In a statement issued on Wednesday, the agency said public misunderstanding of the new Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA) had triggered misconceptions about the levy. It noted that the reforms were crafted to improve economic competitiveness, protect incentives and ensure long-term fiscal stability.
This clarification comes amid increasing concerns from individuals and businesses that the government’s new tax laws taking effect from January 2026 would impose heavier obligations on them.
4% Levy Replaces Multiple Existing Charges
According to the Service, the 4% Development Levy combines several previously fragmented payments, such as the Tertiary Education Tax, NITDA Levy, NASENI Levy and the Police Trust Fund Levy.
“This consolidation reduces compliance costs, removes unpredictability and ends the era of multiple agency-driven levies. The law also exempts small businesses and non-resident companies, offering protection to firms most vulnerable to economic shocks,” the statement read.
Free Trade Zone Incentives Still Protected
FIRS also moved to dispel fears that the new reforms would undermine the attractiveness of Nigeria’s Free Trade Zones (FTZs). It clarified that FTZ incentives remain intact under the revised framework.
Companies operating in FTZs are now allowed to sell up to 25% of their output into Nigeria’s domestic market without losing their tax-exempt status. A three-year transition window has been provided to help such firms adjust smoothly.
Officials noted that the adjustment is intended to address widespread abuse in which some companies used FTZ licences to avoid domestic taxation while competing directly in the local market. The new structure aligns Nigeria’s FTZ operations with global models in countries like the UAE and Malaysia.
15% Minimum Effective Tax Rate Introduced
Another major component of the reforms is the introduction of a 15% minimum Effective Tax Rate (ETR) for large domestic and multinational companies. FIRS said the move aligns with the global tax agreement endorsed by more than 140 countries under the OECD/G20 framework.
It warned that if Nigeria failed to implement the 15% rate, it risked losing revenue through the “Top-Up Tax” rule, where a multinational’s home country would collect the difference.
By adopting the rule locally, Nigeria ensures that the revenue remains within its own borders. The 15% minimum ETR for domestic companies is expected to promote fairness and discourage profit-shifting.
New Incentives for Investors
The reforms also modernise capital gains taxation—now termed “chargeable gains”—introducing a reinvestment relief that exempts investors from tax on gains if the proceeds of share sales are reinvested into another Nigerian company within the same year.
The new rules further improve loss treatment, exempt low-value transactions to protect small investors, and close loopholes that previously enabled companies to disguise business income as capital gains.
Capital Gains Tax Will Not Apply Retroactively
The article also highlighted earlier clarifications by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, who assured investors that the new Capital Gains Tax (CGT) framework would not retroactively tax gains made before 2026.
He explained that for investments made prior to 2026, the cost base used for calculating future gains would be reset to the higher of either the purchase price or the market value as of December 31, 2025—a measure intended to protect investors and stabilise the capital market.
