralizing tax administration to empower states and local governments, tax reform could encourage a shift toward more accountable and responsive leadership. While this transition will not be easy, it is a necessary step to reduce the country’s over-reliance on oil revenues and promote sustainable economic development. The outcome of this reform process ultimately depends on transparent implementation and meaningful dialogue among stakeholders, the governors and the president. By encouraging fiscal autonomy, Nigeria can take a significant step to achieve sustainable growth and economic development.

President Tinubu’s Tax Reform Bill represents a pivotal moment for Nigeria. It offers an opportunity to create a tax system that not only funds essential services but also promotes trust, inclusivity, and collaboration. For this vision to be realized, stakeholders must engage in a transparent dialogue and ensure tax reform is implemented fairly and effectively. The path forward requires determination and cooperation, but the potential rewards will result in a more equitable and prosperous Nigeria.

2.0   THE CONCEPTUAL FRAMEWORK OF TAXATION AND TAXING POWERS

Tax has been defined as a monetary charge imposed by the government on persons, entities, transactions or property to yield revenue. It has also been defined tax as a compulsory levy imposed on a subject or upon his property by the government having an authority over him.

It is important to distinguish a tax from a charge or fee imposed by a public authority or a government. A charge or a fee is paid by the direct beneficiaries of the services. Examples of this include: license fees, water rates, electricity bills, toll fares etc. While tax on the other hand, is imposed by the authority for public purpose without reference to a particular benefit enjoyed by the taxpayer.

The payment of tax in Nigeria is backed up by section 24(f) of the 1999 Constitution. It provides that: “It shall be the duty of every citizen to- Declare his income honesty to appropriate and lawful agencies and pay his tax promptly.”

Section 44(2) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) is the basis for taxation in Nigeria. The provision of the law implies that the compulsory imposition of taxes on citizens does not amount to an infringement of their right to own property but a necessary exercise of governmental powers. The section provides thus: “Nothing in subsection (I) of this section shall be construed as affecting any general law for the imposition and enforcement of any tax, rates and duty.

• OBJECTIVES OF  THE TAX REFORM BILLS.

The Nigerian Tax reform bills has specific objective on each of the four bills that was proposed by the presidency.  These bills are:

• Nigeria Revenue Service (Establishment) Bill, 2024
• Joint Revenue Board (Establishment) Bill, 2024
• Nigeria Tax Administration Bill, 2024
• Nigeria Tax Bill, 2024

• The Nigeria Revenue Service Bill seeks to provide for a legal, institutional and regulatory framework for the administration of taxes and revenue under any law made by the National Assembly and to account for such taxes and revenue collected.
• The Joint Revenue Board Bill seeks to establish the Joint Revenue Board, the Tax Appeal Tribunal, and the Office of the Tax Ombuds for the coordination, harmonisation and settlement of disputes arising from tax administration.
• The Nigeria Tax Administration Bill seeks to provide the legal framework for the assessment, collection and accounting for revenue accruing to the Federation and the three tiers of government.
• The Nigeria Tax Bill seeks to repeal the principal taxation legislation, amend fiscal provisions in other legislations and provide a unified fiscal legislation governing taxation in Nigeria.

4.0  ELABORATION

4.1 Nigeria Revenue Service (Establishment) Bill, 2024

This bill proposes the repeal of the federal Inland Revenue Service (Establishment) Act, No 13 of 2007, and seeks to enact the Nigeria Revenue Service (Establishment) Act, 2024. The new act will empower the service with the responsibility for the assessment, collection, and accounting of revenue accruing to the government of the federation, along with related matters. The proposed change is to reflect the service’s role as the primary revenue authority for the federation with the collection of taxes from both onshore and offshore sources.

The NRS Bill seeks to provide for a legal, institutional and regulatory framework for the administration of taxes and revenue under any law made by the National Assembly and to account for such taxes and revenue collected. The Bill proposes a repeal of the Federal Inland Revenue Service (Establishment) Act, No.13, 2007 (the “FIRS Act”) and in its stead, the enactment of the Nigeria Revenue Service (Establishment) Act to establish the Nigeria Revenue Service (the “NRS or Service”). The Bill seeks to reform the extant Federal Inland Revenue Service (FIRS) into the NRS, stipulating its functions and powers.  While the Bill retains most of the provisions of the FIRS Act, some new provisions have been introduced.

1. Functions of the NRS The functions of the Service under the NRS Bill are similar to the functions of the FIRS under the FIRS Act. They include assessing persons including companies, and enterprises chargeable with tax.   One important introduction under the NRS Bill is the power of the NRS to assist, on request, a State or Local Government, in the collection or administration of taxes. This, however, only applies to taxes in respect of which the requesting government has the statutory right to collect or administer.  The Bill provides that all powers vested in the FIRS will continue to be vested in the NRS. It also provides that all actions taken by the FIRS are deemed to have been taken by the NRS. Similarly, all enforcement processes or proceedings commenced or pending under the FIRS Act will continue to subsist under the Bill. This also applies to all rights, interests, obligations and liabilities under any contract or instrument, or in law or equity.
2. Fund of the Service

The NRS Bill provides that the Service will be funded by a percentage, as may be determined by the National Assembly, of the total revenue collected by the Service. This differs from the previous position in the FIRS Act. Under the FIRS Act, funding of the FIRS from tax revenue was limited to non-oil revenues.

