Highlights and key provisions, By Oyetola Atoyebi

The tax reform payments mark a exceptional paradigm shift from the present tax regime placing an finish to the advanced and multi-layered tax system with its consequent lapses and inefficiencies. In live performance, the payments foster financial fairness, encourage exportation, lengthen the tax internet to replicate present world tendencies and create a business-friendly surroundings to draw native and international investments. The payments additional strengthen fiscal federalism and facilitate cooperation between taxpayers, subnational governments and MDAs for a vibrant and affluent economic system.

Introduction

The tax regime in Nigeria is made up of a posh net of disjointed tax legal guidelines which depart a lot to be desired by way of effectivity and effectiveness each in administration and in reaching the nation’s fiscal coverage objectives. Sequel to this, President Bola Ahmed Tinubu (GCFR) established the Fiscal Coverage and Tax Reforms Committee in August 2023 to handle the urgent want for complete tax reform in Nigeria. The committee, chaired by the tax professional, Mr Taiwo Oyedele, was tasked with producing suggestions geared toward overhauling the nation’s tax system and reaching fiscal coverage objectives. Not too long ago, the President transmitted 4 tax reform payments to the Nationwide Meeting proposing vital modifications to the face and character of the tax panorama. The tax reform payments collectively characterize the excellent efforts and proposals of the Presidential Fiscal Coverage and Tax Reforms Committee.

The Nigeria Tax Invoice (any further known as the NTB) is a complete piece of laws that seeks to stipulate all taxes within the nation hitherto administered by completely different legal guidelines and compress them right into a single simplified regulation. Most significantly, the NTB vests upon the Nigeria Income Service (anticipated to succeed FIRS) powers to gather all nationwide taxes, together with royalties hitherto collected by the Nigerian Upstream Petroleum Regulatory Fee (NUPRC) and excise duties, import VAT and many others, hitherto collected by the Nigeria Customs Service.

The Tax Payments are:

The Nigeria Tax Invoice (NTB) 2024
The Nigeria Tax Administration Invoice (NTAB)
The Nigeria Income Service (Institution) Invoice (NRSEB); and
The Joint Income Board (Institution) Invoice (JRBEB).

The enactment of the NTB will result in the repeal of 11 legal guidelines, whereas 13 different legal guidelines will expertise consequential amendments. The NTB can even revoke one subsidiary laws and consequential amendments on two different subsidiary legislations. The legal guidelines that might be revoked as soon as the NTB comes into impact (as presently proposed) embrace:

Capital Good points Tax Act
Firms Revenue Tax Act
On line casino Act
Deep Offshore and Inland Basin Act
Industrial Improvement (Revenue Tax Reduction) Act
Revenue Tax (Authorised Communications) Act
Private Revenue Tax Act
Petroleum Income Tax Act
Stamp Duties Act
Values Added Tax Act and
Enterprise Capital (Incentives) Act.

The present laws that can witness consequential amendments embrace:

The Petroleum Trade Act, No 6. 2021 (the areas to be deleted within the PIA embrace components I – X of chapter 4; the Fifth and Sixth Schedule; paragraphs 6, 9, 10, 11 and 12 of the Seventh Schedule; and subparagraph 6 of paragraph 14 of the Seventh Schedule.
The Nigerian Export Processing Zones Act (sections 8 and 18(1)(a) deleted).
The Oil and Gasoline Free Commerce Zone Act (sections 8 and 18(1)(a) deleted).
The Nationwide Data Expertise Improvement Company Act (sections 1, 2, and three(3) deleted).
The Tertiary Training Belief Fund (Institution, And so on.) Act (sections 1, 2, and three(3) deleted).
The Nationwide Company for Science and Engineering Infrastructure (Institution) Act (part 20(2), paragraph b(i) and b(ii) deleted).
The Customs, Excise Tariffs, And so on. (Consolidation) Act (part 21(2) deleted).
The Nationwide Lottery Act (sections 35A, 35B and 35C deleted).
The Nigerian Minerals and Mining Act (sections 28 and 33 deleted).
The Nigeria Begin-up Act (sections 25(2), (3), (4) and 29(3) deleted).
The Export (Incentives and Miscellaneous Provisions) Act (part 11(1) deleted).
The Federal Roads Upkeep Company (Institution, And so on.) Act (part 14(1)(h) deleted).
The Cybercrime (Prohibition, Prevention, And so on.) Act (subsections (2)(a) and (4) of part 44 and the Second Schedule are deleted).

