Introduction

Nigeria’s Senate has approved a groundbreaking Tax Reform Bill designed to overhaul the country’s fiscal system and enhance non-oil revenue generation. As the bill moves to President Tinubu’s desk for final approval, companies must brace for significant adjustments.

A key change is the establishment of the Nigeria Revenue Service (NRS), which will replace the existing tax structure. Unlike its predecessor, the FIRS, which retained 4% of non-oil tax revenues, the NRS will receive 2% of all federal revenues—including oil earnings. This reduction is due to the NRS’s expanded mandate, which now incorporates oil royalties (previously managed by the NUPRC).

The Senate adjusted the funding rate to prevent excessive allocations while granting the NRS greater centralized control over tax collection. While this shift aims to strengthen budget oversight, businesses will now deal with a single, more powerful federal tax authority.

Overview of the Nigeria Tax Bill 2024 (HB. 1759) and Associated Tax Reform Bills

The Nigeria Tax Bill 2024 (HB. 1759) is a key component of the government’s broader effort to reform the nation’s tax framework. Designed to boost revenue, encourage compliance, and simplify tax administration, this bill is accompanied by three others: the Nigeria Tax Administration Bill (HB. 1756), the Nigeria Revenue Service (Establishment) Bill (HB. 1757), and the Joint Revenue Board (Establishment) Bill (HB. 1758). Together, these legislative proposals aim to update and harmonize Nigeria’s tax regulations.

Major Highlights of the Nigeria Tax Bill 2024 (HB. 1759)

1. Streamlining of Tax Legislation

The bill replaces multiple existing tax laws with a consolidated Nigeria Tax Act. Affected statutes include:

  • Companies Income Tax Act
  • Personal Income Tax Act
  • Petroleum Profits Tax Act
  • Value Added Tax Act
  • Stamp Duties Act
  • Capital Gains Tax Act

    • 2. Corporate Tax Adjustments

  • Small Businesses: Firms with an annual turnover of ₦50 million or less are exempt from income tax.
  • Standard Rate: The corporate tax rate remains at 30% for other companies.

    • 3. Revised Personal Income Tax Structure

    A tiered tax system is proposed, with the following brackets:

  • 0% for earnings up to ₦800,000 annually
  • 15% for incomes between ₦800,001 and ₦3,000,000
  • 18% for ₦3,000,001 – ₦12,000,000
  • 21% for ₦12,000,001 – ₦25,000,000
  • 23% for ₦25,000,001 – ₦50,000,000
  • 25% for incomes exceeding ₦50,000,000

    • 4. Value Added Tax (VAT) Modifications

  • The VAT rate stays at 7.5%.
  • A revised distribution formula allocates VAT revenue to states as follows:
  • 50% equally among all states
  • 20% based on population
  • 30% tied to consumption patterns

    • 5. Taxation of Petroleum and Hydrocarbon Operations

    A dual-tax system is introduced for upstream petroleum activities, combining hydrocarbon tax and petroleum profits tax. The bill outlines specific rules for deductions, allowances, and fiscal stability measures.

    6. Institutional and Administrative Changes

  • Nigeria Revenue Service (NRS): A new agency to replace the Federal Inland Revenue Service (FIRS), tasked with centralized tax collection.
  • Joint Revenue Board (JRB): A coordinating body to align federal and state revenue initiatives, supported by the Tax Appeal Tribunal and the Office of the Tax Ombudsman for resolving disputes and safeguarding taxpayer rights.

    • 7. Legal Precedence Clause

    Under Section 202, the Nigeria Tax Act takes precedence over conflicting tax-related laws, rendering any inconsistent provisions null and void.

    Implications

    The passage of these tax reform bills by the National Assembly signifies Nigeria’s commitment to a modern and coherent tax system. The reforms aim to broaden the tax base, improve revenue mobilization, reduce administrative inefficiencies, and align Nigeria’s tax system with global standards.

    SMEs Win Big: ₦50m Tax-Free Zone

    Micro and small businesses (turnover ≤ ₦50m) get a total federal tax holiday:

  • 0% Corporate Income Tax (CIT)
  • No Withholding Tax (WHT) on payments to them
  • VAT exemption (aligning with the new ₦50m threshold) Why it matters: 90% of Nigerian businesses fall under this bracket, freeing cash for growth and formalization. But the government bets on long-term gains from a wider tax base over short-term revenue loss.

    • Corporate Tax Cuts: From 30% to 25%

  • 2025: CIT drops to 27.5%
  • 2026 onward: 25% for large firms (vs. decades-old 30%)
  • Oil sector: Replaces chaotic 85% petroleum profit tax with 30% CIT (phasing down to 25%). However, Multinationals (turnover ≥ ₦1 trillion) face a 15% global minimum tax to curb profit-shifting. Loss-making firms also see minimum tax thresholds doubled (₦50m turnover). The bottom line is that Lower rates aim to lure investors, but stricter rules ensure Nigeria gets its share.

    • Development Levy: Fewer Taxes, Smarter Spending

    A new 4% levy on profits (phasing down to 2% by 2030) replaces:

  • Education Tax (2.5%)
  • NASENI Levy (0.25%)
  • NITDA Levy (1%)

    • Student loans, tech innovation, and infrastructure. For businesses, it’s a net tax cut: Total profit tax drops from ~34% (CIT + old levies) to 27% by 2030.

    VAT Revolution: Follow the Money

    The 7.5% VAT rate stays, but revenue sharing flips to consumption-based:

  • FG: 10% (down from 15%)
  • States: 55% (allocated 60% equally, 40% by consumption)
  • Local Govts: 35%

    • Mandatory e-invoicing and a Single Tax Portal to plug leaks. States will audit based on where goods are consumed, not where firms are based.

    Crypto & Digital Assets: Taxman Cometh

    Nigeria doubles down on taxing the digital economy:

  • 10% Capital Gains Tax on crypto, NFTs, and tokens (mirroring 2023 rules).
  • Prior loophole: Digital assets were tax-free pre-2023. Now, gains are treated like property or stock profits. A modest revenue play today, but a strategic move to capture Nigeria’s booming digital future.

    • Nigeria’s 2025 Tax Reform Bill represents a strategic push to modernize the country’s revenue system, drawing from previous initiatives while adapting to international best practices. Key measures—such as reducing corporate income tax, introducing digital economy taxation, and simplifying compliance—aim to boost small businesses, attract foreign capital, and harmonize Nigeria’s tax framework with global trends. However, significant hurdles remain, including potential revenue gaps, the technical demands of digital compliance (e.g., e-invoicing), and inconsistent enforcement.

    If executed effectively, these reforms could accelerate business formalization, strengthen investor trust, and redirect vital funds into priority areas like education and technology. Conversely, poor implementation, lax monitoring, bureaucratic delays, or widespread tax avoidance could undermine progress and weaken fiscal stability.

    Ultimately, the impact of this transformative overhaul depends on consistent and transparent enforcement. Success could reposition Nigeria’s economy as a regional leader, while failure risks squandering a critical opportunity for growth.

    From Moore Bishop & Rooks | Trusted Accounting & Audit Firm in Lagos, Nigeria.