BY J. E. IKECHUKWU
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By all global standards, a truly friendly tax system is built on fairness, simplicity, transparency, and efficiency. It should reduce compliance burdens, inspire trust between citizens and government, and support economic growth rather than stifle it.
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This, according to the authorities, is the foundation of the Nigeria Tax Act 2025, a reform designed to make taxation in Nigeria more inclusive, transparent, and growth-oriented.
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The revised tax framework which commenced January 1, 2026, introduces a more progressive system designed to protect low-income earners. Individuals earning at or around the national minimum wage are exempted from personal income tax. In practical terms, this means many workers at the lower end of the income scale will pay zero tax.
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In the new Tax Act, taxable income up to approximately ₦800,000 falls within a 0% bracket. Only income above that threshold attracts graduated rates. That is not an increase in burden; it is targeted relief.
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More importantly is the treatment accorded to small businesses. The exemption threshold for Company Income Tax has been expanded significantly. Businesses with annual turnover up to ₦100 million now qualify as small companies and are exempt from paying Company Income Tax. This is a substantial shift from previous limits and represents a deliberate effort to ease pressure on micro, small, and medium enterprises.
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However, the policy has recently become the subject of political debate. Former Rivers State Governor and ex-Minister of Transportation, Rotimi Amaechi, recently alleged that the Act is unfriendly and would impose additional tax burdens on Nigeria’s housing sector when it takes effect in 2027.
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In response, the Nigeria Revenue Service (NRS) dismissed the claims as inaccurate. The Service urged Nigerians to rely only on verified information from official government channels regarding the Nigeria Tax Act 2025.
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According to the NRS, rather than introducing new levies, the Act is structured to: Reduce the cost of housing, Encourage real estate and construction investment, Improve affordability for tenants and homeowners and Stimulate broader economic participation.
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The Service emphasized that the law contains targeted reliefs and incentives aimed specifically at strengthening the housing and construction value chain which includes:
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VAT Exemptions: This is a major Relief for Property Transactions and one of the most significant provisions of the Act is the removal of Value Added Tax (VAT) on: Sale of eligible residential properties, Lease of residential properties, Rent (residential and commercial) and Supply of eligible building and construction inputs (under specified conditions). This means that Nigerians buying land, completed buildings, or paying rent will no longer pay VAT on those transactions. This development is a move that is expected to directly lower housing costs.
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Mortgage Interest Relief: The Act introduces mortgage interest deductions of up to ₦8 million for owner-occupied homes. This provision is designed to improve access to home ownership, lower effective borrowing costs and encourage long-term property investment.
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Withholding Tax Reduction: The Withholding Tax rate on construction contracts has been reduced to 2 per cent. For developers, this means more working capital during project execution, improved liquidity and greater capacity to complete projects efficiently.
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Capital Gains Tax Exemption: Individuals who dispose of a dwelling house or an interest in one will no longer pay Capital Gains Tax. This measure aims to encourage property transactions, boost real estate market activity and reduce barriers to asset mobility
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Rent Relief for Tenants: Eligible individuals can claim rent relief of up to ₦500,000, capped at 20 per cent of annual rent. This provision is expected to increase disposable income, support low and middle income earners, and ease rental pressure in urban centers.
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Stamp Duty Exemption: Lease agreements valued below ₦10 million (or ten times the annual minimum wage) are now exempt from stamp duty. The expected impact of this is that it will lower tenancy documentation costs, reduce compliance burden for individuals and small businesses.
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Incentives for Small Businesses: Under the new tax regime, small companies will benefit from 0% Companies Income Tax, VAT exemption obligations and No Withholding Tax deductions on invoices.
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According to the NRS, these measures are designed to support small contractors, suppliers, and developers operating within Nigeria’s housing ecosystem.
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It is therefore important to note that the Nigeria Tax Act 2025 is no doubt a reform with Broader Economic Intent considering the fact that it goes beyond housing. This is because the reform also seeks to reduce transaction costs, improve liquidity, and incentivizing investment, the law seeks to build a tax system that is not only efficient but economically enabling.
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Despite the negative media propaganda from political opponents, the NRS authority has remained steadfast in actualizing its goals with the new Tax Act, “maintaining that the Act reflects a deliberate effort to balance revenue generation with social and economic development,”
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At its core, the Nigeria Tax Act 2025 is presented as a shift toward a more people centered tax framework that is designed to simplify compliance, stimulate growth, and make home ownership and business participation more accessible to Nigerians.
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_J.E Ikechukwu writes from Abuja_
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