FIRS clarifies new tax laws, debunks levy misconceptions

FILE: Executive Chairman, FIRS, Dr Zacch Adedeji

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The Federal Inland Revenue Service has stated that Nigeria’s newly enacted tax laws are designed to strengthen economic competitiveness, attract investments, and improve long-term fiscal stability.

The agency also clarified that the much-debated four per cent development levy on imported goods is not a new or additional tax burden, but a streamlined consolidation of several existing levies.

In recent weeks, the new Nigeria Tax Act and Nigeria Tax Administration Act have sparked widespread debate among citizens and businesses seeking clarity on how the reforms will affect them. But tax authorities say these concerns stem largely from misinterpretations, insisting the laws are aimed at simplifying compliance, protecting incentives and improving Nigeria’s investment environment.

According to FIRS in a statement on Wednesday, one of the most misunderstood elements of the new tax framework is the four per cent development levy. The agency explained that the levy replaces a range of fragmented charges — such as the Tertiary Education Tax, NITDA Levy, NASENI Levy and Police Trust Fund Levy — that businesses previously paid separately.

This consolidation, it said, reduces compliance costs, eliminates 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.

Analysts say the new levy structure sends an important message to investors: Nigeria is moving toward a more coordinated, transparent and predictable fiscal environment.

Another major clarification relates to Free Trade Zones. Earlier commentary had suggested that the government was rolling back the incentives that have attracted export-oriented investors for decades. However, the reforms maintain the tax-exempt status of FTZ enterprises and introduce clearer guidelines to preserve the purpose of the zones.

Under the new rules, FTZ companies can sell up to 25 per cent of their output into the domestic market without losing tax exemptions. A three-year transition period has also been provided to allow firms to adjust smoothly. Government officials say the reforms aim to curb abuses where companies used FTZ licences to evade domestic taxes while competing within the Nigerian market.

With the new measures, Nigeria aligns with global FTZ models in places like the UAE and Malaysia, where the zones function primarily as export hubs for logistics, manufacturing and technology.

The introduction of a 15 per cent minimum Effective Tax Rate for large multinational and domestic companies has also been met with public concern. But the FIRS notes that this policy aligns with a global tax agreement endorsed by over 140 countries under the OECD/G20 framework.

Without this adoption, Nigeria risked losing revenue to other countries through the “Top-Up Tax” mechanism, where the home country of a multinational collects the difference when a host country charges below 15 per cent. By localising the rule, Nigeria ensures that tax revenue from multinational operations remains within its borders.

The ETR is also extended to large domestic companies to ensure a level playing field and discourage profit-shifting practices that undermine the fiscal system. The reforms also introduce sweeping changes to capital gains taxation — now termed “chargeable gains.” The new framework contains several incentives to promote investment and capital mobility.

One of the key innovations is the reinvestment relief, which allows investors who sell shares and reinvest in another Nigerian company within the same year to avoid tax on gains. Experts say this provision will unlock capital for startups, private equity and other emerging enterprises.

The law also modernises capital loss treatment and exempts low-value transactions to protect small investors. At the same time, loopholes that previously allowed companies to disguise business income as capital gains have been closed.

Taken together, the reforms introduce structure, clarity and competitiveness into Nigeria’s tax environment. Government officials maintain that the measures will strengthen investor confidence, support industrial expansion and secure a sustainable revenue pipeline for national development.

While public debate continues, authorities insist the new tax regime is not punitive but strategic — balancing investor incentives with national revenue needs, and positioning Nigeria as a more predictable and attractive destination for global capital.

Okechukwu, a journalist with Punch Newspapers, has 15 years experience covering Energy (Power and Petroleum), Finance, Agriculture, Environment, Humanitarian Services, Works and Housing, Trade and Investment, Capital Markets, Aviation and Transport, ICT, among others

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