The House of Representatives retained 7.5 percent Value-Added Tax (VAT), approved VAT derivation by consumption, and created the Nigerian Revenue Service.
You can download the House of Reps- Approved Tax Reform Bills documents here
The lawmakers approved these recommendations during a clause-by-clause consideration of its Finance Committee Report on Tax Reform Bills sent by President Bola Tinubu.
The House of Representatives’ amendments of these contentious clauses were done at the plenary to align with the concerns of stakeholders such as the Nigerian Governors Forum, Trade Union Congress (TUC), Arewa Consultative Forum, Supreme Council for Sharia in Nigeria (SCIN), and League of Northern Democrats, among many others.
On October 3, 2024, President Tinubu urged the National Assembly to pass the Tax Reform Bills — the Nigeria Tax Bill, the Tax Administration Bill, the Joint Revenue Board Establishment Bill, and the Nigeria Revenue Service Bill.
The amendments affected controversial areas such the revenue sharing formula, proposed increase in VAT, inheritance tax, taxation of free trade zones, the proposed discontinuation of funding of Tertiary Education Trust Fund (TETFund), National Information Technology Development Agency (NITDA) and National Agency for Science and Engineering Infrastructure (NASENI) by 2030.
The VAT rate was amended to retain the current 7.5% as opposed to the proposed staggered increase to 15% by 2030.
On the distribution of VAT revenue, the Nigeria Tax Bill proposed 15 percent for the federal government, 50 percent to the states and the FCT, and 35 percent to the local governments.
However, the House adopted a new distribution of 10 percent to the FG, 55 percent to the state governments and FCT, and 35 percent to the local governments.
The House resolved that the amount of the VAT revenue standing to the credit of states and local governments shall be distributed among them on the following basis: (a) Equally – 50%; (b) Population – 20%, and (c) Consumption – 30%.
The new law states that consumption is determined by the place of consumption, irrespective of where the return is filed.
The bill also proposed that the place of consumption should be the point of derivation.
Currently, VAT revenue is shared as follows: 15% to the federal government, 50% to states, and 35% to LGAs. States presently use a 50:30:20 formula —50% for equality, 30% for population, and 20% for derivation.
The tax administration bill had proposed an increase in VAT derivation from 20% to 60%, which sparked sharp criticisms, particularly from northern stakeholders, who argue that the new formula disproportionately favours southern states, especially Lagos.
The James Faleke-led committee deleted the clause on proposed introduction of inheritance tax as well as the proposed scrap of NASENI, TETFUND and NITDA.
On the taxation of free trade zones, the committee recommended that operators of free trade zones must be limited to 75% for export and 25% outside the free zones before they would enjoy the tax benefits.
The House also limited the powers of the president to exempt from income tax, and subjected it to the approval by the National Assembly.
The lawmakers also deleted the use of the controversial word “ecclesiastical” from one of the clauses and replaced it with “religious.”
They also repealed the Federal Inland Revenue Service to establish the Nigeria Revenue Service, which will now focus on federal-level revenue collection, excluding individual taxpayers in states and FCT.
Section 7 of the law now requires that the NRS have six executive directors, each appointed by the president from the six geopolitical zones on a rotational basis. Each state and the FCT will also have a representative on the board.
The act provides that NRS will now receive a 4% cost-of-collection rate (excluding royalties), subject to National Assembly approval.
Section 13 of the bill mandates that the Secretary to the Board must be a lawyer, chartered accountant, or chartered secretary at the level of Assistant Director or higher.
The report also proposed an extension of tax exemption to specific agricultural businesses in the first five years of commencement. The specific agricultural sub-sectors include livestock, forestry, dairy, animal feed, and cocoa processing.
The wages and salaries of members of the Nigerian armed forces have also been proposed to be exempted from personal income tax.
The new bills, when passed into law, will repeal the following legislations: Companies Income Tax Act (CITA) – 1979, Value Added Tax Act (VAT Act) – 1993, Personal Income Tax Act (PITA) – 1993, Federal Inland Revenue Service (Establishment) Act – 2007, Capital Gains Tax Act – 1967, Stamp Duties Act – 1939, Casino Act – 1965, Deep Offshore and Inland Basin Act, Industrial Development (Income Tax Relief) Act – 1971, Petroleum Profits Tax Act – 1959, and Venture Capital (Incentives) Act – 1993.
The following laws would also be amended: Petroleum Industry Act, 2021, Nigeria Export Processing Zones Act, Oil and Gas Free Trade Zone Act, National Information Technology Development Agency Act, Tertiary Education Trust Fund (Establishment, Etc.) Act, National Agency for Science and Engineering Infrastructure (Establishment) Act, Customs, Excise Tariffs, Etc. (Consolidation) Act, National Lottery Act 2005, Nigerian Minerals and Mining Act, 2007, Nigeria Start-up Act, 2022, Export (Incentives and Miscellaneous Provisions) Act, Companies Income Tax (Significant Economic Presence) Order 2020, Petroleum (Drilling NIGERIA TAX BILL, 2025 and Production) Regulations 1969, while Value Added Tax Act (Modification) Order 2021 is revoked.
