The implementation of Nigeria’s new Tax Reform Acts marks a major shift for businesses, forcing organisations to quickly adjust their internal systems to avoid heavy penalties.
One immediate impact of the reforms is relief for low income earners. Individuals earning N800,000 or less annually are now exempt from income tax, while higher earners are subject to graduated rates of up to 25 per cent. This change is expected to slightly increase take home pay for lower income employees, while raising tax obligations for top earners.
Beyond payroll, Value Added Tax and Withholding Tax have emerged as critical compliance areas. Under the new regime, VAT paid on services and fixed assets can now be claimed against output VAT, expanding relief beyond goods used for resale or production. The law also introduces electronic invoicing to strengthen VAT reporting and enforcement.
Failure to deduct or remit WHT correctly now attracts penalties of up to 40 per cent, alongside interest and possible criminal liability, making accuracy essential.
Speaking at the 2026 Nigeria Economic Outlook in Lagos, PwC Partner Kenneth Erikume said payroll adjustments are the most urgent task for employers, noting that payroll systems must immediately reflect the new income thresholds and tax rates.
He also stressed that businesses can significantly reduce costs if VAT processes are properly updated, adding that automation is critical to managing VAT and WHT risks.
Experts further warned that transactions with vendors lacking a Tax Identification Number could attract penalties of up to N5m, requiring stricter supplier verification processes.
Legal and tax professionals have advised businesses to adopt automated systems, maintain proper records, reconcile accounts monthly, and respond promptly to tax authorities to remain compliant under the new laws.
