Nigeria Tax Reform Act: In mid-2025 the Federal Government of Nigeria signed a set of comprehensive tax reform laws that will reshape how taxes are collected, who pays, and how tax reliefs are handled. These Acts take effect from 1 January 2026. This article explains the core changes, the practical implications for individuals and businesses, and clear actions you should take to prepare.
The reforms consolidate multiple tax laws into a unified legal framework; rename and restructure the tax authority into the Nigeria Revenue Service (NRS); introduce new personal income tax bands with an exemption for lower incomes; replace some long-standing reliefs (like the CRA) with targeted measures such as rent relief; adjust corporate tax rules and thresholds; and emphasize digitalization and administrative reform. Official guidance and gazetted texts were published in 2025. For an authoritative summary, see PwC’s briefing on the reform Acts and the gazette notice published by the federal government.
Which laws were passed and when do they take effect?
The reform is not a single law but a package composed of four principal Acts that were approved and subsequently gazetted in 2025. These are commonly referred to as the package that will govern taxation from 2026:
- Nigeria Tax Act (NTA), 2025 — consolidates substantive tax rules and rates.
- Nigeria Tax Administration Act (NTAA), 2025 — governs administration, compliance procedures and dispute resolution.
- Nigeria Revenue Service (Establishment) Act, 2025 — rebrands and restructures the tax authority (the former FIRS) into the Nigeria Revenue Service (NRS).
- Joint Revenue Board (Establishment) Act, 2025 — aims to streamline federal/state/local cooperation on revenue collection and allocation.
These Acts were signed during June 2025 and the Federal Government announced a start date of 1 January 2026 for operational implementation to allow for transition, sensitization and systems alignment. Read official roll-out commentary and gazette notices via Nairametrics and other outlets that covered the gazetting. (Nairametrics — gazette).
Top-line changes you must understand
| Area | What changed | Why it matters |
|---|---|---|
| NRS (formerly FIRS) | FIRS rebranded as Nigeria Revenue Service with expanded mandate to collect certain non-tax revenues and coordinate revenue functions across tiers. | Centralizes administration, aims for stronger digital compliance and unified enforcement. (KPMG) |
| Personal income tax | Exemption threshold introduced for low incomes (guidance shows full exemption for incomes up to ₦800,000 with changes to reliefs like CRA replaced by a rent relief claim capped at ₦500,000). | Reduces tax burden for millions, but requires declaration and documentation for rent relief claims. (Mercans) |
| VAT & exemptions | VAT rate proposals were debated; the final position retained a VAT rate with targeted exemptions for essentials (food, healthcare, education, some transport and accommodation categories are treated preferentially in the new texts). | Impacts prices and VAT reporting; businesses handling exempt supplies must adjust invoicing and reclaim procedures. (Reuters) |
| Corporate tax & thresholds | Small companies meeting turnover/asset thresholds get special exemptions; new provisions addressing minimum tax and global minimum tax for multinationals were introduced. | Incentivizes small business growth but raises compliance complexity for larger and international groups. (PwC) |
| Administration & digitalization | Emphasis on digital filing, e-invoicing where applicable, taxpayer registers and a six-month transition window between signature and full enforcement. | Expect more automated assessments, quicker audits, and a need for better digital tax recordkeeping. (Andersen) |
How the changes affect individuals (practical view)
The new personal income tax structure is designed to be more progressive with direct relief for low income earners. Key takeaways:
- Exemption for low income: Guidance issued in late 2025 shows full exemption for individuals earning up to a specified threshold (commonly referenced at ₦800,000 in practitioner summaries). If your annual taxable income falls at or below that threshold you will not pay PAYE under the new banding; confirm the final application rules with the NRS when the official guidance is released. See professional notes from Mercans and KPMG for summaries. (Mercans)
- Consolidated Relief Allowance (CRA): The long-standing CRA is removed. In its place the law introduces a rent relief mechanism that allows a deduction equal to the lower of ₦500,000 or 20% of annual rent paid (supporting documentation may be required). This change may reduce the relief amount for many taxpayers who previously benefited from the CRA’s calculation method. (KPMG)
- Records & declarations: Because the rent relief is claim-based, taxpayers who want to claim must keep rent receipts or acceptable evidence of residence arrangements.
- Employees and payroll: Employers must update payroll systems to reflect the new bands, new reliefs and documentation requirements. Expect new employer guidance from the NRS instructing how to adjust PAYE withholdings during the transition window.
How the changes affect businesses (practical view)
The reform package contains multiple business-facing changes. Below are the main operational and strategic implications.
Small businesses and informal sector
The Acts introduce favorable thresholds for smaller companies — including turnover and qualifying asset tests — which may provide tax relief or exemption for micro and small enterprises. Small operators should confirm the exact definitions and conditions in the gazetted texts and seek local tax advice if revenue approaches a threshold.