For the subsidiary legislations, the Worth Added Tax Act (Modification) Order 2021 shall be revoked, whereas the Firm Revenue Tax (Important Financial Presence) Order 2020 shall be amended by deleting paragraph 2 regardless that the dad or mum laws, the Firm Revenue Tax, can be repealed. Lastly, the Petroleum (Drilling and Manufacturing) Rules 1969 can be amended by deleting rules 60B, 60C, 61(1), (2), (4) and 62.

Crucially, the Nigeria Tax Invoice included a supremacy clause in Part 202, a part of which states that” this Act shall take priority over every other regulation close to the imposition of tax, royalty, levy, excise obligation on companies or every other tax, the place the provisions of every other regulation is inconsistent with the provisions of this Act, the provisions of this Act shall prevail and the provisions of that different regulation shall, to the extent of the inconsistency, be void.” This clause successfully elevates the NTB to be Nigeria’s supreme laws on taxes.[1]

This Article appraises the 4 Tax Payments highlighted above with specific concentrate on the Nigeria Tax Invoice, which seeks to harmonise all the foremost taxes reminiscent of company earnings tax, private earnings tax, and value-added tax and many others., discussing key provisions and vital modifications.

The Nigerian Tax Invoice at a Look

As a complete tax laws, the NTB harmonises all tax legal guidelines within the nation right into a extra simplified and manageable single piece of laws. Part 1 of the NTB[2] offers that the target of the Act is to offer a unified fiscal laws governing taxation in Nigeria.

Therefore, varied taxes which have been beforehand administered underneath completely different tax legislations are by the provisions of the NTB unified and compressed into one simplified regulation and administered accordingly.  This simplification is meant to ease compliance for companies and people, making it simpler for them to grasp their tax obligations. As well as, the unification and simplification of our tax legal guidelines which the NTB guarantees is motivated by the necessity to engender effectivity and effectiveness in tax administration whereas eradicating conflicts and the multiplicity of tax legal guidelines that the present tax regime is plagued with.

Intention of the Payments Embrace:

Handle the problem of multi-layered taxation
Consolidate varied authorized frameworks referring to taxation
Develop the nation’s tax base
Generate sustainable income streams for nationwide growth
Handle complexities of the present tax system.
Improve tax-compliance.

Significance of the NTB To People, Company Entities and States 

To People 

Opposite to most speculations on social media, the NTB adopts a progressive private earnings tax system and offers tax reduction for low-income earners. Significantly, incomes under (800,000.00) eight hundred thousand naira are utterly exempted, and better earners are taxed progressively in response to their earnings.[3] It follows, subsequently, that the tax burden on low-income earners is lowered, and that the tax burden is usually unfold to replicate fairness and equity in wealth distribution. The annual tax price, as outlined within the Fourth Schedule of the invoice, is as follows:

First N800,000 – 0 per cent
Subsequent N2.2 million – 15 per cent
Subsequent N9 million – 18 per cent
Subsequent N13 million – 21 per cent
Subsequent N25 million – 23 per cent and
Above N50 million – 25 per cent.

Prior to now, the private earnings tax charges for various bands of annual earnings are as follows:

First N300,000 – 7 per cent
Subsequent N300,000 – 11 per cent
Subsequent N500,000 – 15 per cent
Subsequent N500,000 – 19 per cent
Subsequent N1.6 million – 21 per cent
Above N3.2 million – 24 per cent.

A look on the two units of charges reveals that whereas presently a low-income earner who earns N25,000 month-to-month, which interprets to N300,000 yearly, is required to pay 7 per cent earnings tax, the brand new charges proposed within the Nigeria Tax Invoice exempts people who earn N800,000 or much less yearly from paying any earnings tax. In impact, each minimal wage earner in Nigeria can be exempted from private earnings tax.

