…approve 55%, 35% VAT allocations for States, LGAs
With the newly passed Nigeria Tax Administration Bill, 2025, the President or State Governor are under obligation to obtain the approval of the National Assembly and States Houses of Assembly for Federal and State taxes respectively, where the President or Governor intends to remit taxes payable by a taxable person.
The recommendation was encapsulated in the Section 74 of the Nigeria Tax Administration Bill approved by the House of Representatives during Thursday plenary, awaiting the concurrence of the Senate.
The lawmakers also approved the provisions for the exemption of the personnel of Military Forces and other such Security Agencies from Personal Income Tax, in recognition of the sacrificial services these individuals render in keeping Nigerians safe.
The lawmakers during the consideration of the reports on the four tax reform bills presented by Chairman, House Committee on Finance, Hon. James Abiodun Faleke, unanimously adopted all the recommendations made by the Committee.
Speaking after the passage of the tax reform bills, the elated Hon. Faleke showered encomium on President Bola Tinubu and Speaker Tajudeen Abbas for the roles played in achieving the feat.
“I want to thank Mr. President for considering it worthy to amend our tax laws. Our tax laws have been as old as 1959, some nineteen sixty something even before I was born and we cannot continue to operate with laws that are archaic to our survival and our revenue targets that we all seek to achieve.”
While acknowledging that the agitations that trailed the proposed the amendments of the tax laws faced tumour from various stakeholders, including State Governors, Hon. Faleke applauded Speaker Abbas for embarking on wide consultation to all the interest groups.
“Mr. Speaker took it upon himself to go round to every stakeholder to let them know what he has read in the bills and areas of concerns should be submitted to the National Assembly for possible amendments. And when these were done, so many of the stakeholders wrote and submitted their proposals.”
According to Hon. Faleke, the Committee held 3-day public hearing and embarked on one week retreat where all the critical stakeholders’ inputs were captured.
“And I’m glad to say that our members saw what we have done, they saw that we’ve done thorough job and they approved all our recommendations.”
Section 75 of the bill also emphasised the need for Mr. President to obtain the approval of the National Assembly where he intends to exempt any person or class of income/profits from tax.
Section 76 also provides that the Accountant-General is required to receive a resolution from the National Assembly in order to deduct any unremitted revenue due from Ministries, Department and Agencies (MDAs).
On the contentious distribution of Value Added Tax (VAT), section 77 provides for States: 50% to be distributed equally, 20% to be distributed based on population, and 30% to be based on consumption. Emphasis has also been placed on the actual place of consumption irrespective of where the returns are filed.
According to the synopsis presented by Hon. Faleke on the floor, in the Eighth Schedule on Solid Mineral Royalty was increased to a range of 7.5% and 10% from 3% to 5% in view of the lucrative nature of the sector, to increase revenue for the government.
“Section 7 which focused on issuance of Taxpayer ID: The timeline to issue Tax IDs to taxpayers has been reviewed from the originally proposed two working days to five working days to allow the tax authority some latitude and make room for possible eventualities. Similarly, any refusal to issue a Tax ID must be accompanied by reasons for such refusal to be communicated to the taxpayer.
“Section 11 – Income Tax Returns for Companies: The timeframe within which a company ceasing business is required to file its returns is reduced from six months to three months to curb potential revenue loss from non-operational businesses.
“Section 22 – Returns for Value Added Tax: For the purpose of attribution, the Committee recommended that the place of consumption of taxable supplies will be irrespective of where returns are filed. This is to address the concern raised by various stakeholders at the public hearing that some regions may be disadvantaged as the headquarters of companies are largely located in one region, where all returns are usually filed.
“Section 23 – VAT Fiscalisation System: The Committee included the need for further regulations by the Service to give effect to the relatively new provision of introducing a fiscalisation system.
“Section 28 – Information to be Delivered by Bankers and others: An amendment was introduced to allay the concerns of taxpayers in respect of the proposed information to be provided by banks by including the language ‘for the purpose of tax’ to ensure that the information is not used for purposes other than that for which it was intended.
“Similarly, the qualifying threshold for reportable transactions has been increased from ₦25m to ₦50m in the case of individuals, and from ₦100m to ₦250m in the case of corporate entities.
“Section 32 – Accreditation of Tax Agents: The Committee has proposed the deletion of subsection (5) which implies that tax agents may be accredited by the Service notwithstanding the qualification, experience and certification of such persons. This addresses the concerns around the possibility of unqualified persons being accredited as agents.
“Section 38 – Currency of Assessment and Payment: Amendments made to this section ensure that tax is assessed in the currency of transaction, and any liability is paid in the same currency.
