The Nigeria Revenue Service (NRS) has stated that the new tax law will law addresses double taxation by providing for unilateral relief and recognising double taxation agreements entered into by Nigeria, in order to prevent the same income from being taxed twice.
According to a Frequently Asked Questions (FAQ) report, the relevant provisions are contained in Sections 120 to 123 of the Act.
The document, issued by the Nigeria Revenue Service, provides detailed clarifications on key provisions of the new tax framework, including reliefs for foreign-sourced income, the taxation of digital services, penalties for default, and incentives for research and development.
The NRS explained that Nigerian residents whose income has already been taxed abroad may claim relief on such income, subject to the applicable Nigerian tax rate and within the timeframe allowed by law.
This relief, the NRS said, is designed to encourage cross-border investment while protecting taxpayers from excessive tax burdens.
“The Act provides for unilateral relief and recognition of double taxation agreements to avoid double taxation on foreign-sourced income (Sections 120-123),” the report stated.
On the tax treatment of collective investment schemes, the report clarified that such schemes are treated as companies for tax purposes. Their income is taxed at the scheme level, while distributions to unit holders are treated as dividends in the hands of investors.
It added that “a Nigerian resident whose income has been subjected to tax in a foreign jurisdiction may claim relief for such tax, subject to the applicable Nigerian tax rate and within the time allowed under the law.”
Explaining the treatment of collective investment schemes, the document noted that “collective investment schemes are treated as companies for tax purposes, with income taxable at the scheme level and distributions treated as dividends in the hands of unit holders.”
The FAQs also addressed concerns around foreign income, stating that dividends received from investments in wholly export-oriented businesses, as well as dividends, interest, rent, or royalties earned outside Nigeria and repatriated through approved channels, are exempt from tax.
In a move aimed at promoting innovation, the new tax regime allows companies to deduct up to five per cent of their turnover for research and development expenses incurred in Nigeria.
The report further highlighted how the law seeks to capture revenue from the digital economy. It stated that non-resident digital service providers with significant economic presence in Nigeria are liable to income tax and value-added tax on Nigerian-sourced income, in line with Sections 17 and 151 of the Act.
Taxpayers are also required to maintain accurate records, including invoices, receipts, contracts, and financial statements, as stipulated under the Nigeria Tax Administration Act 2025. Failure to comply, the NRS warned, could attract penalties, interest, and possible prosecution.
Under the law, every taxable person, including individuals, companies, ministries, departments, and agencies, as well as non-residents supplying goods or services in Nigeria, must register with the relevant tax authority and obtain a Taxpayer Identification Number.
Special filing obligations were introduced for Virtual Asset Service Providers, which are now required to submit monthly returns detailing transactions, customer information, and asset values, in addition to their annual returns.
The FAQs also outlined penalties for non-compliance. A taxable person who fails to register for tax faces an administrative penalty of N50,000 for the first month of default and N25,000 for each subsequent month. Late filing of returns may result in interest, additional penalties, and prosecution, while failure to remit withheld taxes attracts a penalty of 10 per cent per annum plus interest at the prevailing Central Bank monetary policy rate.
Companies are required to file their self-assessment returns within six months after the end of their accounting year, while newly incorporated firms must file within 18 months of incorporation or six months after their first accounting period, whichever comes first.
Taxpayers dissatisfied with assessments may file objections within 30 days of receiving the notice, stating the grounds for dispute. Disputes may also be resolved through appeals and other administrative processes provided under the Nigeria Tax Administration Act.
The report explained that while the Nigeria Revenue Service administers taxes on companies, non-resident persons, petroleum operations, VAT, fossil fuel surcharges, and stamp duties, State Internal Revenue Services remain responsible for assessing and collecting certain taxes from individuals, estates, trusts, and businesses within their jurisdictions.