Nonetheless, with the brand new provisions in Part 28 of NTAB, monetary establishments at the moment are mandated to furnish tax authorities with particulars of people whose month-to-month cumulative transactions quantity to N25 million or extra. This may convey extra high-income earners into the tax internet.

Additionally, the Invoice progressively redesigned the capital positive factors tax regime by exempting some types of capital positive factors from taxation and, in different circumstances, elevating the achieve threshold earlier than imposing a capital positive factors tax. For instance, Part 51 of the invoice exempts a person from paying tax on the proceeds of the sale of his residential property or land adjoining his residential property as much as a distance of 1 acre.

In Part 50, the Invoice exempts compensation paid to people for private accidents, reminiscent of lack of employment, defamation, libel, slander, and many others., from capital positive factors tax as soon as the quantity is N50 million or under. Above N50 million, solely the surplus constitutes chargeable positive factors. The present provision of the subsisting Capital Good points Tax Act is that compensation for lack of workplace, and many others, is topic to capital positive factors tax on the portion of the earnings above N10 million at 10 per cent.

To Company Entities

The Invoice goals to make sure ease of doing enterprise, which has lengthy been a hurdle in Nigeria’s financial progress. Companies, significantly small and medium enterprises (SMEs), have traditionally struggled with the advanced net of tax rules. By streamlining tax guidelines, the Nigeria Tax Invoice 2024 simplifies compliance, enabling companies to focus extra on innovation and enlargement moderately than wading by bureaucratic purple tape. In doing so it creates a extra conducive surroundings for entrepreneurship and funding.

The Invoice in Part 20(1)(a)-(l) additionally not directly reduces the taxable earnings of corporations by rising the deductions allowed from the corporate’s gross earnings earlier than ascertaining the corporate’s revenue, which is finally taxed. The invoice additionally eliminates a minimal earnings tax of round 1 per cent of gross earnings hitherto imposed on corporations that didn’t declare revenue.

For company entities, the NTB pursuant to Part 56[4] offers for a discount of the present 30 per cent price for company earnings tax, and proposes 27.5 per cent in 2025 and 25 per cent in 2026, whereas utterly exempting small corporations. This considerably reduces the tax obligation of company our bodies, and in response to analysis, is moderately conservative in comparison with 27 per cent and 30 per cent charges in sister African nations like South Africa and Kenya.[5] Moreover, the NTB raises the edge for company tax emption from 25 million naira to 50 million naira in annual turnover, thereby exempting many small companies from company tax.[6] Moreover, the NTB tackles the issue of multiplicity of taxes for company our bodies by harmonising a number of ranges of taxes by introducing a 4 per cent growth levy which can regress to 2 per cent by 2030.[7]

The invoice went additional in Part 59 to harmonise all of the particular deductions on corporations’ revenue (completely different from the revenue tax) right into a single growth levy that’s anticipated to progressively decline from a price of 4 per cent in 2025 and 2026 evaluation years to simply 2 per cent from 2030. The three direct annual deductions on corporations’ revenue consolidated right into a one-off growth levy by the invoice embrace:

Tertiary Training Tax – as of at present, corporations are required by the TETFUND Act to pay 2 per cent of their annual assessable revenue as tertiary training tax into TETFUND;
NASENI Levy – aside from the deduction of three per cent of the overall income accruing to the Federation Account, the Nationwide Company for Science and Engineering Infrastructure (NASENI) Act additionally mandates FIRS to gather 0.25 per cent of the turnover of corporations and corporations with earnings or turnover of N4,000,000 (4 Million naira) and above; and
Data Expertise Tax corporations with an annual turnover of N100 million or extra who’re engaged in banking and different monetary actions; insurance coverage actions; pension fund administration; GSM service suppliers and telcos, in addition to cyber and web service suppliers, are required by the NITDA Act to pay 1 per cent of their revenue earlier than firm earnings tax (CIT) as data know-how tax yearly to the Nationwide Data Expertise Improvement Company (NITDA) Nigeria Fund (NITDF).