“Section 60 – Power to Distrain: Inclusion of the mandatory need for the tax authority to seek and obtain an order of the court before proceeding to sell movable assets belonging to taxpayers.
“Section 61 – Enforcement of Powers: A new subsection has been proposed by the Committee to provide for the taxpayers’ obligation to provide passwords, access codes, and any such relevant details to access electronically stored information.
“This is deemed particularly important in view of the phasing out of manual storage of records and the increased volume of taxpayers’ information stored electronically in computers, on the cloud, etc.
“Section 74 – Power of the President or Governor to Remit Taxes: Inclusion of the need to obtain the approval of the National Assembly and States Houses of Assembly for federal and state taxes respectively, where the President or Governor intends to remit taxes payable by a taxable person.
“Section 75 – Power of the President to Exempt Companies from Income Tax: Inclusion of the need to obtain the approval of the National Assembly where the President intends to exempt any person or class of income/profits from tax.
“Section 76 – Power of the Accountant-General to Deduct at Source: Similar to the above, the Accountant-General is required to receive a resolution from the National Assembly in order to deduct any unremitted revenue due from MDAs.
“Section 77 – Distribution of Revenue: For VAT purposes, a new basis for the distribution of the 55% and 35% respectively for State and Local Government allocation has been introduced, thus:
“For States: 50% to be distributed equally, 20% to be distributed based on population, and 30% to be based on consumption. Emphasis has also been placed on the actual place of consumption irrespective of where the returns are filed.
“Sections 99 – 117 – Offences and Penalties: The Committee has proposed that the interest charged as a fine for contravening the law to be at the prevailing CBN Monetary Policy Rate, rather than the initially proposed 2% above the prevailing rate.
“Section 121 – General Penalty: Removal of imprisonment as a penalty for offences in respect of which penalties have not been specified, on the ground of excessiveness, while retaining the monetary administrative penalty.
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“Sections 130 – 132 – Provisions relating to Excise Duties: All provisions relating to compliance with the charge of excise duties have been expunged to align with the similar amendments to the Nigeria Tax Bill. This change is necessitated by a number of reasons, including but not limited to the following:
“Introduction of excise duty on telecoms will lead to hike in the tariffs which will be passed on to the end-users. the introduction may lead to a possible loss of jobs, thus worsening the rate of unemployment in the country. Excise on foreign exchange transactions may lead to shortage of forex inflow to the economy
“Section 143 – Definition of Small Businesses: The threshold for the categorization of companies has been reviewed upward from a turnover of ₦50m to ₦100m, while maintaining the fixed assets value of not more than ₦250m.
“This is intended to ease businesses and fill the vacuum which will be created by the scrapped medium businesses currently provided for under the Companies Income Tax Act.
“Other General Amendments: The Committee further introduced and adopted the following amendments to the Tax Administration Bill:
“Reduction of excessive references to other Bills, particularly the Nigeria Tax Bill, by clearly stating the relevant stipulations and provisions, rather than referring to sections in other Bills
“Introduction of a National Single Window Portal to be operated by the Nigeria Revenue Service to as a revenue facilitation tool, to enhance revenue assurance, streamline import and export processes, and facilitate international transit operations, for the purpose of ensuring efficiency and transparency in trade and revenue administration.
“Introduction of penalties for non-compliance by Virtual Assets Service Providers (VASPs) to include revocation or suspension of licence, as well as a ₦10m penalty in the first month and ₦1m for every subsequent month of default.
“Other Proposed Amendment not in the Bill: A further amendment to Section 77 of the Nigeria Tax Administration Bill, to provide for the distribution of VAT revenue allocated to Local Governments thus: 70% to be distributed equally and 30% to be distributed based on population.”
For the Nigeria Revenue Service (Establishment) Bill, 2025, the House adopted the Committee’s amendments to the Nigeria Revenue Service Bill:
“Section 4 – Functions of the Service: Amendments to exclude individuals in states and the FCT from the scope of NRS’ administrative purview.
“Section 7 – Composition of the Governing Board: Amendment to the composition of the Services’ Board to include six Executive Directors, to be appointed by the President, one from each geo-political zone, on a rotational basis among the states in the zone in alphabetical order, and subject to the confirmation of the National Assembly.
“In addition to this, the Committee recommended the Presidential appointment of one member per State and the FCT to sit on the Board of the Service, to ensure federal character representation on the Governing Board.
“Section 13 – Secretary to the Board: Introduction of the qualification of the Board’s Secretary to be a lawyer, a chartered accountant or a chartered secretary, who shall not be less than the rank of an Assistant Director.
“Section 22 – Funds of the Service: Introduction of a cost of collection for the Service being a fixed percentage of 4% of the total revenue less royalty collected by the Service, to be appropriated by the National Assembly.
