The enactment of the Nigeria Tax Act (NTA) 2025, signed into law on 26 June 2025, is the most significant overhaul of the nation’s fiscal framework in over three decades. 

Not only did it repeal all other existing laws, but it also broke down, reclassified, and consolidated the large pool of taxes paid to federal, State, and local administering bodies by large companies into four basic tax categories.

The Company Income Tax (CIT), the single largest source of corporate revenue for the government, as well as the Development Levy, Minimum Effective Rate, and Capital Gains Tax (CGT). 

Companies in Nigeria will now be classified as either Large or Small, with the former defined as those earning over ₦100 million in annual sales and holding assets above ₦250 million. 

This change scraps the regular medium-sized firms category, and it also pegs the relevant rate to 30% chargeable on the business’s accessible profit. Essentially, corporate taxpayers are now either fully exempt ( that is, not tax liable) or fully liable.

The move is an effort by the government to tap into more revenue from the formal sector, which accounts for approximately 20% of the economy. And also bring the informal sector players, like Aloy $ CO Garri network, Afolabi Ventures, accounting for the larger share of the economy (approximately 70-80%) into the tax net, according to analysis by Kreston Padebo’s Adeyemi Oladejo. 

The new tax categories and how they apply to large companies 

Company Income Tax, still the frontliner, accounts for over 30% to 40% of oil and non-oil revenue generated in the state. Data from the National Bureau of Statistics, the country’s primary data-gathering and reporting agency, shows that inflows generated from the CIT over the years remain the most important revenue source for the government. 

It is pegged at 30% and charged on the company’s accessible profit, which is derived after all relevant deductions are made. Conversely, accessible profit combines all Nigerian-source profits for non-resident companies, while for resident companies, it includes all profits accruing in, derived from, brought into, or received in Nigeria.

Development Levy, now charged at a flat 4% on large companies, has been instituted to replace a complex myriad of individual taxes. These former levies were charged at dissimilar rates, and they applied either wholly on all or partly on select sectors.

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The now consolidated tax includes: the Tertiary Education Trust Fund (TETFund), which was 3% and applicable to all companies; the National Agency for Science and Engineering Infrastructure (NASENI), charged at 0.25% on Profit Before Tax (PBT) for companies with an annual turnover above ₦100 million in specified industries. 

The National Information Technology Development Agency Fund (NITDA) levied at 1% on PBT for special industries like Insurance, and the National Cybersecurity Fund, which was 0.05% on most electronic transactions. 

Consequently, the disparity and uneven application of the layered taxes served as a tool for complexity and confusion. However, with the unification, upon remittance, allocation is facilitated across all the relevant agencies backed by a Simple Allocation Framework prescribed in the Acts, thereby eliminating all complexities.  

Then there is the 15% Minimum Effective Rate, which is the lowest rate of tax acceptable from a parent with a foreign subsidiary. The rate is pegged to encourage fair contribution across firms and also regulate profit shifting.

In practice, when the parents’ foreign subsidiary, or part of a multinational group, returns income tax below the minimum effective rate in a given year, the Nigerian parent makes up for the shortfall. The rate is pegged to encourage fair contribution across firms and also regulate profit shifting.

Lastly, large companies are required to pay the Capital Gains Tax, imposed on the gain, or profit made from the sale, or disposal of a company’s assets such as shares, properties, etc. At the corporate level, it is taxed at 30% on asset sales exceeding ₦150 million, or gains above ₦10 million. 

Other taxes large companies must remit

Beyond these taxes, large companies in Nigeria are subject to several other recurring statutory taxes that materially affect cash flow, pricing decisions, and compliance costs. They include: 

Value Added Tax (VAT) is pegged at 7.5% on the supply of taxable goods and services. Large companies whose taxable supplies exceed the ₦50 million statutory threshold are required to register for, collect, and remit net VAT to the Nigerian Revenue Service (NRS) after the necessary input offset has been made. 