The Nigeria Revenue Service (Establishment) Bill introduced several structural and operational reforms.

The President will chair or appoint the chairman of the Revenue Service Board, while an Executive Vice Chairman, subject to Senate confirmation, will serve as the head of the Service. Clause 7 was amended to reflect this leadership structure. To ensure inclusivity, six Executive Directors will be appointed, each from a different geopolitical zone, with a rotational system to ensure no Executive Director and Vice Chairman come from the same state. Clause 4 of the bill expands the Service’s responsibilities to include assessing corporate taxpayers, collaborating with ministries to review tax regimes, and adopting measures to trace, freeze, confiscate, or seize proceeds from tax fraud. Clause 13(2) requires that the Secretary of the Board be a lawyer, chartered accountant, or chartered secretary not below the rank of Deputy Director. The Service must submit its annual reports within three months after each fiscal year.

Clause 4 of the bill expands the Service’s responsibilities to include assessing corporate taxpayers, collaborating with ministries to review tax regimes, and adopting measures to trace, freeze, confiscate, or seize proceeds from tax fraud. Clause 13(2) requires that the Secretary of the Board be a lawyer, chartered accountant, or chartered secretary not below the rank of Deputy Director. The Service must submit its annual reports within three months after each fiscal year. The service cost of collection is reduced from 4%-2%

4.2  Joint Revenue Board (Establishment) Bill, 2024

The JRB Bill in its explanatory memorandum seeks to establish the Joint Revenue Board, the Tax Appeal Tribunal, and the Office of the Tax Ombuds for the coordination, harmonisation and settlement of disputes arising from tax administration.  The JRB Bill represents another tax reform which the Federal Government is seeking to introduce to refine the tax administration process in Nigeria.  Overall, the JRB Bill is designed to streamline tax administration, increase intergovernmental cooperation, and introduce new avenues for dispute resolution, aiming to create a fairer and more consistent tax environment in Nigeria.

1. Establishment of Tax Appeal Tribunal

The JRB Bill establishes a Tax Appeal Tribunal (“Tribunal”) for the resolution of tax-related disputes. The provisions are consistent with the provisions of the FIRS Act relating to the Tribunal. Upon repeal of the FIRS Act, provisions relating to the Tribunal under the FIRS Act will cease to exist and corresponding provisions under the JRB Bill will become effective upon enactment of the JRB Bill. When enacted, the Tribunal will continue to hear and conclude any proceeding commenced before the coming into effect of the JRB Bill, as if they were commenced under the JRB Bill.

1. Establishment of the Tax Office of the Ombud

The JRB Bill also establishes a Tax Ombud41 to deal with complaints brought against tax authorities. This office has a mandate, amongst others, to investigate tax-related grievances, mediate disputes, institute proceedings on behalf of the taxpayer, and inspect premises related to tax administration. The Office also serve as an independent and impartial arbiter to review and resolve complaints relating to tax, levy, regulatory fee and charges, customs duty or excise matters; review complaints against tax officials and authorities and resolve them through mediation or conciliation by adopting informal, fair and cost-effective procedures; receive and investigate complaints lodged by taxpayers regarding the actions or decisions of the tax authorities, agencies or their officials and to also serve as a watch-dog against any arbitrary fiscal policy of the government or by any of its agency and report such policy to the National Assembly.  An investigation by the Tax Ombud is required to be conducted within days of receipt of the complaint, provided that the Office of the Tax Ombud may, where necessary, extend the period of an investigation by seven days.

4.3  Nigeria Tax Administration Bill, 2024

The bill aims to provide a unified framework for the assessment, collection and accounting of revenue accruing to the federation, as well as to  the federal, state and local governments. It prescribes the power and responsibilities of tax authorities and consolidates various tax administrative provisions from existing legislation to promote clarity and ease of compliance. The bill addresses critical areas including taxpayer registration, filling of tax returns, assessment procedures, tax collection, payment obligation and delineation of the powers and jurisdiction of various revenue authorities.

This Bill in its explanatory memorandum seeks to provide a uniform procedure for a consistent and efficient administration of tax laws in order to facilitate tax compliance by taxpayers and optimise tax revenue. Accordingly, the Bill will provide the legal framework for the assessment, collection and accounting for revenue accruing to the Federation and the three tiers of government.

The Nigeria Tax Administration Bill consolidates the existing administrative provisions in the existing tax legislations such as the Companies Income Tax Act, Personal Income Tax Act, Petroleum Profits Tax Act, the Value Added Tax Act, Stamp Duties Act, and Capital Gains Tax Act, and upon enactment will apply as the primary legislation for the administration of the Nigeria Tax Bill.

The Nigeria Tax Administration Bill also seeks to mandate relevant tax authorities to share relevant tax information with each other and conduct joint audits where for instance, a tax authority discovers an instance of non-compliance by a taxpayer of its tax obligations to another tax authority.  This will synchronise tax enforcement efforts by relevant tax authorities and assist in effective tax enforcement. It is also likely to aid in the resolution of disputes between different tax authorities and prevent cases of double taxation where, for instance, a joint tax audit discloses that the tax that is sought to be collected by one tax authority has already been paid to the other tax authority involved in the audit.

