Recommendations by special committee on tax reform bills were adopted following report consideration by the House of Representatives
The House of Representatives has adopted the report of its Committee on Finance on four key tax reform bills aimed at restructuring Nigeria’s tax system and enhancing revenue collection.
The four bills are now a step away from their eventual passage by the House.
The bills included the Nigeria Revenue Service (Establishment) Bill, the Nigeria Tax Bill, the Nigeria Tax Administration Bill, and the Joint Revenue Board (Establishment) Bill.
The four bills were initially read on October 8, 2024. However, deliberations in the House were delayed due to disagreements over the Nigeria Tax Administration Bill, following objections raised by northern leaders and the Nigerian Governors’ Forum.
The Committee Chairman, Rep. James Abiodun Faleke (APC, Lagos), had laid the report from the public hearing during plenary on Tuesday.
Presenting the report for consideration on Thursday Faleke said all contentious areas of the bills were considered by the committee during a six day retreat and resolved, adding that the outcome of the retreat after the public hearing was considered.
Faleke noted that the amendments were based on stakeholder input gathered during a public hearing held between February 26 and 28, 2025, followed by a week-long retreat from March 3 to 9, 2025.
He said the deliberations focused on assessing the potential impact of the reforms on businesses, investments, and the Nigerian economy at large.
Key recommendations adoted in the Nigeria Tax Bill
Faleke addressed concerns over the reintroduction of inheritance tax, clarifying that no such tax was being introduced.
- Income Tax on Inherited Assets: Section 4 was amended to exclude income on inherited assets before distribution from taxable income.
- VAT Rate: The current VAT rate of 7.5% was retained instead of the proposed staggered increase to 15% by 2030.
- Tax Exemptions: Section 164 extends tax exemptions to agricultural businesses in livestock, forestry, dairy, animal feed, and cocoa processing for their first five years. Additionally, wages and salaries of military officers will be exempt from income tax.
- Corporate Tax Rate: The proposed staggered reduction of the corporate tax rate from 30% to 25% was removed, maintaining the standard 30% rate for companies. However, businesses in priority sectors will enjoy a reduced tax rate of 25% for five years.
- Petroleum Sector Taxation: Gains from petroleum operations will be taxed at the corporate tax rate of 30% instead of the 85% Petroleum Profit Tax (PPT) rate.
- Development Levy Allocation: The committee proposed redistributing funds from the Development Levy to various government agencies, including TETFund (50%), Nigerian Education Loan Fund (3%), NITDF (5%), NASENI (10%), Defence Infrastructure Fund (10%), Nigeria Police Trust Fund (5%), National Sports Development Fund (5%), Social Security Fund (10%), National Board for Technological Incubation (10%), and National Cybersecurity Fund ( 1%).
- Free Zone Incentives: New conditions were introduced for free zone entities to qualify for tax incentives, including a requirement for at least 75% of their goods or services to be exported.
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Recommendations in the Nigeria Revenue Service (Establishment) Bill
The Committee recommended several changes to enhance the efficiency of the Nigeria Revenue Service (NRS):
- Jurisdiction Limitations: Individuals in states and the FCT were excluded from NRS’ administrative scope.
- Governing Board Composition: Section 7 was amended to the composition of the Services’ Board to include six Executive Directors, to be appointed by the President, one from each geo-political zone, on a rotational basis among the states in the zone in alphabetical order, and subject to the confirmation of the National Assembly. In addition to this, the Committee recommended the Presidential appointment of one member per State and the FCT to sit on the Board of the Service, to ensure federal character representation on the Governing Board.
- Service Funding: The NRS will receive 4% of total revenue collected (excluding royalties) as its operational cost, subject to National Assembly approval.
- Borrowing Restrictions: An amendment was recommended to section 28 mandating the Service to obtain the approval of the Federal Executive Council and the National Assembly prior to any borrowing amongst others recommendations.
Joint Revenue Board (Establishment) Bill
Key recommendations by the committee to the Joint Revenue Board Bill include:
- Tax Appeal Tribunal Appointments: The requirement for Tribunal Commissioners to have trade or business management experience was removed by amending session 25
- Funding of the Tax Ombud’s Office: Section 43 was amended such that the provision of the funding of the Ombud will expunge all gifts and grants and routing the funding through the Consolidated Revenue Fund, subject to the approval of the National Assembly. This the committee said is to also ensure independence of the Office and remove the likelihood of bias towards any party in the execution of its functions.
- Tax Appeal Tribunal Funding: The Tribunal will also be funded through the Consolidated Revenue Fund to prevent influence from the Federal Inland Revenue Service (FIRS).
Nigeria Tax Administration Bill
Amendments under this bill focus on improving efficiency and transparency in tax administration:
- Taxpayer ID Issuance: Timeline extended from two to five working days.
- Corporate Tax Returns: Companies ceasing operations must file tax returns within three months instead of six.
- VAT Returns: The place of consumption will determine tax distribution, regardless of where returns are filed.
- Banking and Tax Reporting: Reporting thresholds increased to ₦50 million for individuals and ₦250 million for corporate entities.
- Tax Enforcement: Authorities must obtain a court order before selling taxpayers’ movable assets for tax recovery.
- National Single Window Portal: A new digital platform will enhance transparency in trade and revenue administration.
- Penalties for Non-Compliance by Virtual Asset Service Providers (VASPs): Defaulting companies face license revocation and fines.
- The Committee also proposed a revised VAT revenue-sharing formula, ensuring fairer distribution among states and local governments.
Speaking to newsmen after plenary, the Committee chairman assured that the new laws that the tax bills will birth will be acceptable to all Nigerians.
“I am glad that members of the house saw that we had done a thorough job and they have approved all our recommendation.
“We want to appreciate our members and all Nigerians who showed interest in this bills and we assure that the laws that will come after these bills acceptable by all Nigerians,” he said.
Earlier, while speaking during the consideration of the report, Speaker of the House, Rep. Tajudeen Abbas, who presided over the session, commended the Committee for its diligent work. He highlighted that the proposed reforms had received unanimous approval from representatives of all 36 states and the Federal Capital Territory (FCT).
“What we have today is the work of 36 ad-hoc committee members. I have never seen in my years as a lawmaker a report receiving 100 percent endorsement,” Abbas stated.