Nigerian Training Mortgage Fund’s (NELF) main funding supply is thru the deduction of 1 per cent of all taxes, levies and duties collected by FIRS and never essentially further direct deductions from corporations’ income.

Nonetheless, within the Nigeria Tax Invoice, the NELFUND is the best beneficiary of the event levy. In keeping with part 59(2), the event levy to be collected by NRS (i.e. FIRS) at progressively declining charges from 2025 shall be distributed as follows:

Tertiary Training Belief Fund (TETF) will obtain 50 per cent of the overall growth levy in 2025 and 2026 (price of 4 per cent). In 2027, 2028 and 2029, TETFUND will obtain 66 per cent of the overall growth levy collected (the levy price declines to three per cent). From 2030 and above, TETFUND will stop to obtain any share of the event levy.
The Pupil Training Mortgage Fund will obtain 25 per cent of the event levy in 2025 and 2026, 33 per cent in 2027, 2028, and 2029, and 100 per cent from 2030 onwards. This may now be 2 per cent of the assessable income of all corporations (besides small corporations and non-resident corporations).
The Nationwide Data Expertise Improvement Fund will obtain 20 per cent of the event levy in 2025 and 2026 and 0 per cent from 2027 onwards.
The Nationwide Company for Science and Engineering Infrastructure (NASENI) will obtain 5 per cent of the event levy in 2025 and 2026 and 0 per cent from 2027 onwards.

For many corporations, the Nigeria Tax Invoice is coming to harmonise their taxes right into a most of two (earnings tax and growth levy) with a most whole price of 27 per cent (25 per cent revenue tax and a pair of per cent growth levy) for the largest corporations from 2030 as a substitute of a high price of 33.25 per cent they presently pay, which is a reduction for companies.

Additionally, the Nigeria Tax Invoice successfully handed over the income assortment obligation of the Nigeria Upstream Petroleum Regulatory Fee (NUPRC) to the NRS (FIRS). The Seventh Schedule of the Nigeria Tax Invoice prescribed the royalties all manufacturing of petroleum (from inland basin, onshore, offshore and deep water) can be subjected to, that are to be collected on behalf of the Federation by the NRS (FIRS) with the royalties so collected by the NRS administered in accordance with provisions of the Nigeria Tax Administration Invoice (Act).

To States 

The notable implication of the tax payments to the States is the modifications concerning income sharing generated from Worth Added Tax (VAT). Pursuant to Part 77 of the Nigerian Tax Administration Invoice, the brand new sharing formulation has the States and Native Governments receiving the majority of the VAT income, thereby decreasing the present quota accruable to the federal authorities. Exactly, 55 per cent and 35 per cent of the VAT income is accruable to the State and Native Governments respectively, whereas 10 per cent goes to the federal authorities.

Whereas this sharing formulation represents fiscal federalism, it’s noteworthy to state that the VAT derivation mannequin pursuant to Part 77[8] which doubtlessly redistributes revenues amongst state governments equitably, incurs vital losses to some state governments. Primarily based on the 60 per cent derivation mannequin, states that contribute extra in VAT income will earn extra whereas states that contribute much less would possibly earn considerably much less.

Profit To Legal professionals

Recommendation on Compliance and Regulatory Companies: The introduction of the brand new tax Invoice means a rise within the demand for authorized companies associated to compliance and regulatory points. Legal professionals shall be important in guiding companies and people on what the brand new tax Invoice is all about and how one can navigate the tax regulation and construction their companies effectively to make sure compliance and keep away from penalties, thus making a enterprise alternative for legal professionals.
Tax Dispute Decision: The unification of the assorted current tax legal guidelines right into a extra coherent and consolidated system has vital benefit for legal professionals. A unified Tax regulation signifies that legal professionals can shortly establish the relevant guidelines when briefed on tax-related issues, serving to legal professionals to conduct dispute decision extra effectively and decreasing the complexity concerned in representing purchasers in tax-related issues. Legal professionals will not need to navigate by a maze of various legislations which may event overlooking vital provisions.

