Modupe Olalere
President Bola Ahmed Tinubu has recently signed the 2025 Tax Reform Bills, effectively transforming Nigeria’s tax system. The Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA) represent a significant shift in how taxes will be collected, enforced, and managed by the federal, state, and local governments.
The government is trying to increase tax collection and modernise how taxes are handled. However, a big question remains: Who will benefit from these changes, and who will have to deal with new problems? This article examines the recent tax amendments’ effects on small enterprises, including VAT, company income tax, and digital tax enforcement. It also contains perspectives on tax, entrepreneurship, and civil society.
VAT Changes and Company Income Tax: Who Gains and Who Loses?
Value-added tax (VAT) and corporate income tax are two significant changes that have occurred since the most recent tax reform. According to the Nigeria Tax Administration Act of 2025, the Nigeria Revenue Service (NRS) is now responsible for collecting all VAT, which means it has the authority to operate in every state. This move towards centralisation aims to reduce the confusion and inconsistencies between federal and state tax administrations.
The new law promises faster VAT returns for taxpayers. The NRS now has to process refunds within 30 days. Many businesses with trouble getting their reimbursements on time will be happy with this adjustment. It often hurt their cash flow. Esiri Agbeyi, a tax consultant at PwC Nigeria, says that “Faster VAT refunds could improve liquidity for compliant businesses and encourage better tax compliance.”
However, VAT coverage expansion has pros and cons. Since the new law taxes digital services and virtual assets, more transactions are now taxable. This means VAT is now required for more transactions, especially in the internet economy. Companies that trade a lot of digital assets may have trouble paying taxes. Additionally, losses from digital asset exchanges can only be used to lower profits from the same digital assets, making it tougher to lower taxable income.
The corporation income tax has undergone some significant changes. In the past, dividends were exempt from taxation, but that’s no longer the case. In addition, the government has expanded the definition of interest to include various types of interest income, criminal interest, and even foreign exchange differences. This broader definition of taxable revenue aims to widen the tax base but complicates matters for companies involved in various financial activities.
Tax expert Agbeyi advises, “Businesses need to review their tax strategies carefully to ensure compliance with the new definitions and avoid unexpected tax liabilities.” Due to a lack of resources and experience, small and medium-sized businesses (SMEs) may find it challenging to adapt to these developments.
Digital Tax Enforcement: New Rules and Emerging Challenges
Tax compliance in the digital economy is set to be a key focus in the 2025 tax revisions. This means that all taxable entities—including non-resident companies and digital service providers—must have a Taxpayer Identification Number (TIN) linked to every tax transaction and financial activity, as outlined in the Nigeria Tax Administration Act. This reform ensures that Nigerian digital businesses contribute fairly to the government’s revenue.
Tax authorities now require Virtual Asset Service Providers (VASPs), like bitcoin exchanges, to report significant transactions. Banks must send in reports every three months about transactions over ₦25 million for individuals and ₦100 million for businesses. These reporting rules aim to clarify things and help reduce online tax evasion.
However, the digital economy brings its own set of challenges when it comes to enforcing tax compliance. A recent study by KPMG highlights that rapidly changing prices complicate the valuation of digital assets for tax purposes. Also, many digital transactions are anonymous or use fake names, which makes it hard to find out who really owns these assets.
The 2025 Income Tax Bill also allows tax officials to circumvent computer and virtual environment access codes while conducting investigations. This rule makes it easier for the government to enforce tax laws, but also raises concerns about privacy and data security. Civil society groups have warned that these powers must be used carefully to protect people’s rights.
Entrepreneurs in the digital sector have mixed reactions. A Lagos-based fintech startup founder said, “We support efforts to improve tax compliance, but the infrastructure and clarity around digital tax rules need to improve. Small players like us struggle with the technical and administrative demands of these new requirements.”
Small businesses play a crucial role in Nigeria’s economy, but they often bear the brunt of shifts in tax policy. The new tax laws bring advantages and challenges for small and medium-sized enterprises.
Conversely, small businesses might find it easier to comply with regulations thanks to quicker VAT refunds and a more streamlined tax administration process. These adjustments may help eliminate any misunderstandings over who is in charge of collecting which taxes by outlining the functions of federal, state, and local tax authorities. With this additional clarity, small businesses may be able to avoid double taxation and simplify tax payments.
However, the more stringent reporting requirements and the new tax on internet services may result in higher operating costs for small businesses. Many small and medium-sized enterprises lack the financial resources and technological know-how to set up complex tax compliance systems, particularly for internet transactions.
A small business owner in Lagos shared, “The promise of faster VAT refunds is good news, but the new digital tax reporting rules are complicated. We don’t have dedicated tax staff, so keeping up with these changes is tough.” Another entrepreneur in the e-commerce sector added, “We want to comply, but the government needs to provide more support and clear guidelines for small businesses.”
Civil society organisations stress the importance of taking a balanced approach. A tax policy analyst noted, “While the reforms are necessary to boost government revenue, care must be taken to ensure that the tax burden does not disproportionately impact small businesses and low-income earners.”
The government has promised to help small and medium-sized businesses (SMEs) adjust to the new tax system by giving them information and support. Tax clinics, simplified filing processes, and online payment options are just some initiatives designed to make the transition smoother.
Voices from Experts, Entrepreneurs, and Civil Society
Most tax experts agree that the reforms aim to modernize Nigeria’s tax system and expand its revenue sources. However, they caution that for these changes to be successful, significant capacity building among tax authorities and clear communication with taxpayers will be necessary.
Esiri Agbeyi of PwC Nigeria stresses, “The key to success lies in effective enforcement balanced with taxpayer education. Businesses must understand the new laws and prepare accordingly.”
Entrepreneurs appreciate the government’s efforts to improve tax administration but seek more clarity and support. A tech startup CEO commented, “Digital tax enforcement is inevitable, but the government should invest in infrastructure and training to help businesses comply without excessive costs.”
Civil society groups call for transparency and fairness in tax enforcement. A tax policy analyst said, “Tax reforms must be accompanied by measures to protect taxpayer rights and ensure that the benefits of increased revenue are used to improve public services.”
The tax changes set to take effect in 2025 represent a significant step towards modernising Nigeria’s tax system and increasing government revenue. The government is looking to harness the potential of a growing and diverse economy by expanding VAT coverage, redefining taxable income, and focusing more strongly on enforcing digital taxes.
These changes mean businesses will need to adapt to new regulations and may face higher tax bills, especially in the digital sector. Small businesses might face some unique challenges, but they also stand to benefit from a more streamlined tax process and faster refunds.
Ultimately, the success of these reforms will depend on how well they are implemented, how effectively taxpayers are educated, and the ongoing dialogue between the government, businesses, and civil society. The new tax laws aim to foster a more transparent and efficient tax system, but achieving this will require collaboration and commitment from all parties involved.