Monthly Returns for Non-resident Airlines and Shipping Companies

While the basis of taxation, the determination of assessable profits and the minimum effective tax rate of non-resident airlines and shipping companies will remain the same, the Nigeria Tax Administration Bill seeks to introduce monthly tax payment for these companies. When implemented, this will make it easier to collect taxes in this sector and increase compliance

 Anti-Avoidance  

In addition to the general provisions empowering relevant tax authorities to disregard artificial transactions and make necessary adjustments to ensure appropriate taxation of income and profits, the Nigeria Tax Administration Bill introduces comprehensive anti-avoidance measures aimed at curbing tax avoidance schemes. For instance, the Bill mandates that any person who enters into or intends to enter into a transaction or agreement—defined as a disclosable transaction or agreement—whose primary purpose is to obtain a tax advantage, must, without prior notice or request, disclose relevant information about such transactions to the appropriate tax authority. This provision effectively introduces a principal purpose test to counteract tax avoidance, aligning Nigeria’s approach with global tax practices.

This disclosure requirement will enable tax authorities to identify potential tax planning schemes in advance, discouraging aggressive tax planning and facilitating the collection of taxes that might otherwise be lost.

Joint Tax Audit and Exchange of Information

The Nigeria Tax Administration Bill seeks to mandate relevant tax authorities to share relevant tax information with each other and conduct joint audits where for instance, a tax authority discovers an instance of non-compliance by a taxpayer of its tax obligations to another tax authority.  This will synchronise tax enforcement efforts by relevant tax authorities and assist in effective tax enforcement.

It is also likely to aid in the resolution of disputes between different tax authorities and prevent cases of double taxation where, for instance, a joint tax audit discloses that the tax that is sought to be collected by one tax authority has already been paid to the other tax authority involved in the audit.

Deployment of Value Added Tax Electronic Fiscalisation System

The Nigeria Tax Administration Bill seeks to empower the Nigerian Revenue Service (NRS) to introduce an electronic fiscal system for the purpose of recording taxable supplies, and taxable persons would be mandated to deploy any such system introduced by the NRS. This will enable the NRS to track taxable supplies and optimally collect VAT.

Notification to Relevant Tax Authority for claim of Deduction

Section 31 of the tax reform bill provides that deduction shall not be allowed, unless claimed in writing in a form prescribed by the relevant tax authority may prescribe for a year of assessment. This means that taxpayers (individuals and businesses) must actively claim deductions in writing for them to be recognized. However, if a taxpayer does not submit a written claim, they may lose the deduction, increasing their taxable income and overall tax liability. This provision reduces automatic deductions, meaning taxpayers who fail to claim deductions properly may end up paying more tax.

Enhanced Penalties for Non-Compliance:
Stricter penalties have been introduced for tax non-compliance, including:

• Failure to register: ₦100,000 in the first month, ₦50,000 for each subsequent month
• Failure to file returns: ₦200,000 in the first month, ₦50,000 for each subsequent month
• Failure to keep books: ₦10,000 for individuals, ₦100,000 for companies
• Failure to remit tax deducted at source: Up to three years imprisonment upon conviction

4.4    Nigeria Tax Bill, 2024

This bill seeks to repeal certain existing tax legislation and consolidate the legal framework governing taxation in Nigeria. It provides for the taxation of income, transaction and financial instrument as well as for applicable exemptions and taxpayer incentives. The objective is to streamline and modernize tax laws for greater efficiency.

Legal Framework

The Nigeria Tax Bill (from now on referred to as the NTB) is a comprehensive piece of legislation that seeks to outline all taxes in the country hitherto administered by different laws and compress them into a single simplified law. Most importantly, the NTB vests upon the Nigeria Revenue Service (expected to succeed FIRS) powers to collect all national taxes, including royalties hitherto collected by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and excise duties, import VAT etc, hitherto collected by the Nigeria Customs Service.

The coming into force of the Nigeria tax bill will be the amendments of 11 laws while 13 other laws may also experience consequential amendments. These  include:

• Capital Gains Tax Act
• Casino Act
• Companies Income Tax Act
• Deep Offshore and Inland Basin Act
• Industrial Development (Income Tax Relief) Act
• Income Tax (Authorised Communications) Act
• Personal Income Tax Act
• Petroleum Profits Tax Act
• Stamp Duties Act
• Value Added Tax Act and
• Venture Capital (Incentives) Act.

Other 13 existing legislation that may witness consequential amendments also includes:

• The Petroleum Industry Act
• The Nigerian Export Processing Zones Act
• The Oil and Gas Free Trade Zone Act
• The National Information Technology Development Agency Act
• The Tertiary Education Trust Fund (Establishment, Etc.) Act
• The National Agency for Science and Engineering Infrastructure (Establishment) Act
• The Customs, Excise Tariffs, Etc. (Consolidation) Act
• The National Lottery Act
• The Nigerian Minerals and Mining Act
• The Nigeria Start-up Act
• The Export (Incentives and Miscellaneous Provisions) Act
• The Federal Roads Maintenance Agency (Establishment, Etc.) Act
• The Cybercrime (Prohibition, Prevention, Etc.) Act

Key Highlights

1. Value Added Tax (VAT)
2. The VATrate remains unchanged at 7.5%
3. The VAT vertical distribution formula has been revised as follows:

• Federal Government reduced from 15% to 10%
• State government increased from 50% to 55%
• Local Government remains at 35%

1. The VAT horizontal sharing formula is introduced as follows:

• Equality: 50%
• Consumption: 30%
• Population: 20%

For Local Government: the distribution is:

• Equality: 70%
• Population:30%
• Essential items such as food, education, healthcare will enjoy 0% Value Added Tax while rent, public transportation, and renewable energy will be exempted, providing relief for low-income households that spend nearly 100% of their income on these necessities.
• Businesses will be granted tax credits for VAT paid on their assets and all expenses incurred to produce Vatable goods and services. This means up to 7.5% reduction in the cost of production. This proposed measure will eliminate the VAT cost currently borne by businesses and should therefore lead to lower prices. Going forward, this measure will ensure that businesses in Nigeria no longer bear VAT cost regardless of the rate.
• Expanded list of exempted items

The Bill provides a proposed list of goods and services exempt from VAT. The proposed exemption list comprises the new introductions in addition to items that were previously zero-rated. One of such are goods or services supplied to a diplomatic mission, a diplomat or a person recognised under the Diplomatic Immunities and Privileges Act whose activity is in public interest, and not for profit.

The Bill provides a proposed list of goods and services that are VAT zero rated. The new zero-rated list comprises items that were previously exempted and a new introduction. They include electricity generated by generation companies (GENCOs) and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET), electricity transmitted by Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs), and exported incorporeal property, amongst others.

1. Development levy

Development levy is imposed on Assessable profit of companies.

4% development levy is introduced to be allocated to key government agencies as follows:

• Tertiary Education Trust Fund (TETFUND):50%
• Nigerian Education Loan Fund (NELFUND): 15%
• National Information Technology Development Agency (NITDA): 10%
• National Agency for Science and Engineering Infrastructure (NASENI): 10%
• National Cybersecurity Fund: 5%
• Defense Security Fund: 10%

Currently what we are practicing is:-

1. Education tax which is 3% of Adjusted profit
2. NITDA is 1% of profit before tax
3. NASENI is 0.25% of profit before tax
4. Police levy is 0.005% of profit before tax.

The non inclusion of Police levy in the development levy signifies the abolition of police levy.

It is expected that the federal government will set up Development Levy Allocation Committee (DLAC) that will be meeting monthly for the allocation of development Levy where representatives of TetFund, NITDA, NASENI, NELFund, Office of the National Security Adviser , Ministry of defense and the office of the accountant general of the federation where Development Levy will be allocated in line with the provision of the act.

1. Company Income Tax (CIT)
2. CIT rates as follows:

• 0 to 50 million turnover is 0%
• Above 50 million turnover is 30%

This is different from what we are currently practicing where 0 to N25 million turnover is 0%.

Above N25 million to 100 million turnover is 20% and Above N100 million turnover is 30%

1. Small businesses with an annual turnover of ₦50 million or less are exempt from income tax.
2. There is no withholding tax deduction on business income of small businesses. This also includes an exemption from the requirement to deduct and account for tax on payments to vendors.
3. There is a restrictive definition of small business. This excludes companies that are offering professional services. For these companies, the incentives applicable to small businesses under the Tax reform bills are not applicable to them.
4. There is the potential of an increased compliance burden due to mandatory Tax IDs for personal accounts and stricter filing requirements. There are also potential barriers for low-income earners due to stringent penalties for non-compliance.
5. The Tax Reform Bills introduced in Nigeria significantly increased penalties for non-compliance with tax obligations, particularly for failing to file tax returns or providing incomplete or inaccurate information. Previously, penalties for the first month of non-compliance were N25,000 and N5,000 for each subsequent month. The new penalties are N100,000 for the first month and N50,000 for each subsequent month.
6. Elimination of minimum Tax on loss making company and those with low profit margins

Where a company has made verifiable loss, there is no basis for imposition of effective minimum tax. Section 27(1) of the tax bill deals with ascertaining the total profits of companies and also considers the losses of companies

Currently out tax law provides provision of 0.5% minimum tax on a turnover of a company where the company has a turnover above 25 million and has operated upto 4 years and above.

1. The obligations of NGOs under the bills include the following:
2. All Non-Governmental Organisations are expected to register for tax purposes and obtain Tax Identification ID. NGOs are required to file annual Company Income Tax returns with the Nigeria Revenue Service in line with clause 11 of the Nigeria Tax Administration Bill.  The administrative penalty for failing to file tax returns or for filing incomplete or inaccurate returns has increased significantly. Previously set at N25,000 for the first month and N5,000 for each subsequent month, the penalties are now N100,000 for the first month of non-compliance and N50,000 for each subsequent month of continued default.
3. NGOs must deduct Withholding Tax (WHT) on payments made to suppliers and contractors and remit the tax to the relevant tax authorities in the currency of the transactions.
   1. Clause 168 of the Nigeria Tax Bill exempts NGOs from capital gains tax on gains from the disposal of chargeable assets, provided that the gains are not derived from assets acquired for non-approved activities and are applied exclusively to the organisation’s approved activities.
   2. Goods purchased by NGOs for use in humanitarian donor-funded projects are zero-rated. However, VAT applies to goods purchased for non-humanitarian purposes. NGOs are also required to pay VAT on services they procure or consume unless these services are exempt under the Nigeria Tax Bill. Furthermore, NGOs must self-account for VAT on taxable goods and services supplied by non-resident vendors or entities not liable to charge VAT. They are also required to charge VAT on all taxable goods and services they supply and remit the tax to the Nigeria Revenue Service. NGOs must file VAT returns monthly, on or before the 21st day of the following month.

