Tag: new tax laws

The Federal Government, yesterday, assured operators in the manufacturing sector that with the implementation of the new tax laws, better days are here for them, noting that some key features and changes in the new tax laws will stimulate inclusive growth and enhance the sector’s competitiveness.

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, who gave the assurance at a ‘Hybrid Stakeholders’ Engagement’ held at MAN House, Ikeja, Lagos, said the tax laws offer a suite of strategic benefits targeted at boosting the domestic and global competitiveness of Nigerian manufacturers.

 The session was themed ‘From Legislative Assembly to Factory Floor: What the New Tax Laws Mean for Nigerian Manufacturers,’ with Oyedele listing some of the key changes that will significantly benefit manufacturers to include tax exemptions for small companies, reduced compliance for micro-businesses, and incentives for investment among others

Oyedele said, for instance, that under the new tax regime, small and medium-scale manufacturers and businesses with an annual turnover of N100 million or less are now fully exempt from Companies Income Tax (CIT).

While there is zero per cent CIT for small & medium size companies, Oyedele said for larger firms, the plan is to reduce the CIT rate from 30 per cent to 20 per cent, pointing out that this will bring Nigeria’s rates in line with global competitive standards.

The Tax Reforms Committee Chair also said the new tax regime introduced the Economic Development Incentive (EDI) scheme, replacing the older “pioneer status” holidays.

The EDI offers a five per cent annual tax credit for five years on qualifying capital expenditures, which encourages manufacturers to invest in modern machinery and advanced technology.

The new tax laws, according to Oyedele, also allow manufacturers to recover input Value Added Tax (VAT) on all purchases, including services and fixed assets. This eliminates the previous “hidden cost” of non-recoverable VAT, directly improving cash flow and reducing the cost of production.

That’s not all. There is provision for zero-rated essential goods aimed at stimulating demand and supporting social welfare, basic food items, medical supplies, and educational materials.

Manufacturers in these sectors can now claim full VAT refunds on their inputs while charging zero per cent to the end consumer, making locally produced goods more affordable.

Also, under the new tax laws, designed to simplify the tax landscape and incentivize production, input VAT on taxable supplies, including services and fixed assets, may be deducted from the output VAT payable, but only to the extent the input tax was incurred for making taxable supplies.

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However, the portion relating to non-taxable supplies is not deductible. Manufacturers are also exempted from VAT on diesel, which currently contributes to their high cost of production, because of the exorbitant cost of diesel. 

The charging and collection of VAT on petroleum products, renewable energy equipment, Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG), and other gaseous hydrocarbons may be suspended by an Order from the Minister.

Oyedele also said a lot of the tax reforms are targeted at the capital market, noting, for instance, that all investors in the stock market are eligible for Capital Gains Tax (CGT) exemption either unconditionally or subject to re-investment.

Withholding Tax (WHT) on bonus shares has also been eliminated. There are also provisions for tax exemption for state government bonds, stamp duty exemption for all documents relating to the transfer of stocks and shares, as well as faster and clearer rules for tax offsets and refunds.

The new tax laws, according Oyedele, also simplified compliance by making e-invoicing, fiscalisation and real-time reporting mandatory.

The transition to a digital, automated e-invoicing system under the Nigeria Revenue Service (NRS) will reduce the administrative burden on tax departments, allowing firms to focus more on core industrial operations.

Perhaps, the icing on the cake of the new tax regime is the provision for Tax Ombud to protect taxpayer rights including moderation of excessive regulatory fees.

Oyedele explained that the Tax Ombud is an independent and impartial arbiter, to conduct enquiries, institute legal proceedings on behalf of a taxpayer, and act as a watchdog against arbitrary tax policy.

In highlighting the strategic benefits of the new tax laws for Nigerian manufacturers, Oyedele said the tax reform was necessitated by the need top to address inequity and promote shared prosperity.

He said the reforms were intended to mend Nigeria’s broken tax system which he described as “fragmented, complex, unconducive for growth, regressive, and a high burden on Nigerians and businesses.”

The reform objectives, according to him, are designed to usher a regime of fairness, harmonisation, efficiency, ease of doing business, transparency, and economic development.

