You’ve likely seen the headlines about Nigeria’s new tax reform laws, signed in June 2025—one of the most far-reaching overhauls of the country’s tax system in recent history.

But these reforms go beyond policy updates tucked away in government documents. They introduce a new reality for businesses, employees, and how organisations in Nigeria must manage payroll, benefits, and compliance.

If you’re an HR leader or a member of the executive team, here’s what you need to know—and how these changes could shape your workforce strategy going forward.

The Four New Laws

Nigeria’s 2025 tax reform introduced four distinct but interlinked pieces of legislation—each designed to modernise and simplify the country’s tax framework. Here’s what they mean for your organisation:

1. Nigeria Tax Act
This Act consolidates and streamlines the country’s major tax provisions, including personal income tax, corporate tax, value-added tax (VAT), and capital gains tax, into a unified legal framework. This reduces complexity and duplication, making it easy for businesses to comply.

For HR and finance leaders, this simplifies compliance by removing conflicting interpretations across different laws and making it easier to align internal processes with a single, updated reference point.

2. Tax Administration Act
This law brings greater consistency to how taxes are collected and enforced across federal, state, and local governments. It eliminates overlapping roles and reduces bureaucratic complexity.

For organisations operating in multiple states across Nigeria, this offers clarity and reduces administrative friction when managing multi-location payroll or employee tax compliance.

3. Nigeria Revenue Service Act
This Act officially transforms the Federal Inland Revenue Service (FIRS) into the Nigeria Revenue Service (NRS), a more autonomous, digitally enabled body with expanded authority to enforce tax compliance.

The NRS is expected to lead a shift toward data-driven tax administration, using digital tools for real-time reporting, audits, and enforcement. For businesses, this means less room for error and stronger expectations for accuracy in payroll and tax filings.

4. Joint Tax Board Act
This Act enhances collaboration and information-sharing between different government levels and introduces a Tax Ombudsman and Tax Appeal Tribunal to handle disputes fairly. 

For businesses, this means more coordinated oversight, fewer contradictory directives, and a more transparent dispute resolution process when issues arise across jurisdictions.

What Are the Effects of These New Tax Laws?

With the 2025 tax reforms taking effect by January 2026, it’s crucial for businesses to understand how these changes will influence their operations. Here’s a breakdown of the key effects.

1. ₦1 Million Tax-Free Personal Income Threshold

What changed:

Individuals earning less than ₦800,000  per year are now fully exempt from personal income tax under the 2025 reforms, according to PwC Nigeria. The legislation also includes a ₦200,000 housing relief within the consolidated relief allowance.

Implication for HR:

• You’ll need to adjust your payroll process to accommodate new tax thresholds and exemptions.
  
• Employee net pay will shift—especially at the lower-income levels. Communicating this clearly will be key to managing expectations.
  
• Benefits like rent support or allowances may now play a bigger role in compensation planning.

2. Exemptions for Small Business

What changed:
Small businesses with annual turnover under ₦100 million and assets under ₦250 million are now exempt from Company Income Tax (CIT) and Capital Gains Tax (CGT). 

In contrast, large companies will now pay 30% Capital Gains Tax, up from the previous 10%.

Implication for HR:

• If your business qualifies as a small company, this exemption frees up cash flow, allowing more room to invest in employee benefits, training, and strategic recruitment. It also presents an opportunity to improve workforce retention and growth initiatives.
  
  
• HR must work closely with Finance to confirm eligibility and reallocate tax savings toward talent development and operational efficiency. For larger organisations, the increased CGT should prompt a review of employee equity plans, stock options, and exit strategies to ensure tax-efficient compensation.
   

3. Zero-Rated VAT on Essentials

What changed:
While VAT remains at 7.5%, sellers of essential items and services like food, healthcare, education, and residential rent  will no longer have to charge a Value Added Tax (VAT).

Implication for HR:

• If your business offers housing, feeding, or healthcare as part of benefits, this could influence how those perks are valued.
  
• Procurement decisions for employee welfare programs should now consider VAT-exempt items to optimise spend.
  

4. Corporate  Income Tax (CIT)  For Large Businesses

What changed:
Currently, CIT remains at 30% for large businesses. Although initial drafts of the Tax Reform Acts proposed reductions to 27.5% in 2025 and 25% from 2026, those provisions were removed. Any future reduction would require separate legislation.

Implication for HR & Executive Teams:

• This impacts business sale strategies, stock options, and employee share incentive plans.
• HR leaders managing equity-based compensation (especially in tech/startups) must revisit plan structures to ensure tax efficiency.

Why Were These Reforms Implemented?

According to the statement released by the Federal Government of Nigeria, these reforms were a deliberate response to structural, economic, and administrative challenges. 

• The 2025 tax reforms were introduced to address Nigeria’s historically low tax-to-GDP ratio—just over 10% compared to the African average of 16–18%—by expanding the tax base without overburdening low-income earners or small businesses. 

• The tax reforms  aim to simplify Nigeria’s fragmented and overlapping tax structure through unified laws and streamlined administration, making compliance easier for businesses and individuals.

• The reforms also embrace digital transformation, equipping the newly formed Nigeria Revenue Service with modern tools for transparency, data-driven enforcement, and e-filing. 

Above all, the reforms promote equity by offering relief to vulnerable populations, supporting small businesses, and ensuring that high-income earners and large corporations contribute more fairly—laying the groundwork for sustainable revenue, economic inclusion, and renewed investor confidence.

When Will These Changes Apply?

Although signed in June,2025,  these reforms will take effect from January 1, 2026, to allow time for implementation, system redesign, and public awareness campaigns

How Is SeamlessHR Adapting These Changes Into the Payroll System?

At SeamlessHR, we are already reviewing these tax reforms and planning how to align our payroll system with the new tax reforms to ensure full compliance by the January 2026 effective date. Key updates on our payroll system will communicated to all SeamlessHR clients and also via articles on or before the effective date. 

With SeamlessHR Payroll, HR teams can stay ahead—reducing errors, simplifying tax remittance, and giving employees visibility into how the reforms affect their pay.