4% Development levy, not additional tax, says FIRS

The Federal Inland Revenue Service (FIRS) has explained 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 4% Development Levy on imported goods is not a new or additional tax burden, but a streamlined consolidation of several existing levies.

Daily Trust reports that the new Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA) which would take effect in January 2026 have been generating mixed reactions.

The FIRS in a statement while providing clarifications on some of the issues stated that one of the most misunderstood elements of the new tax framework is the 4% 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.

On the Free Trade Zones (FTZs), the statement explained that 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% 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,” the FIRS said.

According to the FIRS, 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% minimum Effective Tax Rate (ETR) 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,” it said.

The reforms, FIRS said, also introduce sweeping changes to capital gains taxation—now termed “chargeable gains.”

The new framework contains several incentives to promote investment and capital mobility.

As the debate continues, the service reiterated that 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.

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