ABUJA, NIGERIA – President Bola Tinubu has officially signed the much-anticipated Tax Reform Bills into law, ushering in a new era for Nigeria’s fiscal landscape. This groundbreaking development, effective immediately, is poised to reshape revenue collection, ease the burden on vulnerable populations, and foster a more business-friendly environment.

Here’s a detailed look at what these new reforms mean for Nigeria and its citizens:

1. Rebranding and Restructuring of Revenue Collection:
One of the most significant changes is the transformation of the Federal Inland Revenue Service (FIRS) into the Nigeria Revenue Service (NRS). This rebranding is not merely cosmetic; the NRS will now centralize revenue collection, taking over responsibilities previously handled by various agencies such as the Nigeria Customs Service, NUPRC (Nigerian Upstream Petroleum Regulatory Commission), NPA (Nigerian Ports Authority), and NIMASA (Nigerian Maritime Administration and Safety Agency). This consolidation is expected to streamline operations, reduce complexities, and improve overall efficiency in revenue generation.

 

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2. Tax Relief for Low-Income Earners:
In a move aimed at alleviating the financial pressure on the most vulnerable, the new law introduces a tax exemption for workers earning ₦800,000 and below annually. This provision is a welcome relief for many Nigerian households, effectively increasing their disposable income.

 

3. Progressive Personal Income Tax for High Earners:
For higher-income earners, a 25% personal income tax will now apply only to individuals earning above ₦50 million annually. This progressive tax structure ensures that those with higher earning capacities contribute proportionally more to the national treasury.

 

4. Boost for Small Businesses:
Recognizing the crucial role of small businesses in economic growth and job creation, the new reform exempts small business owners from paying income tax. This measure is designed to encourage entrepreneurship, foster growth, and reduce the compliance burden on nascent enterprises.

 

5. Reduced Corporate Income Tax for Larger Companies:
To enhance competitiveness and attract investment, the company income tax for medium and large companies will be reduced from 30% to 25% starting in 2026. This reduction aims to create a more attractive business environment, potentially leading to increased investment and economic expansion. It’s important to note that for now, the corporate income tax remains at 30%, with the reduction phased in from 2026.

 

6. VAT Exemptions on Essential Goods and Services:
The new reform brings significant relief to consumers with Value Added Tax (VAT) exemptions on essential goods and services consumed by the poor. This includes critical items such as food, medical services, pharmaceuticals, educational fees, and electricity. This measure directly tackles the cost of living for average Nigerians and is expected to cushion the impact of inflation.

 

7. VAT Rate Remains Stable:
Despite speculations, the VAT rate remains at 7.5%, and there is no increment in corporate income tax for the immediate future. This provides a level of certainty for businesses and consumers alike, avoiding sudden price hikes or increased operational costs.

 

8. Introduction of a Development Levy:
To foster national development and support key institutions, the reform introduces a Development Levy ranging from 4% to 2%. This levy will be strategically allocated to support vital national funds and agencies, including:
* NELFUND (Nigerian Education Loan Fund): Dedicated to providing financial assistance for student loans and educational development.
* TETFund (Tertiary Education Trust Fund): Focused on funding public tertiary institutions to improve infrastructure, research, and staff development.
* NITDA (National Information Technology Development Agency): Responsible for developing and regulating information technology in Nigeria.
* NASENI (National Agency for Science and Engineering Infrastructure): A key agency driving the development of science and engineering infrastructure.

These allocations underscore the government’s commitment to investing in human capital development, technological advancement, and critical infrastructure.

 

The new tax reform represents a comprehensive approach by the Tinubu administration to address economic challenges, stimulate growth, and ensure a more equitable distribution of the tax burden. Nigerians are encouraged to familiarize themselves with these changes to understand their implications and ensure compliance.