As the 2026 tax implementation cycle begins, the Federal Government is highlighting the transformative pillars of the Nigeria Tax Act 2025, describing it as a “paradigm shift” designed to stimulate economic growth by protecting the vulnerable and simplifying the business environment.
The new regime, consolidated from over 60 disparate taxes into fewer than 10 clearly defined statutes, marks the most ambitious fiscal overhaul in Nigeria’s history. The reforms prioritize fairness, replacing regressive “nuisance taxes” with a modern framework that aligns with international best practices.
Key Provisons for Individuals and Households
The 2026 reforms introduce immediate relief for the majority of Nigerian workers through significant exemptions and restructuring:
Tax-Free Threshold: Individuals earning ₦800,000 or less annually are now completely exempt from personal income tax, providing immediate breathing room for low-income earners.
Rent Relief: For the first time, taxpayers can claim a 20% deduction on annual rent (capped at ₦500,000) when computing their chargeable income.
Zero-Rated Essentials: Value Added Tax (VAT) remains at 7.5%, but the law reinforces a 0% rate on essential goods, including basic food items, educational materials, and healthcare services.
Redundancy Protection: Tax exemptions on compensation for job loss or injury have been increased from ₦10 million to ₦50 million.
Empowering Small Businesses and SMEs to drive entrepreneurship, the new law removes the “taxation of capital” and focuses on actual profitability:
CIT Exemption: Small businesses with an annual turnover of less than ₦50 million are now 100% exempt from Company Income Tax (CIT).
Development Levy Consolidation: The new “Development Levy” replaces multiple legacy charges (including the Tertiary Education Tax and IT Levy), simplifying the compliance burden for medium and large enterprises.
Agribusiness Incentives: New companies in the agricultural sector are granted a five year tax holiday to bolster national food security.
Institutional Modernization and Digitalization A core component of the reform is the transition of the Federal Inland Revenue Service (FIRS) into the Nigeria Revenue Service (NRS). This new body is empowered with expanded mandates to:
Harmonize Identification: The use of the Tax Identification Number (TIN) is now mandatory for financial transactions, with an individual’s NIN serving as their Tax ID to streamline the system.
Enhanced Transparency: The establishment of the Office of the Tax Ombud provides an impartial arbiter for taxpayer complaints and disputes.
Digital First Compliance: The NRS is deploying a “single window” for tax administration, moving toward e-invoicing and automated audits to eliminate harassment and corruption.
The Presidential Committee on Fiscal Policy and Tax Reforms emphasizes that these changes are not about increasing the tax burden on the average citizen, but about broadening the base by bringing high-net-worth individuals and large corporations into the net.
“This reform is about fiscal justice,” stated a committee representative. “By reducing the burden on 98% of workers and 97% of small businesses, we are increasing disposable income and encouraging the investments that will lead to sustainable national recovery.”