Also, they are required to make a Withholding Tax Deduction. This type of tax attracts no fixed rate as the rate applied is directly tied to the specific payment made, such as dividends, Royalties, Interest etc. Large companies are required to deduct WHT at source and remit the same to the tax authorities on behalf of the recipient, Vendor, or contractor.

Similarly, they are also responsible for remitting the Pay-as-you-earn tax, otherwise known as PAYE. It is deductible from the employees’ salaries and remitted to the relevant state internal revenue services every month. The obligation applies regardless of earnings made for the period; it covers all actual compensation, allowances, and benefits-in-kind received by employees.

Finally, under the Nigerian Acts, Stamp duty is charged either as a fixed ₦50 duty on qualifying receipts and electronic transactions, or on an ad valorem basis –  typically between 0.375% and 1.5% – depending on the nature and value of the underlying instrument.

Chargeability to tax for companies in Nigeria 

Chargeability to tax refers to the legal obligation or liability of an individual or entity to pay tax on certain income, profits, or assets. It defines when and under what conditions a tax is imposed.

Large companies are liable to tax under: 

 Its own registered corporate name;

Or in the name of any principal officer, attorney, factor, agent, or representative of the company in Nigeria, in the same manner or amount the company would have been charged under its name.

Lastly, in the event of winding up, in the name of its liquidator, receiver, or administrator, the actual tax liability shall be paid.

Treatment of undistributed foreign earnings

According to the Act, the income earned by a large company resident in Nigeria in any given year should consist of all its income earned domestically, as well as that received from its foreign subsidiaries.

Foreign earnings from subsidiaries should be equal to the parent’s share of ownership in such a subsidiary. Consequently, even when profit has been made but not yet distributed to the parent, the parent still has to pay tax on the undistributed share. 

The revenue streams that will attract tax

More often than not, to keep business profitable, companies issue both their core offers, alongside other secondary offers. This practice, which is used to ensure diversification and increased earning momentum, also complicates income tax treatment. To ratify this, the Nigerian Tax Acts of 2025 stipulated that income, regardless of source, that is bound to be taxed, and they include:

Income generated from allowing others to use your property, such as royalties, fees, rents, or interests.

Dividend, premium, charges, or annuities, rebates, and discounts.

Income earned from providing services, including fees, dues, and allowance.

Income or gains from the sale, transfer, or lending of assets that are capital in nature, such as shares, bonds, fixed assets, or other financial instruments.

Funds or assets received not directly from its core business operation, including awards, prizes, honouraria, winnings, grants, and laurels.

Income, profits, or gains from trading digital assets like NFTs, Cryptocurrencies, or tokenised assets.

Any other income the company makes alone or in a partnership that is trade-specific, whether mentioned or not.

How Dividends will be treated 

For large corporations operating in Nigeria, the statutory definition of dividend extends beyond the traditional distribution of profits to shareholders. Accordingly, the law noted that dividends exist in various forms.

Nigerian dividends include:

The amount distributed by a company shall be the gross amount before any deductions or taxes are taken out.

Any other profit of the company that was not distributed but has been treated as distributed in the books.

Income tax treatment on dividends:

How large companies should treat dividend income and payment:

Dividend income received from investment in other companies should be written in the exact amount before any deductions by the sender at the source. However, in a scenario where the paying company is non-resident in Nigeria, this shall be the final tax payable. 

Meanwhile, dividends distributed by a Nigerian company to another company are not subject to further tax if they are paid out of profits that have already been subjected to tax under CITA.

Then there’s dividends received in the form of shares, also known as Bonus shares; these should not be included in the profit chargeable to tax, as they are exempt from tax.

Still, when income received via the above is further issued, the company is allowed to set off tax liability to the extent suffered from the same income at source. 

What these means for large companies going forward

The real impact of these reforms is not just higher or more consolidated rates, but a much wider definition of what counts as taxable income and when it becomes chargeable. With worldwide income, undistributed foreign profits, digital assets, and a long list of non-core earnings now in scope, the difference between a compliant structure and a careless one will increasingly show up in effective tax rates, cash flow strain, and how much room is left to reinvest in growth.