Your Business Has Been Breaking the Law Since January 2026 — And You Probably Don't Know It

Your Business Has Been Breaking the Law Since January 2026 —

And You Probably Don't Know It.

A plain-language guide to the Nigeria Tax Act 2025 — what changed, what it means for your business, and what you must do before the NRS finds you first.

On 26 June 2025, Nigeria's tax system was fundamentally and permanently redesigned. Four Acts were signed into law simultaneously — the Nigeria Tax Act (NTA 2025), the Nigeria Tax Administration Act (NTAA 2025), the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act. From 1 January 2026, every company, every employer, every VAT-registered business in Nigeria has been operating under a new legal framework. New rates. New obligations. New penalties. New enforcement powers.

Most Nigerian businesses do not know this.

I do not say that to be provocative. I say it because I sit across from business owners and directors every week — intelligent, experienced, accomplished people — who are filing tax returns, running payrolls, and issuing invoices exactly as they did in 2024. They are using old frameworks, old assumptions, and old exemptions — some of which no longer exist. And they are accumulating exposure — financial, legal, and reputational — with every passing month.

This article is my attempt to change that. Not with legal jargon. Not with a summary document that requires a law degree to decode. With the clarity that the moment demands.

"A new law does not wait for you to learn about it before it begins to apply. The NTA 2025 has been in force since 1 January 2026. Every month of non-awareness is a month of accumulating risk."

——— SECTION ONE ———

The Architecture of the Reform — What Was Built and Why It Matters

Before June 2025, Nigeria's tax law was spread across more than a dozen separate statutes — the Companies Income Tax Act, the Personal Income Tax Act, the Value Added Tax Act, the Capital Gains Tax Act, the Stamp Duties Act, the Petroleum Profits Tax Act, and several others. Each had its own definitions, filing requirements, penalties — and inevitably, its own contradictions with the others. The result was fragmented, inconsistent, and manipulated — not by sophisticated planners, but simply by the confusion it generated.

The four Reform Acts of 2025 swept all of that away and replaced it with a single, unified framework. The NTA is now the primary legislation governing Nigerian taxation. The NTAA is the procedural manual governing how it is administered, enforced, and disputed.

THE FOUR REFORM ACTS — WHAT EACH ONE DOES

Nigeria Tax Act (NTA 2025): The substantive law. Replaces CITA, PITA, VAT Act, CGT Act, Stamp Duties Act, and more. Defines what is taxable, who is taxable, at what rate, and under what conditions.

Nigeria Tax Administration Act (NTAA 2025): The procedural law. Governs how taxes are assessed, filed, audited, disputed, and enforced. Contains the penalty regime every business must understand.

Nigeria Revenue Service (Establishment) Act: Renames and restructures the FIRS as the Nigeria Revenue Service (NRS) — with expanded powers, greater autonomy, and a mandate for digital-first enforcement.

Joint Revenue Board (Establishment) Act: Creates a coordinating body for federal, state, and local tax authorities — designed to eliminate the multiple taxation that has burdened Nigerian businesses for decades.

The institutional change deserves particular attention. The Federal Inland Revenue Service — which many Nigerians still call FIRS — no longer exists in that form. Its successor, the Nigeria Revenue Service (NRS), is equipped with artificial intelligence tools designed to detect underreporting by automatically cross-referencing bank transaction data, payroll records, and tax filings. The era of a tax system that relied solely on what you chose to tell it is over.

——— SECTION TWO ———

What Has Changed — Nine Things Every Business Must Know

KEY DATES AT A GLANCE 1 January 2026 — NTA 2025 and NTAA 2025 take full effect 1 January 2026 — New PIT bands and ₦800,000 zero-tax threshold in force 1 January 2026 — Minimum tax abolished; Development Levy operative 31 January 2026 — First PAYE employer annual return due under NTAA Q2 2026 — E-invoicing enforcement: Large taxpayers (₦5bn+ turnover) — ACTIVE NOW July 2026 — E-invoicing go-live: Medium taxpayers (₦1bn–₦5bn turnover) Jan–Mar 2027 — E-invoicing enforcement begins for medium taxpayers 2027 — E-invoicing onboarding: Small/emerging taxpayers (below ₦1bn) 2028 — E-invoicing enforcement: Small/emerging taxpayers

1. Small Company Classification — A Critical Distinction You Must Get Right

This is the change with the most immediate impact on the widest range of Nigerian businesses. And it is the change that has generated the most confusion in the tax advisory community — because there is a genuine discrepancy between the two Acts that has not yet been formally corrected by legislation.

