New Tax Law Targets Double Taxation, Expands Compliance Framework

The Federal Government has introduced new measures aimed at eliminating double taxation, widening the tax base, and strengthening compliance under Nigeria’s recently enacted tax laws.

Clarifications contained in an official Frequently Asked Questions document issued by the Nigeria Revenue Service (NRS) outline key provisions of the new framework, including reliefs for foreign-sourced income, the taxation of digital services, penalties for non-compliance, and incentives designed to support research and development.

According to the document, the legislation addresses double taxation through the provision of unilateral tax relief and the recognition of double taxation agreements entered into by Nigeria. These measures are intended to prevent the same income from being taxed multiple times and are covered under Sections 120 to 123 of the Act.

Under the framework, Nigerian residents whose income has already been taxed in another jurisdiction may apply for relief, subject to Nigeria’s applicable tax rate and within the timeframe prescribed by law. The NRS explained that this provision is meant to promote cross-border investment while shielding taxpayers from excessive tax burdens.

The new law also clarifies the tax treatment of collective investment schemes. Such schemes are classified as companies for tax purposes, with income taxed at the scheme level. Any distributions made to unit holders are treated as dividends in the hands of investors.

On foreign income, the guidelines state that dividends from investments in wholly export-oriented businesses are exempt from tax. In addition, dividends, interest, rent, and royalties earned outside Nigeria and repatriated through approved channels are not subject to taxation.

To encourage innovation and local capacity building, companies are permitted to deduct up to five per cent of their annual turnover for research and development expenses incurred within Nigeria.

The legislation also expands Nigeria’s tax reach into the digital economy. Non-resident digital service providers with significant economic presence in the country are now liable to both income tax and value-added tax on Nigerian-sourced income, in line with the relevant provisions of the Act.

Taxpayers are required to maintain comprehensive and accurate records, including invoices, receipts, contracts, and financial statements, as stipulated under the Nigeria Tax Administration Act 2025. Failure to comply may result in penalties, interest charges, and possible prosecution.

The law mandates that every taxable person — including individuals, companies, government ministries, departments, agencies, and non-resident entities supplying goods or services in Nigeria — must register with the appropriate tax authority and obtain a Taxpayer Identification Number.

Special compliance obligations have also been introduced for Virtual Asset Service Providers. These entities are required to submit monthly returns detailing transactions, customer information, and asset values, in addition to their annual filings.

The FAQs outline penalties for non-compliance, including administrative fines for failure to register for tax, monthly penalties for continued default, and interest charges on late filings. Failure to remit withheld taxes attracts an annual penalty of ten per cent, in addition to interest calculated at the prevailing Central Bank monetary policy rate.

Companies are required to file self-assessment returns within six months after the end of their accounting year. Newly incorporated firms must file within either 18 months of incorporation or six months after the end of their first accounting period, whichever comes first.

Taxpayers who disagree with an assessment may file an objection within 30 days of receiving the notice, stating the grounds for dispute. The law also provides mechanisms for appeals and other administrative dispute resolution processes.

While the Nigeria Revenue Service is responsible for administering taxes on companies, non-resident persons, petroleum operations, value-added tax, fossil fuel surcharges, stamp duties, and other federally assigned taxes, State Internal Revenue Services retain authority over taxes collectible at the subnational level. The reforms are designed to improve coordination between federal and state tax authorities, reduce overlaps, and enhance the overall taxpayer experience.

The new tax laws form part of a broader fiscal reform agenda aimed at improving revenue mobilisation, increasing transparency, and reducing Nigeria’s reliance on borrowing. With the country’s tax-to-GDP ratio among the lowest globally, the reforms seek to close loopholes, modernise tax administration, and align Nigeria’s tax system with international best practices, while balancing enforcement with targeted reliefs and incentives for businesses.