Nigeria's new tax reforms offer relief for low-income earners

According to the government, this law, touted as a game-changer, aims to harmonize levies across the country's 36 states, reduce the tax burden, simplify revenue collection, and raise revenue. It also creates a unified tax authority by replacing the Federal Inland Revenue Service with the new Nigeria Revenue Service (NRS).

Nigeria has long struggled to revamp its tax laws. "These new laws simplify our tax regime and deliver Nigeria's first major, pro-people tax cuts in a generation," Tinubu wrote on X, formerly Twitter. "They also provide targeted relief for low-income earners, small businesses, and working families across the country.

According to Tinubu, the tax act reduces redundant taxes and eases the burden by eliminating more than 50 minor and overlapping tax caps.

The Tax Administration Act was also signed to help define how taxes would be collected across federal, state, and local governments.

The bill also enacted a Joint Revenue Service Act, which will help mediate the resolution of tax disputes and appeals.

arbiterz.com

Key Highlights from the reforms:

• Low-income earners, small-scale traders, and businesses earning up to one million Naira receive a rent relief of 200,000 Naira, reducing their taxable income while also exempting them from income tax.

• Small businesses with a turnover of less than 50 million Naira are no longer required to pay company income tax. Larger businesses will see a reduction in corporate tax starting at 27.5%.

• High-income individuals might face higher VAT on luxury items. While the reforms aim to broaden the tax base, there is no confirmed provision yet for higher VAT on luxury items.

• Charity groups, co-operatives, and religious organizations will also benefit from the tax incentives if their income is non-commercial.