He said macroeconomic stability and growth, rising investor confidence, harmonisation, and modernisation are already indications that Nigeria is inching closer to realizing the objectives of the reforms.

Oyedele emphasized that the reforms are a “bold step” towards a competitive Nigeria, encouraging dynamic engagement from businesses to leverage these changes for growth, better revenue generation, and increased domestic and foreign investment.

An oil and gas expert, Ken Ife, has said that the country’s newly implemented Tax Act would curb revenue leakages in the oil and gas sector.

Mr Ife, an energy development economist, said the tax would also free regulatory agencies to concentrate on oversight, performance monitoring and enforcement. He spoke in an interview with journalists on Sunday in Lagos, as the Nigeria Tax Act 2025 officially took effect on January 1, 2026.

The tax laws signed into law in June 2025, represents one of the most sweeping fiscal reforms in Nigeria’s petroleum industry in decades.

Mr Ife said the new law consolidates legacy statutes such as the Petroleum Profits Tax Act (PPTA) and fully integrates the Petroleum Industry Act (PIA) 2021 into a single, unified tax code.

According to him, the Act repeals much of the fragmented tax regime, replacing it with a streamlined fiscal framework designed to improve transparency, efficiency and investor confidence. “For the oil and gas industry, upstream companies will still face a split tax structure,” Mr Ife explained.

“This consists of Hydrocarbon Tax (HT) on profits from crude oil production and Companies Income Tax (CIT) on general corporate profits.” He said the hydrocarbon tax remains between 15 and 30 per cent, depending on licence type, while the standard CIT for large companies is set at 30 per cent, with a planned reduction to 25 per cent in subsequent years.

“The drop from 30 to 25 per cent CIT is very encouraging to prospective investors and improves retained earnings for existing operators,” he said.

Mr Ife identified the introduction of a 15 per cent Minimum Effective Tax Rate (ETR) as one of the most consequential changes for International Oil Companies (IOCs) and large indigenous firms.

“This aligns Nigeria with the OECD’s ‘Pillar Two’ framework where a company’s effective tax rate falls below 15 per cent due to incentives or deductions, a top-up tax will apply to meet the threshold.”

“This effectively blocks tax leakage and guarantees a minimum contribution from multinational groups,” he said. He also highlighted the introduction of a consolidated 4 per cent Development Levy on assessable profits, replacing several smaller levies, including the Tertiary Education Tax, NITDA Levy, NASENI Levy and the Police Trust Fund Levy.

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“The positive aspect is that this 4 per cent levy applies only to profits subject to CIT and not to profits calculated for Hydrocarbon Tax purposes, offering some relief for core upstream operations,” he said.

On energy transition measures, Mr Ife noted that a five per cent surcharge has been introduced on fossil fuel products such as petrol and diesel at the point of sale, in line with global practice. “This policy is currently facing resistance, and effective implementation of a 15 per cent ad-valorem tax on imported fuel may delay its full rollout,” he said.

He added that clean energy products, including Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG or cooking gas) and household kerosene, are exempt from the surcharge. Warning of potential downstream implications, he said: “The current competitive environment that has driven pump prices down to about N739 per litre could be reversed if the government pushes through the 5 per cent tax at the pump.”

Addressing long-standing concerns over high production costs, Mr Ife said the reform introduces the Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025. He said that under the scheme, companies that reduce operating costs below regulatory benchmarks can claim tax credits, allowing them to retain up to 50 per cent of the savings achieved.

He added that the Act reinforces Nigeria’s gas strategy through new Gas Tax Credits (GTC) and Gas Tax Allowances (GTA) for greenfield non-associated gas developments, positioning gas as a transition fuel.

On administration, Mr Ife noted that the newly established Nigeria Revenue Service (NRS) now has the exclusive mandate to collect all petroleum-related taxes and royalties.

“This simplifies the interface for companies that previously dealt with multiple agencies such as the NUPRC and FIRS. More importantly, it reduces revenue leakages and allows regulatory agencies to focus squarely on regulation, monitoring, performance and enforcement,” he added.