“Section 28 – Power to Borrow: An amendment to the section mandating the Service to obtain the approval of the Federal Executive Council and the National Assembly prior to any borrowing.”
On the Joint Revenue Board (Establishment) Bill, 2025, the House adopted the amendments made to the Joint Revenue Board Bill.
“Section 25 – Qualification of a Tax Appeal Commissioner: This section was amended by deleting the proposed paragraph (c). Although currently contained in the FIRS Establishment Act, it is the Committee’s opinion that showing capacity in the management of trade or business is not a standard qualification criterion for a Tribunal Commissioner, and as such expunged the provision.
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“Section 43 – Funds of the Office of the Tax Ombud: The provision of the funding of the Ombud has been amended to expunge all gifts and grants and routing the funding through the Consolidated Revenue Fund, subject to the approval of the National Assembly. This is to also ensure independence of the Office and remove the likelihood of bias towards any party in the execution of its functions.
“Section 44 – Expenditure of the Office of the Tax Ombud: The Committee has included additional expenses to be charged to the fund established for the office of the Ombud including the cost of administration and pre-approved reimbursements to members of the Board or any committee set up by the Board.
“Paragraph 8 of the Second Schedule – Application of the Evidence Act: Amendment to this provision to ensure that the provisions of the Evidence Act are strictly adhered to during proceedings at the Tax Appeal Tribunal.
“Introduction of a New Provision: The Committee has proposed an inclusion in the Bill to provide for the funding of the Tax Appeal Tribunal (TAT) through the Consolidated Revenue Fund, to be appropriated by the National Assembly. This is to put an end to the current funding of the TAT by the FIRS to ensure the independence and fairness of judgements.”
On the Nigeria Tax Bill, 2025, the House adopted the recommendations of the Committee on Finance.
“Section 4 – Income, Profits or Gains Chargeable to Tax: This section was amended to exclude income on inherited assets before distribution from the income of a family that may be chargeable to tax. This amendment clarifies that inheritance tax is not being introduced into Nigerian tax law in any manner.
“Section 18 – Non-resident person engaged in shipping or air transport: The requirement for these companies to present a tax clearance certificate was removed. This amendment is necessary to facilitate ease of doing business and to eliminate the burden involved in processing the TCC, especially as the same requirement has been expunged for resident companies.
“Section 27 – Ascertainment of Total Profits of Companies: This provision was amended to include the requirement for a certificate of acceptance as a condition for companies enjoying priority sector incentives to claim capital allowance.
“The section states that such certification of assets shall be the responsibility of the Industrial Inspectorate Department (IID) at the Federal Ministry of Industry, Trade, and Investment.
“This amendment was further to the several representations made during the public hearing on the need for the IID to continue certifying qualifying expenditures incurred and used for business. This was adopted by the Committee and restricted to only priority companies.
“Section 29 – Presumptive Taxation: This provision was amended to allow the Commissioner in charge of finance of a state and a local government chairman to be able to prescribe the basis for such tax, just like the Minister of Finance on the federal level.
“Section 30 – Ascertainment of Chargeable Income of Individuals: The rent relief available to a taxpayer who declares correctly the amount of rent paid and other relevant information on the landlord was increased to maximum of ₦500,000 from the initially proposed ₦200,000. This is to grant additional relief to taxpayers upon fulfilling prescribed conditions.
“Section 34 – Chargeable Assets: The Committee proposed the reinstatement of the roll-over relief in respect of disposal of shares. That is, when the proceeds of disposal of shares is reinvested within the same year in the acquisition of shares in a Nigerian company, the gains derived from the initial disposal will not be subject to income tax, while any portion of the gain not reinvested will be liable to tax provided that the proceeds and disposal meet the qualifying thresholds.
Section 36 – Disposal of Assets: This section was amended to ensure that assets acquired by way of gift and subsequently disposed will only give rise to chargeable disposal if the beneficiary of the gift had generated income from the gifted asset.
“Section 40 – Expenses Incurred for Disposal of Chargeable Assets: The Committee agreed to remove subsection (2) to avoid ambiguities regarding assets sold and immediately reacquired as no timeframe was provided for what constitutes immediate reacquisition.
“Section 55 – Assets held in Trust for Charities: The word ‘ecclesiastical’ was replaced with ‘religious’ to emphasise the application to all religious organisations, and to address the public outcry in this regard.
“Section 56 – Rate of Tax for Companies: The Committee proposed amendments to remove the staggered reduction in companies income tax rate from 30% to 27.5% in 2025 and 25% in 2026. Per the recommendation by the Nigerian Governors’ Forum, the tax rate of companies other than small companies remains 30%. The Committee further recommends that the tax rate of companies in the priority sector as should be reduced to 25% during the priority period of 5 years.
