The New Tax Law in Nigeria: Key Reforms, Compliance Obligations, and Implications for Businesses and Individuals

CONTRIBUTOR: ANEKWE ANGELA EKENE

Introduction

Nigeria’s tax landscape has undergone significant transformation in recent years, driven by the government’s need to enhance revenue generation, improve tax administration, and widen the tax net.^[1] The introduction of new tax legislation and policy reforms reflect a deliberate effort to modernize the tax system, promote voluntary compliance, and align Nigeria’s tax framework with global best practices.^[2] The tax reform laws, slated to commence in January 2026, repeal all existing tax laws and consolidate the legal framework relating to taxation in Nigeria, providing a harmonised system for the taxation of income, individuals, assets, transactions, and instruments.^[3]

This article examines the key reforms introduced under Nigeria’s new tax legislation and related policy updates. It analyses significant changes to tax administration, assessment, filing procedures, and enforcement mechanisms, with emphasis on their impact on corporate taxpayers, small and medium-sized enterprises (SMEs), and individual taxpayers. The article further highlights key compliance obligations, penalties for non-compliance, and the expanded powers of tax authorities, while addressing practical challenges likely to arise during implementation. It is intended to provide practical guidance to business owners, tax consultants, corporate executives, and legal practitioners on adapting to the new tax regime, managing tax risks, and ensuring regulatory compliance.

Overview of Nigeria’s New Tax Legislation

On 26 June 2025, President Bola Ahmed Tinubu signed the four (4) Tax Reform Bills into law.^[4] The new tax law represents a comprehensive overhaul of Nigeria’s tax framework. By consolidating multiple tax statutes into a unified legislative regime, the reforms seek to eliminate inconsistencies, improve clarity, and simplify compliance.^[5] These laws include the Nigeria Tax Act (NTA), The Nigeria Tax Administration Act (NTAA), The Nigeria Revenue Service Act (NRSA) and the Joint Revenue Board Act (JRBA), collectively referred to as “the Acts” hereafter).^[6]

The Acts comprehensively overhaul the Nigerian tax landscape to drive economic growth, increase revenue generation, improve the business environment and enhance effective tax administration across the different levels of government. The harmonised structure is designed to ensure that taxation of income, assets, transactions, and instruments is governed by coherent principles and uniform administrative procedures.^[7]

A central objective of the reform is to improve efficiency in tax administration while fostering fairness and transparency in the assessment and collection of taxes. The legislation also reflects a policy shift towards digitalisation, risk-based enforcement, and enhanced taxpayer engagement.

Key Reforms in Tax Administration

One of the most notable reforms introduced by the new tax law is the restructuring of tax administration processes. The legislation strengthens the institutional framework of tax authorities by expanding their administrative and enforcement powers, while also imposing clearer obligations on taxpayers.^[8] Tax authorities are empowered to adopt technology-driven systems for taxpayer registration, assessment, filing, and payment of taxes.^[9] This digital approach is expected to reduce human interface, curb tax evasion, and improve the accuracy of tax records. In addition, the reforms promote inter-agency cooperation and data sharing among government institutions to enhance transparency and efficiency in tax collection.

Assessment and Filing Procedures: The new tax regime introduces clearer rules on tax assessment and filing obligations. Corporate taxpayers and individuals are required to maintain proper records and submit accurate returns within prescribed timelines. A key innovation in the NTAA is the introduction of the Electronic Fiscal System (EFS). The EFS is designed to enhance the accuracy, efficiency, and transparency of tax administration. In this regard, all taxable persons are required to maintain accurate records of all transactions processed through the EFS.^[10] The focus on digital tax filing, is one of the most impactful reforms of the NTAA. By reducing human intervention, EFS aims to minimise errors, fraud, and inefficiencies in the tax process.^[11] This feature highlights the critical importance of embracing digitalization in tax administration towards ensuring better compliance and promoting a more efficient and transparent tax system.

Self-assessment remains a core feature of the system, but with stricter verification mechanisms and post-filing audits. For SMEs, the reforms seek to strike a balance between compliance and ease of doing business by simplifying filing procedures and introducing proportional compliance requirements. However, SMEs are still required to maintain minimum documentation standards and comply with registration and reporting obligations. Individual taxpayers, particularly those in the informal sector, are increasingly brought within the tax net through simplified registration and assessment mechanisms, reinforcing the government’s objective of broadening the tax base.

