President Bola Ahmed Tinubu has signed into law four major tax reform bills, marking a significant shift in Nigeria’s fiscal framework. The laws, proposed by the Presidential Committee on Fiscal Policy and Tax Reforms, were signed on Thursday, after months of intense debates involving lawmakers, governors, and policy experts.
The new laws, which overhaul income tax thresholds, introduce digital asset taxation, and mandate Tax Identification Numbers (TINs) for basic financial services, are expected to reshape how individuals and companies interact with the Nigerian tax system.
What This Means for Nigerians
1. Low-Income Earners to Pay Less Tax
The new regime raises the tax-free income threshold from ₦300,000 to ₦800,000 per year, exempting more Nigerians from paying income tax. Only those earning above that amount will now be taxed, with progressive rates reaching 25% for incomes exceeding ₦50 million annually.
2. Everyone Must File Tax Returns — Including Side Income
Under the new law, employees are no longer limited to Pay-As-You-Earn (PAYE) deductions. Every worker must now file annual returns declaring all sources of income, including freelance work, rent, dividends, and other side earnings.
“All Nigerians must declare their income, even side hustles,” one senior member of the Tax Reform Committee told FIJ.
3. Tax ID Required for Banking and Public Contracts
TINs are now mandatory for activities such as opening or operating a bank account, signing contracts with government agencies, or using services like insurance and stock trading. The law empowers tax authorities to automatically assign tax IDs to individuals who fail to register.
4. Government to Monitor Bank Transactions More Closely
Banks are now required to report any account with over ₦50 million in monthly transactions, while corporate accounts hitting ₦250 million must also be flagged. This allows authorities to better track taxable activity and clamp down on evasion.
5. Cryptocurrency and Digital Assets Now Taxable
The reforms expand Nigeria’s tax net to include crypto assets, NFTs, and other digital properties, applying to both residents and foreigners who profit from digital trades in Nigeria. This strengthens provisions already introduced in the 2023 Finance Act.
6. Zero VAT on Essentials
In a move aimed at easing the cost of living, essential goods and services—including food, education, healthcare, house rent, public transport, and renewable energy—are exempted from VAT.
Changes to Tax Sharing and Corporate Levies
While the VAT rate remains at 7.5%, lawmakers revised the revenue-sharing formula to favor states and local governments, adopting a “place-of-consumption” rule to ensure taxes benefit the regions where goods and services are used.
They also:
Retained 30% corporate tax (rejecting a proposed reduction).
Expanded the National Development Levy to cover education, security, and sports.
Placed legal limits on the president’s ability to issue tax waivers.
Required court orders before tax authorities can seize assets from taxpayers.
The bills aim to balance increased tax compliance with reduced burden on lower-income Nigerians, though implementation challenges are expected.