Under the old CITA, companies were classified as small (turnover below ₦25 million), medium (₦25 million to ₦100 million), or large (above ₦100 million). The NTA 2025 and NTAA 2025 simplify this to two categories — but with different threshold figures in the two Acts.

⚠️ LEGISLATIVE DISCREPANCY — RESOLVED IN PRACTICE, PENDING IN LAW

The NTA 2025 (Section 202) defines 'small company' with a turnover threshold of ₦50,000,000. The NTAA 2025 (Section 147) defines 'small business' with a turnover threshold of ₦100,000,000. Both Acts were signed on the same day — 26 June 2025 — and are in force from 1 January 2026. The discrepancy is real and has been publicly acknowledged. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, stated in September 2025: "₦100 million is the correct amount; the ₦50 million in the NTA is an error." Critically, the NRS has now given administrative effect to the ₦100 million threshold through its own digital filing infrastructure. The NRS's Rev360 self-service portal — which replaced TaxProMax as the primary filing platform — automatically does not compute Companies Income Tax for businesses with annual turnover below ₦100 million. The system is configured to give effect to ₦100 million as the operative small company threshold. This is not a platform error. It is the NRS's own implementation of the intended law. Three converging signals therefore point to ₦100 million as the threshold that will be applied in practice: the NTAA's explicit ₦100 million figure, the drafter's public acknowledgement that ₦50 million was a drafting error, and the NRS's Rev360 system which operationalises ₦100 million as the threshold. No corrective gazette amendment has been published as at June 2026 — but the practical reality is clear.

For practical compliance purposes: businesses with annual turnover below ₦100 million that are not professional service providers may file on the basis of the small company exemption — and will find that Rev360 does not generate a CIT liability at that level, consistent with the NRS's own administrative position. However, given that the ₦50 million figure remains in the gazetted NTA as enacted, the prudent course remains to document your classification basis and obtain professional guidance — particularly if your turnover is close to either threshold, or if you are in any doubt about whether your business activity qualifies as a professional service under the Acts.

What is not in dispute — regardless of which threshold ultimately prevails — is the following:

Small companies (however defined) are taxed at 0% CIT — a complete exemption from Companies Income Tax, Capital Gains Tax, and the Development Levy

ALL companies — including those with zero liability — must still file annual returns with the NRS

Professional service providers are expressly excluded from the small company/business exemption in BOTH Acts, regardless of turnover or assets. This applies to accounting firms, law firms, medical practices, engineering consultancies, and IT service companies

🔴 CRITICAL: If your business provides professional services — accounting, legal, medical, engineering, consulting, IT services — you CANNOT claim the small company CIT exemption, regardless of your annual turnover or total fixed assets. A professional practice with ₦20 million annual revenue remains fully liable for CIT at 30%. Do not assume the exemption applies without taking specific professional advice.

2. The Development Levy — A New 4% Tax Now In Force

Every company that does not qualify as a small company now pays a Development Levy of 4% of assessable profits. This replaces four previous levies — the Tertiary Education Tax (TET), the IT Levy, the NASENI Levy, and the Police Trust Fund Levy — consolidated into one charge. Every company with a December year-end is navigating its first full Development Levy assessment right now. If this has not been provisioned in your current year financial statements, it needs to be addressed immediately.

3. VAT Has Been Restructured — Input VAT Is Now More Recoverable

The VAT rate remains unchanged at 7.5%. But the architecture of how VAT works has changed significantly. Under the old VAT Act, input VAT credits were restricted primarily to goods for resale or raw materials. Services were generally not recoverable. Capital assets were not recoverable. The NTA 2025 changes this: businesses can now claim input VAT on both services and capital assets, provided they are used in making taxable supplies. For capital-intensive businesses and those with high professional services expenditure, the cumulative cash flow benefit is substantial. There is, however, a countervailing obligation — and it is urgent.

4. E-Invoicing Is Now Law — Some Deadlines Have Already Passed

The NTA and NTAA 2025 mandate that all VAT-registered businesses must issue, validate, and transmit invoices electronically through the NRS-approved Merchant Buyer Solution (MBS) platform. This is law, with statutory penalties attached. The rollout is phased:

Large Taxpayers (₦5bn+ annual turnover): ENFORCEMENT ACTIVE — Q2 2026

Medium Taxpayers (₦1bn–₦5bn): July 2026 go-live; enforcement Jan–Mar 2027

Emerging/Small (below ₦1bn): 2027 onboarding; enforcement from 2028

What makes e-invoicing uniquely dangerous for non-compliant businesses is the supply-chain dimension. Under the new framework, a buyer can only claim VAT input credits on invoices validated and transmitted through the NRS MBS platform. If your supplier issues a traditional PDF or paper invoice — however professional — you cannot claim the VAT input credit on it. Your supplier's non-compliance becomes your financial loss.