Enforcement Mechanisms and Penalties: The new tax law introduces enhanced enforcement mechanisms to address non-compliance. A taxable person who fails or refuses to file required returns to the relevant tax authority, or who knowingly files incomplete or inaccurate returns, is liable to pay an administrative fine of N100,000 in the first month of contravention and N50,000 for each subsequent month that the contravention continues.^[12]The law also prescribes monetary penalties for taxpayers who fail to keep appropriate books of accounts, records of business transactions and income necessary for ascertaining taxable incomes and taxes payable or appropriate returns required.

The new regime also penalizes the failure or refusal of a taxpayer to grant access to tax authorities to deploy appropriate technology for tax assessment and collection, as well as failure to comply with the various prescribed obligations on the part of taxpayers regarding tax assessment, returns and payment. Failure to pay any tax due within the prescribed period attracts a penalty of 10% of the amount of the tax payable. In the circumstance, a taxpayer will be liable to pay the total of the actual tax payable plus the penalty imposed. Where a tax remittance is required to be paid in naira, any unpaid amount will attract interest at the prevailing monetary policy rate (MPR) of the Central Bank of Nigeria (CBN). In the same vein, where a tax remittance is required to be paid in foreign currency, interest will be charged on any unpaid amount at the prevailing Secured Overnight Financing Rate (SOFR) or any successor rate.

A relevant tax authority is entitled to collect a tax due with any penalty imposed and interest charged. Where any amount due remains unpaid, the tax authority is empowered to enforce recovery of the amount due as prescribed by law.^[13] Other specific offences, such as failure to deduct tax, failure to make attribution or report same to the relevant tax authority, fraud relating to stamp duties, inducement of an authorized officer, impersonation of an authorized officer, aiding and abetting commission of an offence, false declarations, false claim of tax refund, and counterfeiting documents, attract penalty of huge fines ranging from N1 million to N10 million or to a term of imprisonment or both. Failure to comply with the requirements of any notice served in accordance with the provisions of the Nigeria Tax Administration Act attracts a penalty of N20 million and subsequently N2 million for each day the failure continues, or imprisonment for a term of six (6) months.^[14]

Specialized companies face more severe penalties for tax law infringements. For instance, a Virtual Assets Service Provider (VASP) who fails to comply with the relevant provisions of the Nigeria Tax Act 2025 or any other tax law is liable to an administrative fine of N10 million in the first month of default, plus N1 million for every subsequent month during which the default continues or suspension or revocation of operating license by the Securities and Exchange Commission.^[15]

Similarly, oil companies engaged in upstream petroleum operations face a penalty of N10 million or the US Dollar equivalent on the first day of default, for late payment of any tax, royalty or remittance on the due date, and a sum of N2 million or the US Dollar equivalent for each day during which the default continues. This is notwithstanding the power of the relevant tax authority to distrain the defaulting licensee or lessee of its oil well, crude oil, petroleum products, or machinery, etc., or recommend the cancellation or revocation of the operating license or rights of the holder.^[16]

Penalties against a body corporate (company, firm, trust, association of individuals, or any legal arrangement) found guilty of any tax offence shall be enforced against the entity’s directors, managers, secretary or partners, officers or trustees, settlors, beneficiaries, or any person who acts or purports to act in any of the listed capacities, in like manner as if the person committed the offence^[17] unless that person proves that the act or omission constituting the offence took place without the knowledge, consent or connivance of the person.

Dispute Resolution Framework

The new tax regime provides innovative ways of preventing or minimizing disputes between taxpayers and tax authorities and, where controversies unavoidably arise, the new regime creates a framework for achieving the most efficient and effective resolution between disputing parties. Key settlement mechanisms available in the new tax ecosystem include the following:

1. Advance ruling: In a bid to avoid ambiguity, minimize controversy and enhance compliance by taxpayers, the new regime provides opportunity for a taxpayer to seek clarification from the relevant tax authority by applying, in the prescribed format,^[18] to the relevant tax authority for an advance ruling. An advance ruling may be issued by the tax authority for the purpose of providing clarity, consistency and certainty regarding the interpretation and application of any tax law that does not constitute an amendment or replacement of the law.
2. Office of the Tax Ombud: In order to prevent regulatory arbitrariness, ensure justice and fairness, and to minimize disputes in the tax landscape, the Joint Revenue Board of Nigeria (Establishment) Act creates an Office of the Tax Ombud (“OTO”) with power to serve as an independent and impartial arbiter to review and resolve complaints relating to tax, levy, regulatory fees and charges, custom duty or excise matters. The OTO also has power, among other powers, to review complaints by taxpayers about the conduct of tax officials or tax authorities, as well as the power to act as a watchdog against arbitrary fiscal policy of the Government or any of its agencies and report such to the National Assembly.^[19]

Implementation Challenges and Practical Considerations

Despite its laudable objectives, the successful implementation of the new tax law may face challenges, including limited taxpayer awareness, technological constraints, and administrative capacity issues. Continuous stakeholder engagement, public education, and capacity building within tax authorities will be critical to the effectiveness of the reforms. Taxpayers are advised to stay informed, invest in compliance infrastructure, and seek professional guidance to navigate the transition period effectively.

