Nigeria Tax Act 2025 Goes into Effect on January 1, 2026
Employers in Nigeria should take note of the Nigeria Tax Act (NTA) 2025, signed by President Bola Ahmed Tinubu in June 2025. The law takes effect on January 1, 2026, and it consolidates several tax laws and provides a revised framework for employment taxation with the overall objective of streamlining compliance and expanding the country’s tax base. The NTA also introduces stiffer penalties for employers that under-deduct taxes or delay the remittance of taxes.
The law introduces tax exemption for employees earning 800,000 naira (NGN) (approximately $555.00 USD) or less annually, while applying progressive rates to higher income brackets. The tax rate ranges from 0% to 25%.
Employers will need to familiarize themselves with the modernized Pay-As-You-Earn (PAYE) system put forth in the NTA, which includes all forms of remuneration within the PAYE base. In addition to the NTA, the PAYE system is governed by the Personal Income Tax Act and the Finance Acts.
Taxable income is calculated after deducting certain reliefs and contributions. Under the NTA, there are several key changes to Personal Income Tax for individuals, including the following:
- For benefits in kind, defined valuation rules apply to employer-provided assets (capped at 5% of cost).
- Rent relief is included under the NTA, covering 20% of rent, up to a maximum of 500,000 NGN.
- Deductions such as those for pensions, the National Housing Fund, and the National Health Insurance Scheme remain but must be claimed in writing with documentation.
- Gratuity is taxable, and income earned from digital / virtual asset gains, prizes, honoraria, grants, and nontraditional sources is taxable.
