The Presidential Fiscal Policy and Tax Reforms Committee has introduced several key changes to the tax system in Nigeria. These include changes to income tax laws, zero-rated VAT, and other incentives to promote exports in goods, services, and intellectual property. Small businesses with an annual turnover of N50 million or less will be exempt from VAT, including withholding tax, value-added tax, and the 0% corporate income tax rate.

Exemption from PAYE (personal income tax) for minimum wage earners and reduced tax burden for over 90% of all workers in the private and public sectors. VAT at 0% for food, education, healthcare, rent, public transportation, fuel products, and renewable energy will be provided, constituting 82% of household consumption and nearly 100% for low-income households to ameliorate the rising cost of living for the masses.

The Tax Ombudsman will advocate for an improved tax system and protect vulnerable taxpayers. The corporate income tax rate will be reduced from 30% to 25% over the next two years, and earmarked taxes on companies will be eliminated. Instead, a harmonised single levy at a reduced rate will be replaced. Minimum tax on loss-making companies and those with low-profit margins will also be eliminated.

Input VAT credit will be granted to businesses on assets and services to improve investment competitiveness and reduce the cost of goods and services. The personal income tax brackets and rates, VAT, and capital gains tax will be designed to be progressive while protecting the poor.

To reduce pressure on the exchange rate and simplify business compliance, changes will be made to permit the payment of taxes on foreign currency-denominated transactions in naira. Over 50 nuisance taxes and levies will be repealed, and the remaining taxes will be harmonised to a single digit.

A new national fiscal policy will set the framework for fair taxation, responsible borrowing, and sustainable spending. The Tax Ombudsman will advocate for an improved tax system and protect vulnerable taxpayers.

What you should know:

Income Tax Law Changes

• Facilitate remote work opportunities for Nigerians in Nigeria within the global business process outsourcing.
• Empower youths to play a key role in the digital economy space.

VAT and Export Incentives

• Zero-rated VAT and other incentives to promote exports in:
  • Goods
  • Services
  • Intellectual property

Tax Exemptions for Small Businesses

• Tax exemptions for small businesses with an annual turnover of N50 million or less, including:
  • Withholding tax
  • Value added tax
  • 0% corporate income tax rate

Personal Income Tax Adjustments

• Exemption from PAYE (personal income tax) for minimum wage earners.
• Reduced tax burden for over 90% of all workers in the private and public sectors.

VAT Exemptions for Essential Goods and Services

• VAT at 0% for:
  • Food
  • Education
  • Healthcare
• Exemption for:
  • Rent
  • Public transportation
  • Fuel products
  • Renewable energy
• These items constitute 82% of household consumption and nearly 100% of low-income households.

Tax Ombudsman Introduction

• Advocate for an improved tax system.
• Protect vulnerable taxpayers.

Corporate Income Tax Reduction

• Reduction of corporate income tax rate from 30% to 25% over the next 2 years.
• Elimination of earmarked taxes on companies to be replaced with a harmonized single levy at a reduced rate.

Minimum Tax Elimination

• Elimination of minimum tax on loss-making companies and those with low profit margins.

Input VAT Credit for Businesses

• Grant of input VAT credit to businesses on assets and services to:
  • Improve investment competitiveness
  • Reduce the cost of goods and services

Tax Bracket Redesign

• Redesign of:
  • Personal income tax brackets and rates
  • VAT
  • Capital gains tax
• Ensure progressivity while protecting the poor.

Foreign Currency Tax Payment Changes

• Permit the payment of taxes on foreign currency-denominated transactions in naira.
• Reduce pressure on the exchange rate.
• Simplify compliance for businesses.

Nuisance Tax Repeal

• Proposal to repeal over 50 nuisance taxes and levies.
• Harmonize the remaining taxes to a single digit.

VAT Revenue Sharing

• Introduce an equitable basis for VAT revenue sharing to ensure fair treatment of states without many headquarters companies.

Tax Incentive Rationalization

• Rationalize tax incentives to:
  • Reduce uncertainty
  • Provide a level playing field for all investors

National Fiscal Policy

• A new National Fiscal Policy to set the framework for:
  • Fair taxation
  • Responsible borrowing
  • Sustainable spending