07.01.2025

Nigeria: Navigating the Future - Key Tax Reforms in Nigeria for 2024 and Beyond

In our 2024 Outlook, we noted that Nigeria was overhauling its tax laws and processes pursuant to the establishment of the Presidential Committee on Fiscal Policy and Tax Reforms (the Committee). In furtherance of the Reforms, the Committee has proposed four (4) bills – the Nigeria Tax Bill (NTB), Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill (NRSEB), and the Joint Revenue Board Establishment Bill (JRBEB) – for the overhaul of Nigeria’s tax system. In this update we highlight crucial changes that would arise from these reforms.

Companies Income Tax (CIT)

The NTB is expected to unify all Nigerian taxes and proposes a reduction in income tax (CIT) rate from 30% to 25% over the next 2years as well as the exemption of small companies, which has now been reclassified as companies with an annual revenue threshold of N50,000,000.00, from CIT. It also proposes the elimination of minimum tax on loss-making companies and those with low profit margins. The NTB also proposes the introduction of a new Development Levy of 4% which will be gradually reduced to 2% over the next five years for the funding of infrastructure and developmental projects across Nigeria.

Value Added Tax (VAT)

The NTB proposes to introduce a phased increment of Nigeria’s VAT rate with a view to achieving a new VAT rate of 12.5% in 2026 and 15% in 2030, thereby aligning Nigeria’s VAT rate with the ECOWAS standard by 2030. The NTB also introduces a streamlined VAT refund process, ensuring refunds are issued within 30 days of application without requiring an audit. It also proposes VAT reliefs for small companies to reduce their tax burdens. Notably, the NTB revise the VAT Revenue sharing formular by ensuring that sub-national units are fairly treated and rewarded for their economic contributions.

Personal Income Tax (PIT)

The NTB also seeks to reform Nigeria’s PIT regime by, primarily redesigning the PIT brackets and rates based on income levels. The NTB also aims to encourage remote work and digital nomads by making provisions to the effect that income earned by non-resident persons, from employment in Nigeria will only be taxed if the services are physically rendered within Nigeria.

Other notable changes include:

Change of the name and organizational structure of the Federal Inland Revenue Service to the Nigerian Revenue Service (NRS) to make the NRS the sole collector of revenue for Nigeria pursuant to the NRSEB.
The JRBEB introduces the Tax Ombudsman to advocate for an improved tax system and protect vulnerable taxpayers.

Overall, it is clear that the proposed reforms aim to improve Nigeria’s competitiveness while aligning Nigeria with global standards in taxation. These reforms are expected to create a more business-friendly environment in Nigeria, while ensuring that the country’s tax system remains equitable and efficient, fostering economic growth and improving tax compliance.

If you wish to discuss these topics, please contact:

WTS Blackwoodstone

Author

Kelechi Okparaocha

Managing Partner

Nigeria

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