1. Personal Income Tax (PIT)

• Workers earning ₦800,000 annually and below will be exempted from taxes. According to the Nigerian Financial Services Market Report, only 10% of Nigerians earn above ₦100,000, this would mean most Nigerians will experience a reduction in their income tax upon the passage of the bills.

Significance of the Nigeria Tax Bill for Individuals and Businesses

• Reduction in Personal Income Tax:With the new provisions in the NTB, personal income tax would see a progressive reduction in rates, with lower-income earners being exempt from paying PIT or paying reduced rates compared to the current rates. The annual tax rate, as outlined in the fourth schedule of the bill, is as follows:
• First N800k – 0%
• Next N2.2m – 15%
• Next N9m – 18%
• Next N13m – 21%
• Next N25m – 23% and
• Above N50m – 25%

Before now, the personal income tax rates for different bands of annual income are as follows:

• First N300k – 7%
• Next N300k – 11%
• Next N500k – 15%
• Next N500k – 19%
• Next N1.6m – 21%
• Above N3.2m 24%

So, a glance at the two sets of rates shows that while currently a low-income earner who earns N25,000 monthly, which translates to N300,000 annually, is required to pay 7% income tax, the new rates proposed in the Nigeria Tax Bill exempts individuals who earn N800,000 or less annually from paying any income tax. Considering that more than 70% of Nigerians today do not earn up to N800,000 annually, you realise that the bill is pro-poor.

So, in effect, every minimum wage earner in Nigeria would be exempted from personal income tax. Also, the bill in section 13(2a) exempts all employees of start-ups and technology-driven service providers from income tax. This is a massive incentive for youths in ICT

The progressive personal income tax rate in the NTB means that before you pay the top income tax rate of 25%, your annual income must be above N50m. In other words, this new income tax regime seeks to ensure that richer people pay their fair share of tax. Before now, it was the low-income earners who were employees who got to pay income tax through deductions from sources carried out by their employers.

However, with the new provisions in Section 28 of the second bill, the Nigeria Tax Administration Bill, financial institutions are now mandated to furnish tax authorities with details of individuals whose monthly cumulative transactions amount to N25 million or more. This would bring more high-income earners into the tax net.

Requirement for Employees to File Returns

In addition to the existing obligation for employers to remit income taxes and file returns under the Pay-As-You-Earn (PAYE) scheme, the Nigeria Tax Administration Bill introduces a requirement for employees to file annual tax returns on their total income. Unlike PAYE returns, which cover only employment income, these returns will capture both employment and non-employment income. This measure will enable tax authorities to effectively assess and tax non-employment income, thereby contributing to increased tax revenue

Filing of Returns by Taxable Persons Enjoying Incentives

The Bill provides that all taxable persons enjoying incentives administered by the relevant tax authorities, including incentives provided under of Nigeria Tax Bill, shall, in addition to annual tax returns, submit Annual Tax Incentives returns to the relevant tax authority in the form prescribed by the Service covering income tax and any incentive other than those which are generally available to all taxpayers.

Introduction of Rent Relief in Place of Consolidated

Relief Allowance The tax reform bill introduced rent relief, which will replace the Consolidated Relief Allowance. An employee shall be granted a rent relief allowance of ₦200,000 or 20% of annual rent paid, whichever is lower. While the rent relief could be beneficial to low-income earners, it may be less beneficial to high income earners who tend to pay higher rent annually. This would increase PAYE tax for high income earners and reduce PAYE taxes for low-income earners.

1. Capital Gain Tax (CGT)

Redesign of the Capital Gains Tax: The bill also progressively redesigned the capital gains tax regime by exempting some forms of capital gains from taxation and, in other cases, raising the gain threshold before imposing a capital gains tax. For example, section 51 of the bill exempts an individual from paying tax on the proceeds of the sale of his residential property or land adjoining his residential property up to a distance of 1 acre. Section.

• In section 50, the bill exempts compensation paid to individuals for personal injuries, such as loss of employment, defamation, libel, slander, etc., from capital gains tax once the amount is N50 million or below. Above N50 million, only the excess constitutes chargeable gains. The current provision of the subsisting Capital Gains Tax Act is that compensation for loss of office, etc., is subject to capital gains tax on the portion of the income above N10 million at 10%.
• There is tax exemption on compensation for loss of employment not exceeding ₦50,000,000.
• Capital Gains Tax is exempted from sale of residential houses.

Exemption on disposal of Personal Chattels

Based on section 52(1) of the Bill, a gain accruing on a disposal of an asset which is tangible movable property being personal chattels of an individual shall not be a chargeable gain if the total amount or value of the consideration for the disposal does not in a period of assessment exceed ₦5,000,000 or three times the annual national minimum wage, whichever is higher.

vii. Stamp Duties

REPEAL OF THE STAMP DUTIES ACT

Section 197 of the Bill expressly repeals, amongst other statutes, the SDA. Further underscoring the advent of a new legal regime, Section 202 of the Bill designates it (the Bill) as the principal legislation governing taxation, rendering any conflicting provisions in other laws void to the extent of their inconsistency. Consequently, barring any iterations during the legislative process, following the passage of the Bill into law, the SDA would cease to be the extant law on the administration of stamp duties in Nigeria.

