Tax reforms: Expert outlines new rules, strategies to avoid penalties

By Olakunle Oke

The proposed Nigeria Tax Reform 2025 is set to fundamentally reshape the nation’s fiscal landscape when it takes effect in January 2026.

Speaking at the Nigerian NewsDirect X Space webinar yesterday, prominent tax expert Mr. Taiwo Oluwatobi provided an exhaustive breakdown of the reform’s implications for salary earners, the self-employed, and the business community.
Mr. Oluwatobi, a Senior Consultant at UHY Professional Services and a dual associate of ICAN and AATWA, sought to de-escalate public anxiety by clarifying that more than half of the reform's provisions are amendments to existing statutes rather than the introduction of new taxes.

He explained that the central objective is to simplify a fragmented framework and foster a culture of voluntary compliance.

A cornerstone of the reform is the repeal of over 15 disparate tax laws some of which have been in place since 1969 and their consolidation into a unified Nigeria Tax Act. This legislative overhaul is expected to eliminate overlapping regulations and reduce the administrative burden on taxpayers.

Institutional changes are equally significant. The reform replaces the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service (NRS) and establishes a Tax Ombudsman Office to resolve disputes without the need for protracted litigation.

Also a new Joint Revenue Board will coordinate tax authorities across federal, state, and local levels to finally address the persistent issue of double taxation.

For the average Nigerian, the reform introduces several progressive measures designed to protect purchasing power. Mr. Oluwatobi highlighted a new ₦800,000 annual tax-free threshold alongside significant reliefs for rent (20 percent or up to ₦500,000), pension deductions, and mortgage interest. These allowances mean that millions of low- and middle-income earners will either see their tax liabilities drop significantly or fall out of the tax net entirely.

Small businesses also remain protected under the new rules. Companies with an annual turnover below ₦50 million and total assets under ₦250 million will continue to enjoy a 0 percent Company Income Tax (CIT) rate, provided they are not professional service firms. Conversely, larger corporations specifically those with revenues of ₦5 billion and above will face stricter digital monitoring, including the mandatory adoption of e-invoicing for VAT.

Warning that compliance is cheaper than penalties, Mr. Oluwatobi urged Nigerians to adopt rigorous documentation practices.

He emphasized that the era of estimated figures is over, as digital audits and electronic receipts become standard. Taxpayers were cautioned to avoid red flags such as rounding up figures, inconsistent reporting across different filings, and unexplained drops in profit margins, all of which will trigger immediate scrutiny from the NRS.

To ensure transparency, the reform explicitly outlines how levies will be allocated to critical sectors like security, education, student loans, and technology. This move is aimed at building public trust by showing a clear link between tax payments and national development.

As the 2026 implementation date approaches, Mr. Oluwatobi advised individuals to calculate their future liabilities early and ensure their employers have updated records. Businesses were encouraged to upgrade their accounting systems and seek professional guidance to legally optimize their tax positions. The overarching message was one of preparation over panic, as the new system aims to be fairer, clearer, and more transparent for all citizens.