“Section 57 – Effective Tax Rate: Amendments were made to this section to emphasise that only multinationals with a group aggregate turnover of at least £750m or its equivalent are subject to the global minimum tax, in line with global best practices. The section was also amended to increase the qualifying threshold for minimum tax for resident from a turnover of ₦20 billion to ₦50 billion, as well as exclude free zone entities which export at least 75% of its goods and services, from the minimum tax regime.
“Furthermore, the net profit of life assurance companies to be considered for the minimum tax has been amended to exclude gross premium and investment income for policyholders.
“Section 58 – Rate of Tax for Individuals: The section was amended to exclude minimum wage earners from income tax.
“Section 59 – Development Levy: The proposed amendments to this section include the removal of the sunset provision in the Bill and the sharing of the Levy. Beneficiary agencies have been expanded to include TET – 50%; Nigerian Education Loan Fund – 3%; NITDF – 5%; NASENI – 10%; Defence Infrastructure Fund – 10%; Nigeria Police Trust Fund – 5%; National Sports Development Fund – 5%; Social Security Fund – 10%; National Board for Technological Incubation – 10%; and National Cybersecurity Fund – 1%.
“Section 62 – Lottery and Gaming Business: Removal of reference to the Lottery Trust Fund in alignment with the Supreme Court judgement on the subject.
“Section 78 – Income Tax on Petroleum Operations: Recommended amendment to capture gains accruing to companies engaged in petroleum operations. The intention is to charge such gains at corporate tax rate of 30% instead of the 85% PPT rate.
“Section 91 – Deductions Allowed: For petroleum companies, the Committee opted to maintain the current practice and amended the section to allow for the deduction of development levy paid by petroleum companies in arriving at the adjusted profit.
“Section 135 – Duty on Loan Capital: This section was amended to ensure that loan obtained for onward disbursement to any other person in an on-lending arrangement is not subjected to duty in the hand of the intermediary.
“Section 146 – VAT Rate: The VAT rate was amended to retain the current 7.5% as opposed to proposed staggered increase to 15% by 2030.
“Sections 157 – 163 – Excise Duties: Deletion of provisions relating to excise duties based on the rationales highlighted above.
“Section 164 – Income Tax Exemption: Extension of tax exemption to specific agricultural businesses in the first five years of commencement. The specific agricultural sub-sectors include livestock, forestry, dairy, animal feed and cocoa processing. In addition, wages and salaries of military officers have been proposed to be exempt from income tax.
“Section 169 – Application for Economic Development Incentive Certificate: This section was amended to include fees payable to NIPC for processing the incentive certificate.
“Section 174 – Production Day and Qualifying Capital Expenditure: For priority sector companies, a maximum fee of N5m payable to the IID has been introduced. The amendment also includes a 14-day timeline to issue the certificate following the inspection.
“Section 178 – Economic Development Tax Credit: The credit claimable is 5% per annum of eligible qualifying capital expenditure acquired within 5 years from the production date. The amendment also includes a provision to allow unutilised credit to be claimed within 5 years after the priority period.
“Section 186 – Exemption from Stamp Duties: The proposed amendment to exclude all documents relating to the transfer of stocks and shares, as in the extant law.
“Section 203 – Definitions: The following definitions were amended by the Committee:
“Company: removal of Limited Liability Partnerships to ensure they are only liable to tax under personal income tax payable to the State by the partners and not subjected to corporate tax like companies.
“Family Income: Introduction of a new definition to be any income accruing to a family from all sources.
Small Companies: Redefined to increase the threshold to a gross turnover of ₦100 million or less per annum with total fixed assets not exceeding ₦250 million.
“Second Schedule – Free Zone Entities: Certain conditions were introduced to allow the claim of available incentives. The conditions include the following:
“When goods and services are sold to persons engaged in upstream, midstream, or downstream petroleum or gas operations in the customs territory.
When at least 75% of goods or services are exported or used as inputs in goods or services, at least 75% of which are exported.
“An overriding condition has been introduced to qualify for the export incentive, that is, the evidence of export proceeds, either in the form of cash flow, imported materials, or equipment, must be provided.
“Eighth Schedule – Solid Mineral Royalty: The royalty rates in the Bill have been increased to a range of 7.5% and 10% from 3% to 5%. This is in view of the lucrative nature of the sector, to increase revenue for the government.
“Other Amendments: Decommissioning and abandonment was introduced to ensure 35% of fund meant for this purpose are deposited with Nigerian banks and to authorise the Service and CBN to accredit the participatory banks.
“New provision for Conveyance of Sale for the purpose of stamp duties to limit the imposition of duty on sale of real property only.”
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