Introduction In 2025, Nigeria enacted a sweeping tax law reform aimed at simplifying tax administration, improving compliance, and easing burdens on the masses. As a citizen or business owner, it is vital to understand how these changes affect your income, business obligations, and future tax planning.
Key Highlights of the 2025 Tax Reform
1. VAT Remains 7.5%, Essentials Still Exempt
The Value Added Tax (VAT) rate remains at 7.5%, with essential goods and services like food, healthcare, education, transport, and rent remaining VAT-exempt. This protects the most vulnerable citizens and ensures inflation is kept under control.
2. Income Tax Relief for Individuals
Personal Income Tax (PAYE) now includes a new tax-free threshold of ₦800,000 annually (about ₦66,000 per month). This means many low-income earners will no longer pay income tax, and others will pay less under the revised progressive rates ranging from 15% to 25%.
3. SMEs Get a Boost
Small businesses with an annual turnover below ₦50 million are now exempt from both VAT and Corporate Income Tax (CIT). This move is expected to ease financial pressure and encourage the formalization of small enterprises.
4. Simplified Tax Administration
The new law introduces a unified tax identification number (TIN), digital tax filing systems, and an independent Nigeria Revenue Service (NRS) to replace the FIRS. A tax ombudsman and appeals tribunal have also been introduced to protect taxpayer rights.
5. Revised Revenue Sharing Formula
States and local governments will now receive a larger share of VAT revenues: 55% to states and 35% to LGs, while the Federal Government takes 10%. This aims to improve development at the grassroots.
6. Reintroduction of Telecom Tax
A 5% excise duty has been reintroduced on telecom services, meaning you may notice slightly higher charges for data and calls.
Implications for You
- Employees: If you earn less than ₦800,000 annually, you won’t pay any income tax.
- Entrepreneurs: Your business may now qualify for tax exemption if your revenue is under ₦50 million.
- Consumers: Basic necessities remain VAT-free, but digital services may cost more due to the telecom tax.
Next Steps To stay compliant and benefit from these reforms, consult a qualified tax advisor. At Sarah Taiwo & Co., we help individuals and businesses navigate tax changes with ease.
Contact us today to assess your compliance and explore your savings
@SARAH TAIWO & CO. 
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