Main Operational and Administrative Changes in the new Nigeria Tax Act

Nigeria has entered a potentially transformative phase in public finance following the promulgation of four interconnected tax reform statutes. These landmark legislations institute a consolidated tax code, streamline revenue administration, reinforce institutional coordination, and broaden the tax base to encompass digital and non-resident activities. Jointly, the Nigeria Tax Act, the Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act reconfigure the nation’s legal, administrative, and operational tax infrastructure. The reforms aim to address persistent issues including fragmented tax laws, inefficiencies in revenue collection, weak intergovernmental coordination, and an outdated compliance framework.

Central to the reform is the adoption of a digital-first, performance-driven, and equity-focused tax ecosystem. The Nigeria Revenue Service (NRS), now operating as an autonomous corporate entity, succeeds the former FIRS and underpins a revised enforcement approach utilizing real-time analytics, e-filing, cross-border treaty management, and fiscal accountability.

The framework also revises the scope of subnational fiscal power by enhancing fiscal access for state and local governments to VAT revenues, 60% of which will now be allocated based on the derivation principle, thereby incentivizing subnational revenue generation and fiscal responsibility. Accompanied by digital invoicing, consolidated taxpayer databases, and expedited dispute resolution processes, the reform is intended to establish the groundwork for enhanced investor confidence, public trust, and sustainable revenue growth.

MAIN OPERATIONAL & ADMINISTRATIVE CHANGES – NIGERIA TAX ACT

Unified Digital Infrastructure

• Single Assessment Platform: A unified tax filing portal has been implemented, allowing federal, state, and local taxes to be filed through one platform, reducing duplication and enhancing taxpayer clarity.
• Real-Time Invoicing: Businesses are now mandated to adopt electronic invoicing and fiscalisation systems that synchronise with the Nigeria Revenue Service for real-time tax validation and transaction transparency.
• Nationwide Taxpayer Registry: A single Taxpayer Identification Number system has been established, enabling unified traceability and profiling of all taxpayers.

Enhanced Compliance & Enforcement

• Automated Deductions: Government Ministries, Departments, and Agencies are authorised to deduct outstanding taxes from contractor payments via a warrant of deduction, without requiring prior court approval.
• Cross-Border Information Exchange: The Nigeria Revenue Service can now access offshore financial data under international treaties to detect evasion by High Net-Worth Individuals and Multinational Corporations.
• Asset Tracing and Confiscation: The Nigeria Revenue Service is empowered to trace and confiscate undeclared or fraud-linked assets, subject to the completion of due process.

Dispute Resolution & Taxpayer Rights

• Digital Appeals Process: A digitised appeals process has been introduced, facilitating online filing, tracking, and resolution of disputes through a reconstituted Tax Appeal Tribunal.
• Office of the Tax Ombud: Establishment of an Office of the Tax Ombud, serving as a quasi-judicial authority to address taxpayer grievances and recommend binding actions against abusive practices.

Institutional Realignment & Subnational Empowerment

• Nigeria Revenue Service Autonomy: Creation of the Nigeria Revenue Service, replacing the Federal Inland Revenue Service, operating as a performance-driven corporate body with expanded responsibilities encompassing levies, duties, and fees.
• Joint Revenue Board: Institutionalisation of a Joint Revenue Board as a coordination mechanism for federal-state harmonisation, replacing the Joint Tax Board.
• Derivation-Based Value Added Tax Sharing: For the first time, states and local governments receive 60% of Value Added Tax on a derivation basis, providing an incentive for local economic growth and tax collection efforts.
• Voluntary Delegation by States: Subnational governments are permitted to delegate the administration of their taxes to the Nigeria Revenue Service, potentially enhancing efficiency and reducing administrative overlap.
  With the enactment of these reforms, stakeholders can anticipate the following shifts:
• Large Corporates & Multinationals: Increased compliance requirements, including mandatory e-invoicing, real-time tax remittance, and heightened scrutiny on cross-border and digital transactions. Transfer pricing, dividend planning, and SEP-related filings require restructuring to comply with new thresholds. This also presents opportunities in factoring and invoice discounting.
• Small and Medium Enterprises (SMEs): Beneficial exemptions for companies with annual turnover below ₦25 million and streamlined tax filing procedures. SMEs can also leverage sector-specific incentives via Economic Development Incentive Certificate (EDIC) and must integrate with digital reporting platforms.
• High Net-Worth Individuals (HNIs): Expanded audit reach, stricter enforcement, and potential exposure to asset tracing and global exchange of information under new personal tax rules. Estate planning, dividend income, and high-value transactions face tighter oversight.
• Individual Taxpayers: Simplified return filing and tax exemptions for those earning below ₦2.5 million annually. Access to online self-assessment portals and recourse via the Tax Ombudsman to enhance transparency and improve dispute resolution.
• Digital Platforms (Domestic & Foreign): Non-resident suppliers must register, file monthly returns, and comply with e-fiscalisation rules or risk market access restrictions. Platforms monetising Nigerian data or targeting users are now deemed to have a Significant Economic Presence.
• Subnational Governments: Potential for higher revenue from VAT due to the 60% derivation clause, incentivizing states that enhance economic activity and improve VAT collection. States may delegate collection to NRS and benefit from unified taxpayer registries and improved dispute coordination through the Joint Revenue Board.
• Investors & Incentive Beneficiaries: Pioneer Status is replaced by EDIC, linking benefits to local reinvestment. Failure to file required incentive returns may lead to clawbacks.
• SOURCE: Coronation Merchant Bank