Nigeria’s New Tax Policy Explained: What It Means for Businesses in 2026
🟡 Introduction: Talking About Tax in Simple Terms
Imagine you run a small shop in Balogun Market. Every day, you sell provisions, clothes, or food items and make some profit. One day, someone from the government asks you to pay a small part of that profit — or adds a small fee to the goods you sell. That’s called tax.
Tax is simply money the government collects from individuals and businesses to provide public services like roads, security, hospitals, schools, and infrastructure. Some taxes are collected when you buy goods (like VAT), some when you make profit (like Company Income Tax), and some when you sell assets (like Capital Gains Tax).
For years, Nigeria has struggled to collect enough tax. In 2025, the government introduced major tax reforms that will fully take effect in 2026, with a focus on modernization, digitalization, and widening the tax net.
Whether you are a market woman, SME owner, or multinational, this policy will affect how you run your business.
🧾 1. Understanding the New Tax Policy (2025–2026)
In 2025, the government passed the Nigeria Tax Reform Acts, introducing a series of changes to make tax collection more efficient and aligned with global standards.
According to the Federal Inland Revenue Service (FIRS), these changes aim to:
Modernize tax collection
Reduce evasion and loopholes
Expand the tax base
Encourage compliance through technology
Some of the key changes include:
🧮 a. VAT (Value Added Tax) Reforms
VAT remains 7.5%, but several aspects are changing:
The revenue sharing formula between federal, state, and local governments is being adjusted.
Some goods like basic food, educational materials, and medicines will now have expanded zero-rated or exempt VAT status.
VAT will be reported and remitted digitally in real time, reducing leakages.
👉 Example:
If Mama Ngozi sells bags of rice (zero-rated), she won’t collect VAT. But if she sells provisions, she must collect VAT and remit it using the new system.
For official details, see the FIRS VAT Guidelines.
💻 b. E-Invoicing and Digital Reporting
Previously, many businesses used manual receipt books. From 2026:
All registered businesses must issue electronic invoices through approved platforms.
Transactions are reported directly to FIRS servers in real time.
Non-compliance attracts penalties and possible audits.
👉 Scenario:
Chinedu owns a supermarket in Enugu. He now uses a simple POS/e-invoice system linked to FIRS. Every sale is recorded automatically, so VAT owed can be calculated accurately.
This is part of the government’s digital transformation push to make tax more transparent and efficient.
🏦 c. Capital Gains and Digital Asset Tax
The Capital Gains Tax rules have been updated to cover:
Property sales (land, buildings, assets)
Profits from digital assets like crypto or NFTs
Clearer exemptions and reporting obligations
👉 If Ngozi sells land for ₦15 million and makes ₦5 million profit, she must now declare and pay tax on that profit. The same applies to individuals trading digital assets.
For guidance, see the Federal Ministry of Finance website.
🌍 d. International Tax Rules (Minimum ETR and Top-Up Tax)
Nigeria has joined the global Pillar II framework developed by the OECD, which introduces a 15% minimum effective tax rate for large multinational companies.
This means:
If a multinational pays less than 15% in another country, Nigeria can collect the difference through a top-up tax.
This prevents big corporations from hiding profits in tax havens.
📝 e. Stronger Enforcement & Transfer Pricing Rules
Other changes include:
Controlled Foreign Company (CFC) rules to monitor offshore entities
Stricter transfer pricing audits to curb profit shifting
Heavier penalties for failing to remit VAT or falsifying invoices
These measures target large corporations but also push SMEs to formalize their businesses.
🧠 2. How the New Policy Affects Businesses in 2026
🟡 Small Businesses & Market Traders
For informal businesses, this is a major shift:
More traders will be brought into the tax net through digital monitoring.
Many will need to register their businesses and keep proper records.
Prices may increase slightly as businesses adjust to collecting and remitting VAT.
Recordkeeping becomes essential to avoid penalties.
👉 Example: A market woman selling clothes may now need a simple app or POS system to issue receipts and keep records.
🟠 Medium & Large Businesses
For SMEs, supermarkets, restaurants, and logistics firms:
Compliance costs will rise — software, training, and reporting upgrades.
Cash flow pressure may increase as VAT must be remitted promptly.
Capital gains and digital transactions will be more closely monitored.
No more hiding under informal operations — everything goes digital.
For big corporations, the 15% minimum tax rule removes profit-shifting advantages and increases scrutiny.
🔵 Consumers
Even though VAT isn’t increasing, compliance costs may lead to slightly higher prices in formal sectors.
But zero-rated essential goods like basic food items should remain stable.
📌 3. What Businesses Should Do Now (2025–2026)
Here’s a quick checklist for Nigerian businesses:
- ✅ Register your business with CAC & FIRS.
- 🧾 Keep proper records — invoices, receipts, expenses.
- 💻 Adopt e-invoicing tools approved by FIRS.
- 📚 Know your VAT obligations (what’s taxable vs exempt).
- 💰 Separate VAT from profit — don’t mix the two.
- 👩💼 Get tax advice as your business grows.
- 📢 Respond to FIRS notices quickly to avoid penalties.
Also, understanding tax strategy vs superstition is crucial in Nigeria’s business environment. For a deeper insight, read our post: Strategy vs Voodoo: What Drives Business Success.
🌟 Conclusion
Nigeria’s 2026 tax policy is a big change. It brings more businesses — big and small — under a digital, stricter, and more transparent tax system.
For small traders, it may feel overwhelming at first, but embracing compliance can open doors to:
Business visibility
Access to loans and contracts
Growth opportunities
For larger companies, it’s time to upgrade systems, plan cash flow wisely, and adopt a proactive tax strategy.
Doing business in Nigeria is evolving — and understanding tax is now part of the survival kit.
