Nigeria's fiscal landscape has undergone a significant transformation with the implementation of a new tax structure effective from January 1, 2026. The reforms, which represent the most comprehensive overhaul of the country's tax framework in decades, have clearly redefined the groups bearing the lightest and heaviest tax burdens.
Progressive Structure: Higher Rates for Top Earners
The cornerstone of the new policy is a more progressive tax system designed to strengthen fiscal equity. Individuals with an annual income of ₦50 million and above now fall into a new tax band, facing a top marginal rate of 25%. This marks an increase from the previous highest rate of 24%, ensuring a greater contribution from the nation's highest-income citizens.
For the corporate sector, the changes are equally impactful. The Capital Gains Tax (CGT) rate for companies has seen a sharp rise from 10% to 30%. Authorities, including the Fiscal Policy Reforms Committee, explained that this adjustment aligns the CGT with the standard corporate income tax rate. The move aims to eliminate arbitrage opportunities between capital and trading income and discourage artificial asset disposal strategies previously used to minimize tax obligations.
Who Benefits from the Lowest Tax Burden?
The reforms provide substantial relief for lower and middle-income Nigerians. Salary earners with an annual income below ₦800,000 are now completely exempt from personal income tax, allowing them to retain 100% of their earnings. This measure is targeted at protecting vulnerable, low-income households from financial strain.
Furthermore, middle-income earners with annual earnings between ₦1 million and ₦10 million have been identified as the group paying the lowest effective tax rates. Tax experts, however, emphasize the importance of proper documentation of all allowable deductions to ensure full compliance and avoid potential disputes with the tax authorities.
Broader Impact of the 2025 Tax Reform Acts
These changes stem from the historic 2025 Tax Reform Acts, signed into law on June 26, 2025. The legislation introduced four new Acts: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act. These laws unified personal income tax, corporate taxation, VAT, and capital gains under a modernized, streamlined framework.
Key provisions include:
- Exemption for small businesses: Companies with a turnover below ₦50 million and fixed assets under ₦250 million are exempt from corporate income tax, capital gains tax, and the new 4% development levy.
- Minimum tax for large corporations: Firms with turnover exceeding ₦50 billion or multinational groups earning €750 million or more must meet a minimum effective tax rate of 15%, with top-up taxes applied if they fall short.
- VAT adjustments: While the VAT rate remains at 7.5%, the scope of zero-rated goods has been expanded to include essential items like food, books, and medical supplies. Input VAT on services and capital assets is now fully claimable.
- Digital compliance: The reforms mandate e-invoicing, real-time VAT reporting, and the digitization of compliance processes across all tax types.
The government states that the overarching goal of these measures is to strengthen fairness in the system by ensuring wealthier individuals and larger corporations contribute more, while providing a safety net for low-income earners and fostering a supportive environment for small businesses. The changes, now in effect, are poised to reshape Nigeria's tax landscape by balancing crucial revenue generation with principles of social equity.
