The New Tax Reforms in Nigeria: What You Should Know and Why It Matters
... here’s a breakdown of what you need to know and how it could benefit you.
If you run a small business in Nigeria, or you’re just trying to keep your head above water in today’s economy, you know the pressure. Prices keep rising, the Naira keeps shaking, and taxes feel like one more thing trying to eat into your hustle.
But here’s some good news: the Federal Government recently introduced a series of tax reform bills aimed at making life easier for individuals, small business owners, and even state governments. Whether you're an entrepreneur, an employee, or just someone trying to understand what’s changing, here’s a breakdown of what you need to know and how it could benefit you.
For Small Business Owners
1. Zero Company Tax for Small Businesses
If your business makes less than ₦50 million in a year, you are now exempt from paying company income tax. This used to apply only to businesses earning under ₦25 million, but that threshold has now doubled. This means more small businesses will keep their money and use it to grow.
2. No More Withholding Tax Deductions
Previously, you might have noticed clients deducting withholding tax before paying you, especially if you were a contractor or vendor. This used to mess up cash flow and confuse your records. The new reforms say small businesses no longer have to deal with that. You’ll now get your payments in full, which gives you more financial control.
3. No Need for Audited Accounts
If you’re a small business owner, you no longer need to submit audited financial statements when filing taxes. A simple, signed statement of your income and expenses is now enough. This saves money on accounting fees and removes one more barrier to staying compliant.
4. Crackdown on Multiple Levies and Roadblock Taxes
You know those “local government” agents who stop you on the road and demand some form of generator tax, signage fee, or random levy? These reforms aim to put an end to that. All these unofficial payments and cash demands that frustrate small businesses are now outlawed.
5. A New Tax Help Center for Businesses
There’s also a plan to set up an independent Office of the Tax Ombud. Think of it like a complaint center where businesses can report unfair treatment by tax officials. If there’s a dispute, it must be resolved in 14 days.
For Everyday Individuals and Workers
1. Tax Relief for Low-Income Earners
If you earn less than ₦1 million per year (about ₦83,000 monthly), you will no longer pay personal income tax (PAYE). For those earning slightly above that, the tax rate has been reduced. This puts more money back into your pocket.
2. VAT Removed from Essentials
Value Added Tax (VAT) is now zero on many basic services and goods. This includes food, healthcare, education, baby products, sanitary pads, transportation, and electricity. The goal is to reduce the cost of living and ensure essentials are more affordable for families.
3. Incentives for Employers
Companies now get tax breaks for hiring more people than they did in the previous three years. This could encourage more recruitment and reduce unemployment.
For State Governments
1. More Control and Revenue for States
State governments will now receive a bigger share of VAT and the entire income from the Electronic Money Transfer Levy. This gives states more money to build roads, pay salaries, and support businesses locally.
2. Autonomy for State Revenue Services
Each state will have more power to manage its internal revenue systems. There will also be a unified system that lets states share tax data and reduce confusion and duplication.
So, What Does All This Mean?
These reforms aim to ease the pressure on those who keep Nigeria’s economy moving: business owners, working-class Nigerians, and state governments. By simplifying taxes, removing unfair charges, and putting more money in the hands of citizens, the goal is to shift people from survival to stability and eventually, to real growth.
If you’ve been delaying registering your business, now is the time to do it. These benefits only apply to registered enterprises. If you’re struggling with tax compliance, know that the rules are becoming simpler, and the system is being cleaned up to work better for you.
The reform isn’t perfect. But it’s progress. And in this economy, that’s worth paying attention to.