Corporate tax, minimum tax and multinationals
The reforms include measures to limit profit base erosion and to align domestic rules with international minimum tax expectations for multinational enterprises. This may include a domestic minimum tax and rules that apply top-up taxes for large cross-border groups. The intention is to ensure multinationals contribute fairly while aligning Nigeria’s regime with global minimum tax frameworks. See PwC’s practitioner guide for technical explanation. (PwC)
VAT, invoicing and sector effects
Some essential supplies are exempted under the new legal structure, which means businesses in sectors like food, healthcare and education will need to review pricing, input VAT recovery and invoicing formats. Businesses that previously claimed input VAT on a broad basis must now carefully allocate input claims between taxable and exempt supplies to avoid disputes during audits.
Compliance and digitalization
One of the reform aims is to move Nigeria toward a more digital tax ecosystem. This will increase automation of filings, assessments and possibly data exchanges between government agencies. Businesses should plan for:
- Upgrading accounting systems to handle new VAT/exemption codes and rent relief reporting.
- Strengthening document management and e-recording for rent receipts and invoices.
- Training finance teams on new filing cycles, e-platforms and dispute procedures introduced by the NTAA.
Winners and potential losers
The reforms are intended to be broadly progressive, but distributional effects differ by sector and taxpayer profile.
- Likely winners: lower-income wage earners who fall below exemption thresholds; small businesses below threshold caps; compliant taxpayers who benefit from simplified filing processes.
- Potential losers / friction points: homeowners who previously benefited from CRA without paying rent (they lose rent relief advantage); businesses that have to reclassify supplies and manage VAT exemptions; taxpayers unprepared for increased documentation demands.
Top operational risks during the transition
Any major administrative reform carries execution risk. The most common operational issues to watch for:
- System readiness: Delays in NRS digital platforms or inconsistencies across state tax authorities could create filing confusion.
- Capacity and training: Employers, accountants and tax consultants need training on new bands, reliefs and claim rules to avoid misfiling.
- State vs federal coordination: The Joint Revenue Board Act aims to harmonize revenue functions, but practical allocation of VAT and other shared revenues may create short-term disputes between tiers of government (a risk flagged during legislative debates). (Reuters)
- Public communication: Misunderstanding about increases (or not) in VAT rates caused significant debate – clear NRS guidance will be essential to calm stakeholder concerns.
What professionals are saying
Large accounting and advisory firms have issued practitioner notes stressing the need for swift internal action plans. KPMG, PwC and other international firms published summaries underscoring rent relief administration, PAYE band changes, and the rebranding to the NRS. Practical observation: while the policy shift is pro-growth and aims to boost disposable incomes, the mechanics (claims, documentation, digital filings) will determine public confidence and the reform’s effectiveness. See PwC and KPMG briefings for details. (PwC) — (KPMG).
Step-by-step checklist: what to do now
Use this checklist to organize your compliance and planning activities ahead of January 1, 2026.
- Read the official gazette: obtain and review the gazetted texts and any implementing regulations. Reliable coverage and links to the gazette are available via national financial news outlets and practitioner notes. (Nairametrics)
- Assess payroll systems: update pay tables, tax band logic and rent relief claim workflows before the first payroll cycle in 2026.
- Collect rent documentation: where employees will claim rent relief, set up a process to gather and verify receipts or tenancy evidence.
- Review VAT processes: identify which supplies will be reclassified as VAT exempt and update invoicing templates and accounting mapping.
- Upgrade accounting systems: ensure your ERP or accounting software supports new codes, digital filing formats and reports required by the NRS.
- Train staff and advisors: run training sessions for finance, HR and tax teams; consult external tax advisors for interpretation of complex provisions.
- Plan for cashflow volatility: allow extra time and buffer for any change in tax payment timing or disputes during the first filing seasons under the new Acts.
Common implementation questions (brief answers)
When exactly do the rules start? The government published a start date of 1 January 2026 to allow a transition period following signature and gazetting. See official notices and practitioner alerts for precise operational timelines. (Nairametrics)
Do I still need a tax consultant? For most businesses and higher-income taxpayers, targeted advice is recommended at least once to interpret reliefs and update systems; small employers should ensure payroll software vendors provide updated tax tables.
Where can I find authoritative summaries? Leading international accounting firms published accessible briefings summarizing the Acts and their implications. Read PwC’s summary and the KPMG flash alerts for practitioner-level details. (PwC), (KPMG).
Longer-term outlook
If implemented as intended, the 2026 tax reform package could deliver tangible benefits: higher disposable incomes for low earners, a simplified legal environment, and better revenue mobilization enabled by digital administration. The reforms aim to increase Nigeria’s tax-to-GDP ratio and reduce reliance on borrowing for budget financing.
However, success depends on accurate implementation, transparent revenue sharing across federal/state/local governments and strong public communication. Stakeholder engagement during the transition period will be crucial to minimize disputes and ensure the intended distributional benefits are realized.
Authoritative resources & further reading
The following practice and news resources offer detailed texts, practitioner guides and ongoing updates. They were used as primary references while preparing this article:
Final words — practical mindset for 2026
The 2026 tax reforms represent one of Nigeria’s most significant modernizations of tax law. For taxpayers and businesses the next few months are a preparation period: gather documents, update payroll and accounting systems, and secure clear guidance from tax professionals or your payroll provider. The reforms were designed to simplify where possible, but the short-term administrative demands will be real being proactive is the best way to convert policy change into operational advantage.
