President Bola Tinubu has signed four new tax reform bills into law, introducing sweeping changes to Nigeria’s tax landscape. A key highlight is the consolidation of multiple existing levies into a single four per cent development levy on companies’ assessable profits.
Experts say banks and big companies could benefit slightly from this change. Previously, they paid over four per cent combined in various levies, including the Tertiary Education Tax, NASENI levy, Information Technology Levy, and Police Trust Fund levy. Now, all these have been merged into a flat four per cent development levy, creating room for easier compliance and potential savings.
Ayotunde Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, explained that the reform allows banks to plan taxes better. “The real beauty for banks is that all these levies are now bundled into a four per cent share of taxable income. It helps banks plan and consolidate their taxes and may slightly reduce liabilities,” he said.
He added that the laws will strengthen collaboration between banks and tax authorities. “There is now a provision requiring banks to work closely with tax authorities on planning and monitoring, especially for small businesses declaring low revenues.”
Under the new Acts, small companies with an annual turnover below N100 million are exempt from Companies Income Tax, Capital Gains Tax, and the new Development Levy. This aims to protect small businesses while raising more from larger firms.
The reforms also revised the VAT revenue sharing formula, increasing state and local government allocations to 55% and 35% respectively, while the Federal Government’s share drops to 10%. Experts say this change will give states and LGAs more funds to drive development, but also increase citizen demands for accountability.
The Chartered Institute of Taxation of Nigeria praised the reforms as historic. Its President, Innocent Ohagwa, said, “The signing of the new tax Acts marks a commendable milestone in Nigeria’s fiscal reform journey. It shows the government’s resolve to use tax as a tool for growth and stability.”
Professional services firms like PwC and KPMG urged companies to update compliance systems and rethink tax strategies in line with the changes. PwC warned businesses to prepare for stricter penalties, including a N100,000 fine for late returns in the first month and N50,000 for each subsequent month, alongside penalties for awarding contracts to firms not registered for tax.
Analysts believe the new tax laws will modernise Nigeria’s tax system and improve revenue, while for banks, the simplified development levy may boost profitability slightly by reducing multiple tax burdens into a single rate.
