Nigeria: New tax law targets double taxation, strengthens compliance – NRS

The Federal Government has rolled out new measures aimed at reducing double taxation, widening the tax base and improving compliance under Nigeria’s revised tax framework, according to a Frequently Asked Questions (FAQ) document released by the Nigeria Revenue Service (NRS).

The document provides clarity on key elements of the new tax laws, including reliefs for foreign-sourced income, the taxation of digital services, compliance obligations, penalties for default, and incentives to support research and development.

On double taxation, the NRS explained that the law introduces unilateral relief and recognises Nigeria’s double taxation agreements to prevent the same income from being taxed more than once. These provisions are set out in Sections 120 to 123 of the Act.

Under the framework, Nigerian residents whose income has already been taxed abroad may claim relief, subject to the applicable Nigerian tax rate and within the period allowed by law. According to the NRS, this approach is intended to promote cross-border investment while easing excessive tax burdens on taxpayers.

“The Act provides for unilateral relief and recognition of double taxation agreements to avoid double taxation on foreign-sourced income,” the document stated.

The FAQs also clarified the tax treatment of collective investment schemes, noting that such schemes are treated as companies for tax purposes. Income earned by the scheme is taxed at that level, while distributions to investors are treated as dividends in the hands of unit holders.

On foreign income, the NRS noted that dividends from wholly export-oriented businesses, as well as dividends, interest, rent or royalties earned outside Nigeria and repatriated through approved channels, are exempt from tax.

To encourage innovation, the new tax regime allows companies to deduct up to five per cent of their turnover as research and development expenses incurred in Nigeria.

The law also addresses the digital economy, stating that non-resident digital service providers with significant economic presence in Nigeria are liable to both income tax and value-added tax on Nigerian-sourced income, in line with Sections 17 and 151 of the Act.

Taxpayers are required to keep proper records, including invoices, receipts, contracts and financial statements, as stipulated under the Nigeria Tax Administration Act 2025. The NRS warned that failure to maintain accurate records could result in penalties, interest charges and possible prosecution.

All taxable persons—including individuals, companies, ministries, departments and agencies, as well as non-residents supplying goods or services in Nigeria—must register with the relevant tax authority and obtain a Taxpayer Identification Number (TIN).

Special filing obligations have also been introduced for Virtual Asset Service Providers, which must submit monthly returns detailing transactions, customer information and asset values, in addition to annual filings.

The FAQs outlined penalties for non-compliance, including a ₦50,000 administrative penalty for the first month of failure to register for tax and ₦25,000 for each subsequent month. Late filing of returns attracts interest and additional penalties, while failure to remit withheld taxes carries a 10 per cent annual penalty plus interest at the prevailing Central Bank monetary policy rate.

Companies are required to file self-assessment returns within six months after the end of their accounting year. Newly incorporated firms must file within 18 months of incorporation or six months after their first accounting period, whichever comes first.

Taxpayers who dispute assessments may file objections within 30 days of receiving a notice, stating the grounds for disagreement. Further resolution is available through appeals and administrative processes provided under the Act.

The NRS noted that while it administers taxes on companies, non-residents, petroleum operations, VAT, fossil fuel surcharges and stamp duties, State Internal Revenue Services remain responsible for collecting certain taxes from individuals, estates, trusts and businesses within their jurisdictions.

The new tax laws, anchored by the Nigeria Tax Administration Act 2025, form part of the Federal Government’s broader fiscal reform agenda to boost revenue mobilisation, improve transparency and reduce reliance on borrowing. Authorities say the reforms are designed to modernise tax administration, close loopholes and align Nigeria’s tax system with global best practices, while balancing compliance with targeted reliefs and incentives for businesses.