Nigeria Tax Reform Bills 2025: House Retains 7.5% VAT, Rejects 15% Increase

Introduction
The Nigerian House of Representatives has upheld the Value Added Tax (VAT) rate at 7.5% while rejecting a proposed gradual increase to 15% by 2030, as suggested in the ongoing Tax Reform Bills deliberations. The decision comes as part of a broader review of tax legislation aimed at overhauling Nigeria’s tax framework.

Key Developments in the Tax Reform Bills
The House also dismissed the proposed reintroduction of an inheritance tax under the guise of family income taxation. However, industry stakeholders, including the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), are awaiting further details before making official statements.

The Movement for Socialist Alternative (MSA), a member of the Joint Action Front (JAF), has urged Nigerians to remain cautious regarding the bill’s rejection, emphasizing that it does not fully address economic burdens faced by the working population.

Major Amendments in the Tax Reform Bills
The tax reform deliberations encompassed four significant pieces of legislation:

Nigeria Tax Bill
Nigeria Tax Administration Bill
Nigeria Revenue Service (Establishment) Bill
Joint Revenue Board (Establishment) Bill

The review, submitted by the Chairman of the House Committee on Finance, James Faleke, incorporates extensive public input and seeks to refine Nigeria’s tax administration.

Revised Provisions in Key Bills

Nigeria Revenue Service Bill

Restructuring the NRS’s Functions: The revised bill limits the Nigeria Revenue Service (NRS) to federal-level taxation, excluding individual taxpayers in states and the Federal Capital Territory (FCT).
Board Composition Changes: The governing board will now include six executive directors appointed by the president on a rotational basis across geopolitical zones. Additionally, each state and the FCT will have a representative on the board.
Secretary Qualifications: The Secretary must hold professional qualifications as a lawyer, chartered accountant, or chartered secretary at the Assistant Director level or above.
Funding and Borrowing Regulations: The NRS will receive a fixed cost-of-collection rate of 4% (excluding royalties), subject to National Assembly appropriation. Furthermore, borrowing powers have been tightened, requiring approvals from the Federal Executive Council and National Assembly.

Joint Revenue Board (Establishment) Bill

Improved Oversight and Transparency: The requirement for Tax Appeal Commissioners to have business management experience has been removed.
Strengthening the Tax Ombud’s Independence: Funding will now come directly from the Consolidated Revenue Fund, preventing undue influence through external gifts or grants.
New Tax Appeal Tribunal (TAT) Funding: The tribunal will receive independent funding to prevent conflicts of interest with the Federal Inland Revenue Service (FIRS).

Nigeria Tax Administration Bill

Extended Timeframe for Taxpayer Identification Numbers: The issuance timeline has been increased from two working days to five.
Faster Income Tax Filing for Ceasing Companies: The timeframe for companies ceasing operations to file their returns has been shortened from six months to three.
VAT System Overhaul: Taxable supplies will now be attributed to their place of consumption rather than where returns are filed. A VAT fiscalisation system is also in the works.
Higher Banking Transaction Reporting Thresholds: The reporting threshold for individuals has been raised from N25 million to N50 million, while corporate entities must report transactions above N250 million (previously N100 million).
Judicial Oversight for Asset Seizure: Tax authorities must obtain court orders before seizing movable assets.
Access to Electronic Taxpayer Records: Authorities now have mandatory access to electronically stored taxpayer data.
New VAT Distribution Formula: Local governments will now receive 70% of VAT revenues equally, with the remaining 30% distributed based on population.

General Amendments

The House of Representatives upheld the 7.5% VAT rate despite initial proposals for a gradual increase. Other key changes include:

Revised Petroleum Industry Taxation: Petroleum profits will now be taxed at 30% instead of 85%.
Removal of Certain Excise Duties: Various excise duty provisions were removed due to economic concerns.
Revised Small Business Classification: Companies with an annual turnover below N100 million will be classified as small enterprises, with an asset cap of N250 million.

New Penalties and Compliance Requirements

Stricter Rules for Virtual Asset Service Providers (VASPs): Non-compliance will attract heavy fines and potential license suspension.
Enforcement of International Standards: Nigeria’s tax administration will align with global best practices, ensuring a transparent system.

Stakeholders’ Reactions

While NACCIMA’s President, Dele Oye, has withheld comments pending further details, civil society organizations remain skeptical about the bill’s impact on economic fairness.

The Movement for Socialist Alternative (MSA) cautioned that rejecting the VAT increase alone is not enough to address Nigeria’s economic disparities. They have called on labor unions, including the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), to demand a higher minimum wage and progressive taxation targeting billionaires instead of the working class.

Conclusion

The House of Representatives will continue deliberations in the coming weeks. The final decision on these bills could significantly impact Nigeria’s tax structure, revenue generation, and economic policies.

For further details on Nigeria’s tax policies, visit the official Federal Inland Revenue Service (FIRS) website.