CHARGE OF DUTIES AND APPLICABLE RATES

In a structured and simplified manner, Section 123 of the Bill, subject to the exemptions outlined in Part III of Chapter 8 of the Bill and consistent with the rates specified in the Ninth Schedule to the Bill, categorizes the instruments liable to stamp duties as follows:

1. Instruments which, not having been previously executed by any person, are executed in Nigeria;
2. Instruments executed outside Nigeria, that relates to property situated, or to any matter or thing done or to be done, in Nigeria. Enhancing the rates stipulated in the Schedule to the SDA, and reinforcing the powers conferred by Section 4 of the SDA (as amended by the Finance Act, 2019) on the Federal Inland Revenue Service (“FIRS”) to impose, charge, and assess stamp duties on relevant instruments, the Ninth Schedule to the Bill provides a more comprehensible and self-explanatory outline of the applicable rates for various instruments. Some significant amendments introduced by the Bills in this regard are:
3. Loan Instruments

Departing from the customary 0.125% ad valorem rate applied to all types of unsecured loans under the SDA, item 9 of the Ninth Schedule to the Bill exempts overdrafts at banks and short-term loans (loans raised for a period not exceeding 12 months) from this rate.

1. Loan Capital

Unlike Section 103 of the SDA which provides an incentive for companies in the form of reimbursement of duty paid on loan capital wholly or partially applied for the conversion or consolidation of existing loan capital, Item 10 of the Ninth Schedule to the Bill specifies a reduced ad valorem rate of 0.1% for such loan capital.

1. Mortgages

The Bill retains the stamp duty rate for mortgages at 0.375% as contained in the SDA, however, mortgages relating to property of less than N10 million are exempted from the payment of stamp duty.

1. Leases:

Item 22 of the Ninth Schedule to the Bill adjusts the rates applicable to leases as follows:

1. 0.78% for leases with terms between 0–7 years; and
2. 3% for leases exceeding 7 years.

Additionally, it excludes properties with an annual value less than ₦1million or 10 times the annual minimum wage (whichever is higher).

This marks a shift from the previous “tripartite structure” of:

1. 0.78% for leases of 7 years or less;
2. 3% for leases between 7–21 years; and

iii.   6% for leases exceeding 21 years.

1. Conveyance or Transfer on Sale:

Whilst the rate remains at 1.5%, the Ninth Schedule to the Bill exempts transactions where:

1. The property value is ₦10million or less; The transfer occurs between associated companies holding at least 90% shareholding in each other (directly or through a third party), provided that the instrument had been stamped upon initial purchase.
2. Electronic Money Transfer Levy:

Retaining the provisions introduced and modified by the Finance Acts, the Ninth Schedule continues to impose a fixed duty rate of ₦50 on transfers of ₦10,000 and above, excluding:

1. Payments into one’s own account; or
2. Transfers between accounts of the same account holder within the same bank.
3. Liability for Stamp Duty

One of the most noteworthy reforms in the Bill is the clarification provided in Section 125(2)5 and the Ninth Schedule regarding the party liable to pay stamp duty. For instance:

1. For loans, the lender is liable;
2. For leases, the lessee is liable;

iii. For transfers of property, the transferee is liable; and

1. For guarantees, the guarantor is liable.

These provisions resolve longstanding uncertainties concerning liability for stamp duty, thereby fostering greater clarity and compliance for contracting parties.

MANNER OF DENOTING DUTY

Pursuant to Section 5 of the SDA and as reiterated in other provisions,6 documents may currently be stamped using methods such as adhesive stamps, impressed stamps, embossed stamps, postage stamps, or stamps

made by die. However, in alignment with modern trends, Section 124(1) of the Bill introduces updated methods for stamping, which include: tax stamps; a die; electronic or digital tagging; electronic receipt; or issuance of  certificate. The inclusion of multiple digital stamping methods underscores the nation’s commitment to advancing towards a digitized economy and enhancing the efficiency of service delivery.

CHANGE OF ADMINISTRATIVE BODY

Currently, Section 4 of the SDA,7 designates the FIRS as the competent authority for imposing, charging, and collecting stamp duties, on instruments executed between a company and an individual, group or body of individuals, whilst the relevant tax authority in a State is charged with the responsibility of collecting duties in respect of instruments executed between persons or individuals at such rates to be imposed or charged as may be agreed with the Federal Government. However, Section 124(2) of the Bill proposes a significant shift by identifying the Joint Revenue Board (the “Board”) as the relevant administrative body for the administration of stamp duties.8 Consequently, the passage of the Bill into law will supersede the FIRS’ and State tax authorities’ role in stamp duty administration, effectively transferring such powers to the Board.

viii. Digital Assets as Chargeable Assets

The Nigeria Tax Bill incorporates a definition for “digital assets,” aligning with their introduction as chargeable assets under the Finance Act 2023. Digital assets are defined as digital representations of value that can be exchanged electronically, including but not limited to crypto assets and non fungible tokens (NFTs). Under the proposed provision, all digital assets, including cryptocurrencies and non-fungible tokens (NFTs), are classified as property or assets and are deemed chargeable for tax purposes. This classification implies that any individual or entity, whether a Nigerian resident or a Non Resident Company (NRC), deriving gains from the disposal of digital assets, such as cryptocurrencies or NFTs, will be subject to taxation in Nigeria. This framework underscores the government’s intent to regulate and capture tax revenue from the growing digital asset economy, ensuring compliance from both domestic and international entities engaging in taxable transactions within its jurisdiction.