Different Notable Highlights of the Tax Reform Payments

Consistent with the goals of the payments to handle the problem of multi-layered taxation, broaden the tax base, simplify and harmonise varied tax legislations, and generate sustainable income streams for nationwide growth, the next are notable highlights of the payments:

Institution of the Nigeria Income Service (NRS) and Joint Income Board (JRB):The tax reform payments, significantly the Nigeria Income Service (Institution) Invoice and the Joint Income Board (Institution) Invoice set up the NRS and JRB respectively.[9] Pursuant to the NRSEB[10] the NRS replaces the FIRS and performs a broader function of income administration in Nigeria, and in addition drives collaboration with subnational governments and MDAs. In the identical method, the JRBEB established the JRB to exchange the present Joint Tax Board (JTB) with an enhanced function for cooperation and tax harmonisation. Moreover, the invoice additionally established the workplace of the tax ombudsman to guard taxpayers and guarantee tax simplification.
Promotion of Exports and Worldwide Commerce: Exports of products, companies, and mental property will profit from zero-rated VAT alongside extra incentives geared toward boosting Nigeria’s competitiveness in worldwide commerce. By eliminating VAT on exports, the brand new regulation offers a fertile floor for worldwide commerce, assist for native industries in accessing world markets, and attracting international funding.
Simplifying and Rationalising Taxes: Over 50 nuisance taxes are to be repealed, with remaining levies harmonised into a number of variety of taxes. Company earnings tax charges will scale back from 30 per cent to 25 per cent over the following two years, and earmarked taxes on corporations shall be changed with a streamlined single levy. Additional, important items and companies, reminiscent of meals, training, and healthcare, shall be topic to 0 per cent VAT, whereas lease, public transportation, and renewable vitality can even be VAT-exempt.
Enhancing Enterprise Competitiveness: Companies will achieve from enter VAT credit on property and companies, alongside the removing of minimal tax necessities for corporations with low margins or these reporting losses. These modifications will scale back manufacturing prices and foster elevated funding exercise.
A Tax System Primarily based on Fairness and Equity: the payments implement progressive charges for private earnings tax, VAT, and capital positive factors tax, guaranteeing safety for low-income earners. As well as, taxes on international forex transactions shall be payable in naira, simplifying compliance for companies and assuaging stress on the change price.
Fairness Amongst States: VAT income shall be allotted to states utilizing a fairer mannequin that rewards their precise financial contributions, changing the present system that disproportionately advantages states internet hosting company headquarters the place VAT remittances are usually made.
Tax Accountability and Transparency: With the institution of the Tax Ombudsman susceptible taxpayers are protected thereby guaranteeing fairness and equity in tax administration.

Conclusion 

The tax reform payments mark a exceptional paradigm shift from the present tax regime placing an finish to the advanced and multi-layered tax system with its consequent lapses and inefficiencies. In live performance, the payments foster financial fairness, encourage exportation, lengthen the tax internet to replicate present world tendencies and create a business-friendly surroundings to draw native and international investments. The payments additional strengthen fiscal federalism and facilitate cooperation between taxpayers, subnational governments and MDAs for a vibrant and affluent economic system.

References

[1] ProShare. President Tinubu’s Tax Reform Payments Below a Microscope. Avaliable at accessed sixth December 2024.

[2] NTB 2024, s 1.

[3] Ibid, part 58 and the Fourth Schedule.

[4] NTB 2024, s 56.

[5] Opeyemi B., ‘5 Takeaways from Tax Reform Payments’. Punch (December third, 2024) < > accessed fifth December 2024.

[6] NTB 2024, s 203.

[7] Ibid, s 59.

[8] Nigeria Tax Administration Invoice, s 40.

[9] Nigerian Income Service (Institution) Invoice, s 3 and the Joint Income

[10] Ibid.

Oyetola Muyiwa Atoyebi is a Senior Advocate of Nigeria (SAN).