Based on the Valucop Global Webinar with Barrister Ugochukwu Kelechi
1. Why Nigeria Introduced New Tax Reforms
Historically, Nigeria’s tax system has been:
- Complex and difficult to understand
- Overlapping (federal, state, and local bodies issuing similar taxes)
- Largely focused on government workers and registered companies
- Weak in compliance and digital tracking
The new reforms aim to:
✔ Unify the tax structure
All previous tax laws are consolidated into a single framework called the Nigerian Tax Acts.
✔ Digitize tax administration
Filing, reporting, and payment will now be done digitally, using platforms like TaxPro Max (soon migrating under the Nigeria Revenue Service, NRS).
✔ Expand the tax base
The government is capturing:
- Remote workers
- Digital creators
- Freelancers
- People with foreign income
- Crypto and virtual asset traders
- SMEs with significant economic activity
✔ Reduce multiple taxation
For example, the reform merges numerous levies into a single 4% Development Levy, which decreases to 2% by 2030.
2. The Six Major Taxes That Apply Under the New Regime
Nigeria now operates two categories of taxes: Direct and Indirect.
2.1. Personal Income Tax (PIT)
Applies to:
- Salaried workers
- Freelancers
- Business owners
- Remote workers earning from abroad
- Creators and service providers
This includes “Pay-As-You-Earn” (PAYE) for employees.
2.2. Company Income Tax (CIT)
Paid by companies on profits, not on revenue.
Under the new reform:
- CIT reduced from 30% to 25%
- Small companies are exempt from paying CIT
However: all companies MUST still file returns, even if exempt.
2.3. Value Added Tax (VAT)
VAT remains 7.5%, but the exemption list has expanded significantly.
2.4. Withholding Tax (WHT)
Applies to payments like:
- Dividends
- Rent
- Royalties
- Interest
Threshold increased from ₦10M to ₦15M for exemptions.
2.5. Capital Gains Tax (CGT)
Paid on profit from sale of:
- Properties
- Shares
- Assets
- Digital assets (NEW)
Rate remains 10%, but with several exemptions.
2.6. Development Levy
A unified levy replacing multiple micro-taxes.
3. VAT Exemptions That Will Reduce Cost of Living
The new law exempts VAT on:
- All food items (previously only certain categories were exempt)
- Educational materials
- Pharmaceuticals
- Medical services
- Electricity
- Baby products
- Agricultural inputs
- Rent
- Humanitarian goods
- Electric vehicles
- Land and buildings
4. Who Is Required to Pay Tax Under the New System?
Under the 183-day residency rule, anyone who lives in Nigeria for at least 183 days a year is considered a tax resident.
This includes:
- Nigerians abroad sending income back home
- Foreigners living and working remotely from Nigeria
- Remote workers paid by foreign companies
- Crypto traders
- Creators earning through YouTube, TikTok, X, Upwork, Fiverr, etc.
Important Clarification:
The law does NOT tax every inflow into your account.
It only taxes income earned from providing goods or services.
For example:
- Diaspora remittances → NOT taxable
- Gifts → NOT taxable
- Salary, content revenue, consulting fees, digital sales → Taxable
5. New Personal Income Tax Rates (Annual)
| Annual Income Bracket | Tax Rate |
|---|---|
| Below ₦800,000 | 0% |
| ₦800,000 – ₦2.2 million | 15% |
| ₦2.2 million – ₦9 million | 18% |
| ₦9 million – ₦13 million | 21% |
| ₦13 million – ₦50 million | 23% |
| Above ₦50 million | 25% |
This structure is progressive — higher income means higher tax.
6. Massive Tax Reliefs and Exemptions You Should Know
6.1. Personal Exemptions
You are exempt from tax if:
- You earn below ₦800,000 annually
- You earn minimum wage
- You receive compensation for job loss up to ₦50M
- You receive gifts
- You earn pensions and gratuities
- You have life insurance contributions
- You pay mortgage interest on your home
- You pay NHF or NHIS contributions
6.2. Rent Relief
20% of annual rent (up to ₦500,000) is tax-deductible.
6.3. Capital Gains Exemptions
You pay zero CGT on:
- Sale of your personal residential home
- Sale of personal effects worth up to ₦5M
- Sale of up to two private vehicles per year
- Gains on shares below ₦150M per year
- Reinvested share gains
6.4. SME Relief
Small companies with:
- Revenue below ₦100M
- Fixed assets below ₦250M
→ Pay 0% Company Income Tax
→ 0% VAT
→ 0% Withholding Tax
→ 0% Development Levy
6.5. Startup Label Companies
Eligible Nigerian startups with official “Startup Label” enjoy:
- CIT exemption
- Capital gains exemptions for investors
- Incentives to attract venture capital
7. Digital & Virtual Assets: Crypto is Now Officially Taxable
The new law formalizes taxation of digital assets such as:
- Crypto
- NFTs
- Tokenized assets
- Utility tokens
- Security tokens
What will be taxed?
Your profit — not your capital.
Example:
If you buy BTC at ₦5M and sell at ₦7M → Gain is ₦2M → CGT applies.
This also means:
- Crypto traders can no longer be profiled as fraudsters
- Nigeria will soon issue licenses for crypto platforms
- Taxation proves crypto is now recognized as a legitimate asset class
8. How to Prepare for the New Tax System (Practical Steps)
Step 1: Get Your Tax Identification Number (TIN)
Every individual AND business must have a TIN by 2025.
Banks may require it for:
- Account opening
- Large transactions
- Business verification
Step 2: Separate Personal & Business Finances
Creators and freelancers should open:
- A business account
- A registered company (Preferably Ltd.)
This alone may drastically reduce your tax burden.
Step 3: Keep Proper Financial Records
Store digital proof of:
- Bank statements
- Invoices
- Receipts
- Payroll
- Transfers
- Expenses
Documentation protects you from over-taxation.
Step 4: Make All Transactions Digital
Digital transactions create traceable evidence.
Cash-based businesses may struggle to defend claims during audits.
Step 5: Take Advantage of Tax-Deductible Expenses
Examples:
- Rent
- Pension
- Office equipment
- Software subscriptions
- Business utilities
- Marketing costs
- Internet costs
These can reduce your taxable income significantly.
Step 6: Work With a Tax Lawyer or Accountant
This is crucial for:
- Annual filings
- Claiming exemptions
- Structuring your business
- Avoiding penalties
- Preparing for digital audits
9. Filing Taxes: How It Works
Company Taxes (CIT, CGT, VAT)
Filed on the FIRS TaxPro Max portal (soon migrating to NRS).
Personal Income Tax (PAYE and others)
Currently collected by State Internal Revenue Services (SIRS), but the new law may unify this soon.
You may need professional help—especially in the transition year of 2026.
Conclusion: What This Means for Nigerians
The new Nigerian tax regime is changing and will impact:
- Creators
- Freelancers
- Remote workers
- Small business owners
- Crypto traders
- High-income earners
- Universities & religious institutions involved in commerce
- Employees in private companies
But it also provides INCREASED protections and exemptions for:
- Low-income earners
- Small companies
- Tech startups
- Agriculture businesses
- Families and homeowners
The most important actions you can take NOW:
- Get your TIN
- Organize your financial records
- Digitize your transactions
- Register a company if you earn meaningfully
- Take advantage of exemptions and reliefs
- Consult a tax professional
The goal is not to burden Nigerians but to build a modern economy where everyone contributes fairly, and enjoys clarity, structure, and protection.