1. Relief from Double Taxation

The Nigeria Tax Bill provides for unilateral relief for taxes suffered outside Nigeria on income that is brought into Nigeria. It provides for credit for taxes paid outside Nigeria, provided that the income is brought into Nigeria through approved channels. This differs from the current position which provides a deduction for taxes paid outside Nigeria. The Bill further provides that Double Taxation Agreements (DTAs) between Nigeria and any other country shall have effect upon domestication.

It also empowers the Minister to issue Regulations for the implementation of DTAs. Presently, the Company Income Tax Act and Personal Income Tax Act confer precedence on DTAs over domestic tax legislation. The Nigeria Tax Bill seeks to remove the precedence. It also seeks to amend the DTAs by excluding additional taxes paid in conformity with global minimum tax rules from the reliefs granted under DTAs. The question, however, is whether Nigeria can unilaterally amend the provisions of her DTAs.

1. Economic Development Tax Incentive

The Nigeria Tax Bill seeks to introduce the Economic Development Tax Incentive (EDTI), granting specific incentives to priority sectors. The EDTI will replace the Pioneer Status Incentive granted under the Industrial Development (Income Tax Relief) Act (IDITRA) for pioneer industries. The Bill contains provisions on eligibility for the EDTI, the duration of EDTI, and addresses other incentives that may be enjoyed by certain categories of businesses, post their utilisation of EDTI. Some of these include, profits or gains of friendly societies, co-operative societies, educational, ecclesiastical, or charitable organisations, trade unions, and government entities, provided such profits or gains are not derived from trade or business activities. Dividends distributed by authorised collective investment schemes, dividends or rental income received by real estate investment companies on behalf of shareholders, provided at least 75% of such income is distributed within 12 months are also exempted from income tax. However, shareholders and the company remain taxable on other forms of income or undistributed amounts.

Gains from the disposal of assets by angel investors, venture capitalists, and others in labelled startups, provided the assets were held for at least 24 months in Nigeria. These provisions aim to promote investment, protect vulnerable groups, and ensure certain public and non-profit activities remain tax-free.

Other Highlights

• Offences and penalties are consolidated into a single chapter for clarity and ease of enforcement. The bill introduces new offences and imposes stiffer penalties to reflect current realities, granting tax authorities the power to apply administrative sanctions.
• Taxable persons engaged in services involving the exchange custody or management of virtual assets classified as Virtual Assets Service Providers (VASPs) are required with or without notice to submit returns on virtual assets in addition to regular income tax returns.
• The senate version retains the investigation power of the service and other relevant authorities which were removed in the house version.
• The bill introduces surcharges on telecommunication services, gaming and lottery.
• It allows the input of VAT claims on all items, including fixed assets and services.
• A clear legal framework is provided for the taxation of Limited Liability Partnerships (LLPs) with the definition of a “company” expanded to include the place of management.
• The reasonability and necessity tests are removed as criteria to determine allowable business expenses
• Lottery and gaming businesses are treated as specialized sectors subject to corporate tax at the standard 30% rate.
• The bill domesticates the Global Minimum Tax Rules with exemption for Nigerian companies with an annual turnover of less than ₦20 billion.
• It introduces economic development incentives to replace the existing pioneer status with a focus on rewarding productivity.
• The bill also provides mechanisms for dispute resolution, advance rulings, mandatory disclosure of tax planning and the accreditation of tax agents.

5.0    ECONOMIC STABILIZATION BILL(ESB)

Apart from the tax reform bills ,the Economic Stabilisation Bills (ESB) was earlier approved by the Federal Executive Council contain some recommendations of the Presidential Fiscal Policy and Tax Reforms Committee as part of the Accelerated Stability and Advancement Plan (ASAP) of the government.

The ESB seeks to amend about 15 different tax, fiscal, and establishment laws to facilitate economic stability and set the country on the path for sustained inclusive growth.

Policy objectives Include-:

1. a) Inflation reduction and price stability.
2. b) Complement monetary policy measures with appropriate fiscal interventions to strengthen the naira and sustain exchange rates convergence
3. c) Promote fiscal discipline and consolidation
4. d) Enhance job creation and poverty alleviation
5. e) Export promotion and diversification

Proposed changes:

The key changes to be made to the various laws include –

Amendments to the income tax laws to facilitate employment opportunities for Nigerians in Nigeria within the global value chain, including the digital economy.

