Toba Owojaiye reporting
Abuja, Nigeria
In a significant move to reform Nigeria’s tax system, President Bola Tinubu has sent a new tax reform bill to the National Assembly.
Truth Live News gathered that the proposed legislation, titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions and Instruments, and Related Matters,” was dated October 4, 2024. This bill aims to streamline tax administration, broaden the tax base, and introduce incentives to stimulate economic growth.
Key Features of the New Nigeria Tax Bill
Corporate Income Tax (CIT):
Small Companies (Annual Turnover Below ₦50 Million): Exempt from CIT, promoting entrepreneurship and small-scale enterprise growth.
Other Companies:
27.5% on taxable profits for the 2025 assessment year.
Reduced to 25% from 2026 onwards, aligning with the government’s goal to encourage corporate compliance.
Personal Income Tax (PIT):
Progressive tax rates starting at 0% for the first ₦800,000, scaling up to 25% for incomes above ₦50 million. This tiered approach aims to ensure fairness while boosting revenue collection.
Value Added Tax (VAT):
Gradual increase in VAT rates:
10% for the year 2025.
12.5% from 2026 to 2029.
15% from 2030 onwards, reflecting the government’s revenue optimization goals.
Capital Gains Tax (CGT):
A uniform rate of 10% on gains from the disposal of chargeable assets, including real estate and shares. Notably, this also extends to gains from digital assets and online transactions, recognizing the growing importance of the digital economy.
Withholding Tax (WHT):
Adjusted rates to streamline the tax deduction process at the source, reducing the potential for tax evasion.
The bill also proposes various exemptions from VAT to ease the financial pressure on Nigerians and support key sectors:
– Baby products, sanitary towels, pads, and tampons: Essential goods for family care exempted to promote affordability.
– Military and Security: VAT relief on military hardware, arms, ammunition, and locally manufactured uniforms for armed forces and paramilitary agencies.
– Transport Services: Shared passenger road transport services exempted to reduce transportation costs for the public.
– Agricultural Equipment: Relief applies to equipment like tractors and ploughs, although VAT must be paid initially and reclaimed later, encouraging mechanized farming.
– Diplomatic and Educational Activities: VAT exemption on goods and services provided to diplomatic missions and non-profit educational performances, fostering goodwill and educational support.
– Financial Instruments, Government Licenses, and Real Estate: Supplies consumed within export processing or free trade zones for approved activities are also exempted.
These exemptions are designed to support local manufacturing, agriculture, transport, and diplomatic engagements, aligning with the government’s broader economic development goals. However, the provision allows for the reimposition of VAT on these items if the Minister publishes an order in the Official Gazette specifying a date.
A notable highlight of the new tax bill is its focus on the digital economy. Digital assets, online services, and fintech activities are now clearly subject to taxation, aligning Nigeria’s tax policies with global standards. Gains from digital transactions will be taxed at 10%, similar to traditional financial instruments, ensuring that the growing digital sector contributes fairly to national revenue.
The New Nigeria Tax Bill marks a major reform in the country’s tax system, aiming to consolidate various tax regulations into a single, unified legal framework. By simplifying compliance, introducing clearer guidelines, and recognizing emerging sectors, the bill seeks to position Nigeria as a competitive and business-friendly economy.
“These progressive reforms reflect a strategic approach to enhance revenue while promoting fairness and equity,” said a government spokesperson. “The introduction of tax incentives for small businesses and the gradual increase of VAT demonstrates the government’s commitment to balance economic growth with fiscal responsibility.”
The bill is set to take effect from 2025, offering a comprehensive overhaul of the tax framework. If passed, it is expected to support business growth, encourage compliance, and provide a more straightforward and responsive tax system for a rapidly evolving economy. Public sentiment is likely to be mixed, as while the tax incentives for small businesses and essential goods will be welcomed, the gradual increase in VAT may draw concerns over rising costs.