"Your supplier's failure to comply with e-invoicing is not just their problem. It is your money. When the NRS rejects your VAT input credit claim because your supplier did not validate their invoice, the financial loss lands on your books — not theirs."

5. The Penalty Regime — Designed to Make Non-Compliance More Expensive Than Compliance

The 2025/2026 penalty framework is a financial deterrent calibrated to make non-compliance cost more than the underlying tax liability in many scenarios:

Critical point: Even where your company has zero tax liability, you must still file a nil return. Non-filing attracts the same ₦100,000 initial penalty. As the NRS moves toward automated penalty generation, the absence of a filed return triggers a penalty notice without human intervention. Silence is no longer safe.

6. The NRS Now Has Powers Its Predecessor Did Not Possess

Power to distrain: The NRS can seize and sell a taxpayer's assets — land, buildings, goods — to recover unpaid tax without a lengthy court process

Power of substitution: The NRS can designate your bank or any creditor as your 'agent' and compel them to pay your tax liability directly from funds they hold for you

AI-driven cross-referencing: Bank transaction data, payroll records, and tax filings are automatically compared. Discrepancies are flagged without human intervention

Mandatory Disclosure Rules: Certain tax planning arrangements must be reported to the NRS proactively before implementation — not discovered during audit

Advance Rulings: Taxpayers can apply for a binding NRS opinion on how the law applies to a specific transaction before executing it

7. Personal Income Tax and PAYE Have Changed — Your Employees Are Affected

The NTA 2025 restructures personal income tax bands. Key changes for every employer:

Individuals earning ₦800,000 or less per annum are now completely exempt from Personal Income Tax

Progressive bands: 15% on next ₦2.2M; 18% on next ₦9M; 21% on next ₦13M; 23% on next ₦25M; 25% on income above ₦50M per annum

Compensation for loss of employment is tax-exempt up to ₦50 million (increased from ₦10 million)

Annual employer PAYE returns are due by 31 January each year — your payroll system must reflect the new bands from January 2026

8. Digital Assets Are Now Explicitly Taxable

The NTA 2025 explicitly provides that profits or gains from transactions in digital or virtual assets — cryptocurrencies, NFTs, and similar instruments — are chargeable to Nigerian income tax. If your business or directors have realised gains from digital asset transactions since 1 January 2026, those gains require disclosure and assessment.

9. Minimum Tax Is Abolished — But Do Not Confuse It With the Minimum Effective Tax Rate

Under the old Companies Income Tax Act (CITA), a company that made no taxable profit — or whose CIT liability was lower than the minimum tax figure — was still assessed for minimum tax at 0.5% of gross turnover. It was a blunt instrument that levied a charge on revenue regardless of whether the business was profitable. For companies in genuine loss positions, early-stage businesses, and those in capital-intensive or cyclically difficult sectors, minimum tax was a recurring burden with no economic justification. The NTA 2025 abolishes it entirely for companies generally. A company that makes no profit pays no CIT. Full stop. This is one of the most unambiguously business-friendly changes in the entire reform package — and one of the least reported.

The NTA 2025 does introduce a concept called the Minimum Effective Tax Rate (METR) — but this is an entirely different instrument that must not be confused with the old minimum tax. The METR is Nigeria's domestic implementation of the OECD BEPS Pillar Two global minimum tax framework. It applies only to constituent entities of multinational enterprise groups with annual global consolidated revenue of €750 million or more — a threshold that places it well beyond the reach of virtually every Nigerian-owned business. Its purpose is to ensure that large multinationals pay at least a 15% effective tax rate in every jurisdiction where they operate, preventing profit-shifting to low-tax territories. The METR and the old minimum tax share a name structure but nothing else. One has been abolished. The other applies to a handful of global giants. Knowing the difference is not a technicality — it is the kind of clarity that protects businesses from unnecessary compliance anxiety on the one hand, and from misplaced comfort on the other.

If your company has historically been assessed for minimum tax — particularly if it operated at a loss or on thin margins — confirm that this obligation has ceased from 1 January 2026. Any minimum tax demand raised by the NRS for periods from 1 January 2026 onwards should be challenged. Review prior year minimum tax assessments, any accumulated minimum tax losses, and overpayments with your tax adviser. What was previously unavoidable is now unlawful.