• Zero rated VAT and improved incentive regime to promote exports in goods, services, and intellectual property.
• Amendments to facilitate investment in the gas sector and simplify the local content requirements to ensure competitiveness.
• Reform of the foreign exchange regime to enhance the regulatory powers of the CBN, unlock more forex liquidity, strengthen the naira, and sustain rates convergence.
• Tax reliefs for private sector employers in respect of wage awards and transport subsidies provided to their employees.
• Tax relief to companies that generate incremental employment and retain such employees for a minimum of 3 years.
• Fiscal discipline and enhancement of remittances from government agencies and corporations to the Consolidated Revenue Fund of the federal government.
• Collaboration with states to suspend certain taxes on small businesses and vulnerable population such as road haulage levies and other charges on transportation of goods; business premises registration; animal trade and produce sales tax; bicycle, truck, canoe, wheelbarrow, and cart fees; shops, kiosks and market taxes and levies.
• Introduction of “Tax Identification Consolidation and Collaboration (TICC)” initiative to expand the tax base, widen the tax net, and create a level playing field for businesses.
• Provision of additional funding for the Students Loan Scheme.

6.0    Conclusion

The tax reform bill is a landmark piece of legislation that reflects Nigeria’s ambition to modernize its tax system and create a more efficient, equitable, and sustainable fiscal environment. While the bill has faced criticism and revisions, its overall direction suggests a significant shift in how Nigeria will approach taxation in the coming years. The government’s ability to implement these reforms effectively will determine the success of the tax system in fostering economic development, reducing inequalities, and improving compliance. Only time will tell whether these ambitious changes will bring about the desired transformation in Nigeria’s economy.

The provisions outlined in the Tax Reform Bills offer considerable opportunities for revenue optimisation. These measures primarily aim to ensure the appropriate taxation of income, profits, and transactions that are rightfully taxable. Aside from the proposed increase in the VAT rate, many experts have stated that the provisions do not introduce substantial additional tax burdens on businesses or individuals, and they are unlikely to lead to adverse economic distortions.

To ensure the effective implementation of these provisions, the government must adopt approaches that balance efficiency with minimal taxpayer burden. Specifically, the enforcement of minimum tax provisions should be carefully structured to avoid negatively impacting investment and profitability.

6.1 Recommendations

One of the major challenges we face in Nigeria is effective implementation of laws, policies and regulations. We do hope that when the tax reform bills are signed into law that there will be effective implementation of the laws especially in the following areas:-

1. Taxation of high network individuals

We expect the tax authority to have the political will to ensure that high network individuals are brought into the tax net and pay their fair share of taxes. Taxation is a fiscal tool for redistribution of income and wealth.

2. Capital gains tax effective implementation.

Many properties are being sold and bought in the country and little is collected as capital gains tax. Government agencies especially the Land approval and Development Authorities, must ensure that capital gains tax is paid on a property before perfection of title documents.

3. Company Income Tax inefficient collection.

Many companies in Nigeria that are doing business are still not in the tax net. The NRS should put all structures, systems and strategies in place to bring all companies in to the tax net by collaborating with the Corporate Affairs Commission(CAC) .

4. Implementation of institutional mechanism to combat tax evasion in Nigeria.

People should be ask to present their tax certificate or tax receipts when they go to government agencies to look for international passport, driving licence, vehicle license, land acquisition, public schools admission of their children etc

5. Government accountability of taxpayers money.

Government at all levels should transparency and accountability on use of taxpayers money. Nigerians are willing to pay taxes if they see improve in security, uninterrupted power supply, good roads, improved public health and educational facilities. It is not enough asking people to pay tax. Politicians and government officials should show Nigerians that they are transparent and accountable in managing public funds.

6. Curbing Double and Multiple Taxation.

Multiple taxation can only be minimised when the National Assembly amend the Constitution by reducing the number of taxes and levies collected by the three (3) tiers of government. The current practice where Local government collect about 21 levies and fees, while the states collect about 20 taxes and levies pose disincentive to entrepreneurship and growth of small and medium scale enterprises. For instance, while the Federal government through the FIRS collects VAT from hotels, the states through the states IRS collect consumption tax from the same hotels in their states. VAT is a consumption tax and should not be collected twice from same business entity.

References

• Adewola Orobiji and Dimoka Onyebuchi (2025) Understand the impact of tax reform bill. Anderson publications.
• Afriwise (2024): President Tinubu’s Tax Reform Bill: Implications and Pathways for Progress. Afriwise publications
• Kennedy Iwundu (2024) Contemporary Issues On Taxation in Nigeria,  Vol 2., WOCA Printing Hub. ISBN: 978-792 – 992-6
• Michael Chibuzo (2024) President Tinubu’s Tax Reform Bills under a microscope. Proshare publications
• Odo Etonu Ugwu and Ella Eboigbe (2025) The Newly Approved Tax Reform Bill: A Voyage into The Future of Nigeria’s Tax Allocation. Mondaq Newsletters Publications
• Oyeyemi Oke and Chukwuemeka Ozuzu (2024) Nigeria’s Tax Bill. Potential Repeal of Stamp Duty Act. AO2Law Firm Publications
• Policy and legal advocacy center (2025): Analysis of The Nigerian Tax Reform BILLS, Policy and Legal Advocacy Centre (PLAC) publications
• Policy and legal advocacy center (2025): understanding tax reform bill, Policy and Legal Advocacy Centre (PLAC) publications
• Taiwo Oyedele (2024) some key facts about Nigeria tax bill. X.com publications

Source: BarristerNG