How Nigeria’s New Tax Structure Affects SMEs and Large Corporations

Nigeria has embarked on its most sweeping tax overhaul in decades. In 2025, the National Assembly passed, and the President assented to a suite of reforms that consolidate fragmented rules, simplify compliance, and recalibrate who pays what across the economy. 

At the core are a refreshed Nigeria Tax Act (NTA) and companion laws on administration and revenue services, which aim to cut “multiple taxation,” widen the base, and align Nigeria with global norms like the 15% minimum effective tax for multinationals.

What actually changed?

1) One framework, fewer overlapping rules

The reforms consolidate and update multiple legacy tax statutes into a unified structure. That matters for businesses that previously had to interpret conflicting provisions across different laws.

2) VAT stays at 7.5%, with clearer input-VAT recovery

Lawmakers kept the value-added tax at 7.5% rather than raising it, easing near-term price pressure. The reform also clarifies input-VAT recovery,especially important for service providers that previously struggled to claim input VAT on costs.

3) Company size thresholds and rates are codified—and expanded

Historically, small companies (turnover ≤ ₦25m) paid 0% Companies Income Tax (CIT), medium companies (₦25m–₦100m) paid 20%, and large companies (≥ ₦100m) paid 30%. The 2025 framework keeps the top CIT rate at 30% and increases relief for smaller firms by lifting the small-company threshold in practice. Businesses should verify their position against the gazetted thresholds and any asset tests, as circulars and practice notes are issued.

4) A development levy and minimum effective tax for big players

The NTA introduces a development levy (exempting small companies and non-residents) and implements a 15% minimum effective tax rate (ETR) for members of multinational enterprise groups and, in some cases, for companies with very high turnover, Nigeria’s local articulation of the OECD Pillar Two regime.

5) Personal income tax changes coming into view

A more progressive personal income tax (PIT) schedule,geared to give relief at the lower end, has been announced, with implementation timelines around 2026. This affects payroll planning and net-of-tax compensation strategy.

6) Capital-market tweak: withholding on short-tenor paper

Authorities moved to apply 10% withholding tax on interest from short-term securities (e.g., T-bills, short corporate notes), while interest on federal government bonds remains exempt. Treasury and cash managers should recalibrate yields and pricing.

What it means for large corporations and multinationals

1) 30% headline CIT remains—but effective rates could rise under Pillar Two

While statutory CIT is unchanged, large groups may feel a higher effective burden due to the 15% minimum ETR. Nigerian groups in MNE networks will need Pillar Two modelling, data pipelines, and intercompany-pricing hygiene to avoid top-up taxes.

2) Broader base, tighter rules, fewer arbitrage angles

The consolidation folds capital gains and certain previously separate rules into a single income-tax base, reducing avenues for mismatches. Expect more standardised audits and analytics-driven risk targeting by FIRS.

3) VAT neutrality improves for services and capex

Clearer input-VAT recovery can lower the VAT “stickiness” on large service operations and capital projects useful for telcos, tech, and professional services where input VAT historically leaked.

4) Payroll and talent planning need a refresh

With PIT reforms trending progressive, total-rewards teams should remodel gross-to-net, revise equity/bonus timing, and sharpen shadow payroll for cross-border staff.

5) Treasury note: short-term yields now “less clean.”

The 10% WHT on interest from short tenors changes the after-tax math for cash parks and corporate paper issuance. Investor communications and pricing may need to be adjusted.