The Federal Inland Income Service (FIRS) has clarified that the much-debated 4% Improvement Levy on imported items shouldn’t be a brand new or further burden on companies, noting that it’s a consolidation of a number of present prices designed to simplify compliance, cut back unpredictability and strengthen Nigeria’s funding local weather.
The Service gave the reason in an announcement issued on Wednesday, the place it famous that the new Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA) have generated important public reactions largely due to “misinterpretations,” particularly across the new levy construction.
The company burdened that the reforms are aimed toward enhancing financial competitiveness, defending incentives and securing long-term fiscal stability.
This clarification comes amidst critical issues by particular person Nigerians and companies that the federal government could be putting extra tax burden on them because it implements new tax legal guidelines from January 2026.
What the FIRS is saying
In line with the company, the 4% levy replaces a protracted checklist of fragmented prices that companies beforehand paid individually, together with Tertiary Schooling Tax, NITDA Levy, NASENI Levy, and Police Belief Fund Levy.
“This consolidation reduces compliance prices, eliminates unpredictability and ends the period of a number of agency-driven levies. The legislation additionally exempts small companies and non-resident corporations, providing safety to companies most susceptible to financial shocks,” the FIRS defined.
- FIRS additionally addressed issues that the reforms may erode the enchantment of Nigeria’s Free Commerce Zones (FTZs). Opposite to earlier commentary, the company clarified that FTZ incentives stay intact.
- Underneath the brand new guidelines, FTZ corporations can now promote as much as 25% of their output into Nigeria’s home market with out dropping their tax-exempt standing. A 3-year transition interval has additionally been launched to assist companies modify seamlessly.
- Officers say the changes are supposed to curb abuses the place some corporations used FTZ licences to keep away from home taxes whereas competing within the native market, undermining the aim of the zones.
- The brand new construction aligns Nigeria’s FTZs with world fashions in international locations just like the UAE and Malaysia, the place the zones perform primarily as export hubs.
15% minimal tax price
One other main component of the reforms is the introduction of a 15% minimal Efficient Tax Charge (ETR) for big home and multinational corporations.
Whereas some companies have expressed fear concerning the affect, FIRS mentioned the measure aligns with a worldwide tax settlement endorsed by greater than 140 international locations underneath the OECD/G20 deal.
The company warned that with out adopting this rule, Nigeria risked dropping income to the “Prime-Up Tax” mechanism, the place the house nation of a multinational collects further taxes if the host nation prices under 15%.
By implementing it regionally, Nigeria ensures that these revenues stay inside its borders. The 15% ETR additionally applies to giant home corporations to preserve equity and discourage profit-shifting.
New incentives for traders
The reforms equally introduce a modernized method to taxing capital good points, now known as chargeable good points.
One of many standout provisions is the brand new reinvestment aid, which exempts traders from tax on good points in the event that they reinvest proceeds from share gross sales into one other Nigerian firm inside the identical 12 months.
The brand new guidelines additionally replace loss remedy mechanisms, exempt low-value transactions to guard small traders and shut loopholes that beforehand allowed corporations to masks enterprise earnings as capital good points.
What it’s best to know
In November, Chairman of the Presidential Fiscal Coverage and Tax Reforms Committee, Taiwo Oyedele, needed to make clear to the investing group that the new Capital Positive factors Tax (CGT) framework would not retroactively tax funding good points made earlier than 2026.
- The reason got here on the again of the steep decline within the capital market throughout that interval as traders launched into a mass selloff to keep away from the tax.
- In his explanations, Oyedele mentioned CGT reform introduces a important change in how the tax can be calculated for investments made earlier than 2026.
- Particularly, the price base or reference worth for calculating capital good points can be reset to the upper of two quantities: the precise quantity paid to purchase the asset or the asset’s market worth as of December 31, 2025.