Abstract risk is hard to act on. Concrete consequences are not. Here is what the NTA 2025 looks like when it meets a real Nigerian business that was not ready.

——— SECTION THREE ———

The Story That Will Be Told — A Port Harcourt Business Scenario

GRANDEUR CONSTRUCTION LIMITED — A Nigerian Business Illustration

Grandeur Construction Limited is a Port Harcourt-based civil engineering firm with annual turnover of approximately ₦3.2 billion. Experienced directors. An accountant who files returns on time. Broadly satisfactory compliance.

When July 2026 arrived and the NRS medium taxpayer e-invoicing phase commenced, Grandeur was still issuing PDF invoices by email — as they had done since 2015. Professional, VAT-compliant, paid promptly. But not transmitted through the NRS Merchant Buyer Solution platform. No Invoice Reference Number. No Cryptographic Stamp Identifier.

Three of Grandeur's largest clients — companies with annual turnovers above ₦5 billion, already in Phase 1 compliance — began rejecting their invoices. Not because of poor workmanship. Because their VAT compliance officers had instructions: do not process invoices without NRS validation. Unvalidated invoices cannot support VAT input credit claims.

Grandeur lost three contracts worth a combined ₦480 million in Q1 2027. Not to a competitor with better quality or lower prices. To a competitor who had completed their e-invoicing integration six months earlier.

Grandeur Construction Limited is a fictional company. Its story is not.

——— SECTION FOUR ———

What Your Business Must Do — The Practical Action Plan

Immediate — Do This Now

Determine your CIT classification: If your annual turnover is below ₦100 million and you are not a professional service provider, log into Rev360 — the NRS's current filing platform. The system will not compute CIT at that level, reflecting the NRS's administrative position on the small company threshold. Document this position and confirm you are filing correctly. If your turnover is close to ₦100 million or you are unsure whether your business qualifies as a professional service, seek specific professional guidance before filing.

Check your filing position: Are all returns — CIT, VAT, WHT, PAYE — filed and current? Even nil returns must be filed to avoid penalties

Determine your e-invoicing phase: If turnover is above ₦1 billion, your obligation is active or imminent. Treat non-completion as a board-level emergency

Review your VAT input claims: You may now be entitled to input VAT credits on services and capital assets previously unrecoverable. Document and recover

Near Term — Complete Within 90 Days

Update payroll systems to reflect the new NTA 2025 income tax bands effective from January 2026

Quantify the Development Levy for the current year and ensure it is properly provisioned

Audit your supply chain: identify which key suppliers are e-invoicing compliant — their non-compliance is your VAT risk

Build a Tax Risk Register documenting your positions on all material tax exposures

Strategic — Medium and Long Term

Seek Advance Rulings for complex or high-value transactions to eliminate uncertainty and obtain legal protection

Prepare for data-driven audits: the NRS's AI tools cross-reference bank data and tax filings automatically. Clean records and documented positions are your best defence

Review any group or cross-border structures under the new CFC rules, Mandatory Disclosure Rules, and minimum effective tax rate provisions

——— SECTION FIVE ———

The Eight Questions Your Board Must Answer Today

If your board cannot answer all of these questions confidently — with documentation to support each answer — your tax position under the NTA 2025 is unverified. That is a risk no business should be carrying.

1. Has our company been formally classified under the NTA/NTAA 2025 framework? If our turnover is below ₦100 million, have we confirmed through Rev360 that the system does not compute CIT for us — and have we documented our classification basis and confirmed we do not fall within the professional services exclusion?

2. Are we filing nil returns for all tax types where we have zero liability? Non-filing is a punishable default even with no tax due.

3. Have we updated our payroll systems to reflect the new NTA 2025 income tax bands effective January 2026?

4. Are we in our e-invoicing phase, and if so, have we completed integration with an NRS-accredited Access Point Provider?

5. Have we assessed which key suppliers are e-invoicing compliant? Their non-compliance creates VAT input credit risk on our books.

6. Has the 4% Development Levy been modelled into our current year tax provision and financial statements?

7. Do we have a Tax Risk Register documenting our positions on all material exposures under the new framework?

8. Have we confirmed that minimum tax assessments have ceased from 1 January 2026? If the NRS has raised or is threatening a minimum tax demand for any period from that date, have we formally challenged it?

——— CLOSING THOUGHT ———

Your Business Has Been Breaking the Law. Now You Know. Act.

