TAX UPDATE FOR NIGERIAN COMPANIES IN NIGERIA

The Nigerian tax landscape has undergone a tremendous shift with the signing of the new Tax Reform Acts 2025 by the Nigerian Government on 26 June 2025. These reforms, which took effect on the 1^st of January 2026, represent the most comprehensive overhaul of Nigeria’s fiscal architecture in a long time. For foreign companies already operating in Nigeria, as well as those planning to enter its market, understanding these changes is no longer optional but very critical to commercial survival and success and avoidance of penalty.

This update reveals the key changes affecting non-resident companies (NRCs), the new compliance obligations, and the strategic implications for multinational enterprises (MNEs).

Major Tax Reforms Impacting Foreign Companies

1. Expanded Tax Nexus

Before now, foreign companies in Nigeria were only taxed by the Nigerian government if they had a permanent establishment (PE) or significant economic presence (SEP) in Nigeria. The NTA has dramatically broadened this scope to include the following;

1. Foreign companies without any physical presence in Nigeria are now subject to taxation on payments received for services provided to persons resident in Nigeria, as well as to non-residents with a PE in Nigeria.
2. The law assesses tax on profit earned from the direct supply of goods by foreign companies with a PE to residents of Nigeria, with the profit attributed to the supplier’s PE.
3. Non-residents will now pay tax on gains derived from the disposal of shares of a foreign company if more than 50% of the value of those shares is attributable to underlying assets located in Nigeria. This captures indirect offshore transfers that previously escaped Nigerian tax.
4. Minimum Effective Tax Rate (ETR) for Multinationals

Nigeria has introduced a minimum 15% effective tax rate for:

• Multinational corporations with global revenues of €750 million or more
• Nigerian companies with annual turnover exceeding ₦50 billion

If a qualifying company’s actual tax paid in Nigeria falls below 15%, a top-up tax applies to bring the effective rate up to the global minimum. This aligns Nigeria with the OECD’s Pillar Two framework, despite the country not having formally signed the multilateral agreements.

3. Controlled Foreign Company (CFC) Rules

For the first time, Nigerian parent companies must now include the undistributed profits of foreign entities they control in their taxable income. This prevents profit shifting to low-tax jurisdictions and ensures that Nigerian-resident companies cannot indefinitely defer Nigerian tax on offshore earnings.

4. The New 4% Development Levy

One of the most significant changes for foreign companies is the introduction of a 4% Development Levy on assessable profits. This levy replaces a patchwork of industry-specific taxes, including:

• Tertiary Education Tax (3%)
• NITDA Levy (1%)
• NASENI Levy (0.25%)
• Police Trust Fund Levy (0.005%)

5. Capital Gains Tax (CGT) Overhaul

The CGT rate for companies has been increased from 10% to 30% thereby harmonising it with the CIT rate. The scope of CGT now explicitly includes disposals of digital and virtual assets, such as cryptocurrencies and NFTs. However, a partial relief exists: gains below ₦150 million in a 12-month period (subject to a ₦10 million cap per disposal) are exempted.

6. Mandatory Tax Registration for All NRCs

Effective from the 1^st of January 2026, the NTAA has introduced mandatory tax registration for non-resident companies, even those without a PE or SEP in Nigeria. This expands the definition of a “taxable person” and imposes a significant penalty of ₦5 million on Nigerian companies that engage unregistered foreign vendors.

Practically, this means that a foreign company earning any form of Nigerian-source income which includes royalties, rental income, or service fees are now mandated to register with the Nigeria Revenue Service (NRS, formerly FIRS), regardless of whether it has a physical presence. Nigerian counterparties are increasingly unwilling to contract with unregistered foreign vendors, making registration a commercial necessity.

7. VAT on Digital Services and Cross-Border Transactions

From the 1^st of January 2026, non-resident persons supplying digital services to Nigerian consumers must register for VAT, charge the 7.5% VAT on their invoices, and remit it to the NRS as and when due.

This captures a wide range of digital activities, which includes but not limited to the following:

• Streaming platforms (Netflix, Spotify)
• Cloud computing services (AWS, Azure)
• Online advertising (Google, Meta)
• Software subscriptions (SaaS)
• Cryptocurrency exchanges

Penalties for Non-Compliance

The new laws significantly increase penalties for non-compliance:

Practical Steps for Foreign Companies

Immediate Actions to Take

1. Assess your current and historical Nigerian-source income to determine whether you have any unfulfilled tax obligations.
2. Even if you have no physical presence, mandatory tax registration for NRCs is now required under the NTAA.
3. Consider whether formally incorporating a Nigerian subsidiary is now more tax-efficient than operating as an NRC.
4. If you supply digital services to Nigerian consumers, ensure you are registered for VAT under the Simplified Compliance Regime.

Conclusion

The 2025 Tax Reform Acts represent a watershed moment for foreign companies operating in or seeking to enter the Nigerian market. The expanded tax nexus, mandatory registration requirements, and enhanced enforcement mechanisms mean that the era of operating “under the radar” in Nigeria is over.

For foreign companies, the choice is clear: either comply fully with the new registration and filing obligations as a non-resident company or take the strategic step of formally incorporating a Nigerian subsidiary to access the benefits of local status including the reduced 25% CIT rate, full input VAT recovery, and the new Economic Development Incentive.

Navigating Nigeria’s new tax landscape requires expert guidance. Whether you need assistance with tax registration, compliance reviews, or company incorporation in Nigeria, our team of tax and corporate law specialists is here to help.

Contact us today to schedule for a free consultation and ensure your Nigerian operations are fully compliant with the 2026 tax reforms.