Conclusion

The Tax laws represent a clear effort towards achieving a fair, transparent, and growth-oriented tax system. The harmonization of Nigeria’s often disparate tax landscape while embracing digital modernization is an innovative feature of the Tax Laws. The successful implementation of the Tax laws will however, largely depend on judicial clarity on potential constitutional questions, and robust infrastructure development at both federal and state levels. It is therefore imperative for individuals and corporate entities to undertake a comprehensive review of their tax strategies, processes, and compliance frameworks to ensure readiness and resilience. If properly implemented, the tax laws could provide investor confidence, and redirect critical revenues to key sectors of the economy.

Reference

1. Nnamdi Oragwu, Decency Nkume, Japhet Olayemi, Halimat Abdul salam, ‘THE NIGERIAN TAX REFORM ACTS, 2025: AN INDEPTH GUIDE FOR BUSINESSES, INVESTORS, AND TAXPAYERS’ (2025) https://punuka.com/wp-content/uploads/2025/07/tax-reform-act-2025_article.pdf accessed 23 January, 2026. ↑
2. Dipo Komolafe, Igonikon Adekunle, and Sesan Sulaiman, ‘Understanding the New Nigerian Tax Regime: Key changes and impact’ (2025) https://www.templars-law.com/knowledge-centre/understanding-the-new-nigerian-tax-regime-key-changes-and-impact/ accessed 23 January, 2026 ↑
3. Ibid. ↑
4. PwC, ‘The Nigerian Tax Reform Acts’ (2025) https://www.pwc.com/ng/en/publications/the-nigerian-tax-reform-acts.html accessed 27 January, 2026. ↑
5. Koleade Charles Adeoye & Mofolajesusewa Oyelami, ‘Nigeria’s 2025 Tax Reform Acts Explained: Key Changes, Business Impacts, and Compliance Strategies’ (2025) https://www.bakertilly.ng/insights/nigerias2025taxreformactsexplained#:~:text=1.,Gains%20Tax%20Aligned%20with%20CIT accessed 27, January, 2026. ↑
6. Ibid, PwC, ‘The Nigerian Tax Reform Acts’ (2025) ↑
7. SeamlessHR, ‘Nigeria’s 2025 Tax Reform Acts: Key Tax Changes’ (2025) https://seamlesshr.com/blog/nigerias2025taxreformactskeytaxchanges/#:~:text=for%20Small%20Business-,What%20changed:,to%20ensure%20tax-efficient%20compensation accessed 27 January, 2026. ↑
8. Aderonke Alex-Adedipe and Eniola Sogbesan, ‘Tax Administration In Nigeria – A Review Of The 2025 Nigerian Tax Reform Laws’ (2025) https://www.mondaq.com/nigeria/taxauthorities/1648424/taxadministration-in-nigeria-a-review-of-the-2025nigeriantaxreformlaws#:~:text=The%20NRS%20Act%20establishes%20the,Service%20and%20continued%20by%20it.&text=The%20Joint%20Revenue%20Board%20Nigeria,the%20rights%20of%20the%20taxpayers accessed 27 January 2026. ↑
9. Adejumo, A., & Oloyede, T. (2022). Determinants of digital technology adoption among tax officials in Nigeria, 12(4), Journal of Public Administration and Governance, pp. 45-60. ↑
10. Afriwise, ‘Tax Administration in Nigeria – A Review of the 2025 Nigerian Tax Reform Laws’ (2025) https://www.afriwise.com/blog/tax-administration-in-nigeria—a-review-of-the-2025-nigerian-tax-reform-laws#:~:text=Digitalization%20of%20Tax%20Filing%20and,efficient%20and%20transparent%20tax%20system accessed 27 January, 2026. ↑
11. Ibid. ↑
12. Section 101, Nigeria Tax Administration Act 2025. ↑
13. Section 65, Nigeria Tax Administration Act 2025. ↑
14. Section 130, Nigeria Tax Administration Act 2025. ↑
15. Section 109, Nigeria Tax Administration Act 2025. ↑
16. Section 129, Nigeria Tax Administration Act 2025. ↑
17. Section 126, Nigeria Tax Administration Act 2025. ↑
18. Section 73(5) Nigeria Tax Administration Act 2025. ↑
19. Section 41, Joint Revenue Board of Nigeria (Establishment) Act 2025 ↑