Every significant reform in Nigeria's tax history has followed the same arc. The law changed. Most businesses did not know. A period of de facto grace followed — not because the law permitted it, but because enforcement capacity lagged. And then enforcement caught up. Businesses that had not prepared paid dearly — in penalties, back-taxes, reputational damage, and occasionally criminal proceedings.

The NTA 2025 is following that same arc — but with one critical difference. The enforcement infrastructure this time is digital. The NRS's AI tools do not need a field officer to visit your premises. They run continuously, automatically, comparing what your bank reports about your business against what your tax filings declare. The gap between those two figures is flagged without human intervention.

The window for unhurried preparation is still open. The businesses that treat the NTA 2025 as a priority now — that clarify their classification, file their returns, integrate their e-invoicing, update their payrolls, and document their tax positions — will not be reading about penalties in the trade press two years from now.

"Tax compliance is not the most exciting part of running a business. But it is the part that can end a business fastest when it goes wrong. The NTA 2025 does not exist to punish you. It exists to fund a nation. Engaging with it honestly and proactively is both a legal obligation and a competitive advantage."

The title of this article is not a metaphor. It is a statement of fact. If your business has not filed nil returns, has not integrated e-invoicing where required, has not updated its PAYE, or has been operating under the wrong CIT classification since January 2026 — it has been in technical default. Not because of dishonesty. Not because of negligence. Because the law changed and nobody told you clearly enough.

The businesses that will look back on 2026 as the year they got ahead — not the year they got caught — are the ones making that decision right now.

What a Compliant Business Looks Like by End of 2026

A business that is fully compliant with the NTA 2025 by end of 2026 looks like this: it has obtained professional confirmation of its correct CIT classification; it files returns for every tax type — including nil returns — before each deadline; its payroll reflects the new income tax bands; if above ₦1 billion turnover, it has integrated with an NRS-accredited Access Point Provider and its invoices carry the required Reference Number and Cryptographic Stamp Identifier; it has audited its key suppliers for e-invoicing compliance; it has provisioned the Development Levy in its financial statements; it has confirmed that no minimum tax liability exists from 1 January 2026 and has documented that position, and it maintains a Tax Risk Register with documented positions on every material exposure. That business does not fear an NRS audit. It welcomes one.

SOURCES & REFERENCES

• Nigeria Tax Act, 2025 (NTA 2025) — Official Gazette, Federal Republic of Nigeria, Vol. 112, No. 117, 26 June 2025 — Sections 56, 59, 202

• Nigeria Tax Administration Act, 2025 (NTAA 2025) — Sections 22, 147

• PwC Nigeria: The Nigerian Tax Reform Acts — Top 20 Changes (June 2025)

• EY Global Tax Alert: Nigeria Tax Act 2025 has been signed — highlights (June 2025)

• TheCable: 'Nigeria Tax Act contradicts NTAA on turnover cap for small business' (September 2025) — Oyedele: '₦100M is correct; ₦50M is an error'

• Baker Tilly Nigeria: Nigeria's 2025 Tax Reform Acts Explained (January 2026)

• Forvis Mazars Nigeria: Navigating Nigeria's New Tax Era (December 2025)

• AO2 Law: Small Business v. Small Company under the NTAA/NTA 2025 (October 2025)

• BusinessDay Nigeria: June 30 e-Invoicing Deadline Puts Nigeria's Tax Reforms to Test (June 2026)

• NRS Rev360 Portal — administrative practice on CIT computation for companies with turnover below ₦100 million (observed in live system, 2026)

• OECD BEPS Pillar Two — Global Anti-Base Erosion (GloBE) Model Rules: Minimum Effective Tax Rate framework (15%) — context for METR distinction

• NRS DigiTax / e-Invoicing Programme: NRS official communications and onboarding materials for the Merchant Buyer Solution (MBS) platform (2025–2026)

About the Author

Joe Adinma FCA, FCTI

Joe Adinma is the Managing Partner of Joe Adinma & Co. (Chartered Accountants), based in Port Harcourt, Rivers State. With over 30 years of professional practice, he specialises in IFRS financial reporting, Nigerian tax compliance and dispute resolution under the NTA 2025, forensic accounting, and audit and assurance for businesses across the oil and gas, energy, real estate, and professional services sectors. He qualified as a Chartered Accountant in 1996 and established the firm in 2010.

www.joeadinma.com | info@joeadinma.com | Port Harcourt, Rivers State

This article is part of the Joe Adinma & Co. Business Intelligence Series. The information provided is for general informational purposes only and does not constitute professional tax or legal advice. The legislative discrepancy noted herein reflects the state of the law as at June 2026. Readers should obtain specific professional advice on their individual tax positions.