The Nigeria Tax Act: Some Important Changes in The Final Gazette – And Why It Matters for Businesses

By Kenneth Erikume and Emeka Chime of PwC

The new year opens with Nigeria’s most significant tax reset in a decade, and unsurprisingly, considerable controversy. The cause is simple but significant: some gazettes of the Act (“the Initial Gazette”) circulated widely in 2025 and they have now been superseded by a final, National Assembly-approved Act (“the Final Act”) that took effect on 1 January 2026. The differences are not cosmetic edits; they change eligibility, computation bases, thresholds and incentives across key regimes from corporate income tax, Value Added Tax (VAT), free zone incentives, minimum effective tax rate mechanics, among others. So, it is essential to know which of the rules in the various versions actually apply.

This article distills the material shifts between the Initial Gazette and the Final Act, focusing on what taxpayers, investors and advisers should now align to in 2026.

Export income tax relief: gone from the income tax basket, retained in VAT zero-rating
One of the most debated changes is the treatment of export incentives. The earlier versions expressly exempted from income tax the profits of Nigerian companies (other than those engaged in petroleum value chains) arising from exported goods or services, provided proceeds were repatriated through official channels. That item appeared as part of the income tax exemptions list but has now been deleted, thereby narrowing the scope of income tax relief for exporters. The effect is a deliberate policy tilt: export promotion shifts away from a broad income tax exemption and rests instead on VAT zero-rating of exports and any sector-specific schemes.

For clarity, exported goods and services remain zero-rated for VAT under the Final Act. What has changed is the removal of the parallel income tax exemption for export profits in the Final Act.

However, there is a separate withholding tax (WHT) exemption on dividends distributed by wholly export-oriented companies, which has been retained under
the Final Act.

Small company definition: a clearer, higher turnover threshold
The definition of a “small company” has practical consequences for rate reliefs and compliance expectations as they are subject to 0% corporate tax rate and exemption from registering and charging VAT.

The Initial Gazette pegged the turnover threshold at N50 million per annum (with a fixed asset cap of N250 million) and included language that did not exempt professional services. The Final Act now defines a small company as one with gross turnover not exceeding N100 million and total fixed assets not exceeding N250 million, without reproducing the Initial Gazette’s professional-services carve-out in that clause. This removes an ambiguity that had been introduced by the earlier phrasing in the Initial Gazette.

This clarity matters in two ways: first, it determines which entities sit within small company concessions; second, it reduces interpretive disputes that typically arise when draft carve-outs are left half-stated or a different threshold stated in the Nigeria Tax Administration Act.

Minimum Effective Tax Rate: a single, audited “net income” base – no alternative “profits” construct
The Minimum Effective Tax Rate (METR) provisions are substantially different between versions. The Final Act defines “effective tax rate” by reference to covered taxes as a percentage of “net income,” with “net income” defined as profits before tax (PBT) as reported in audited financial statements, excluding franked investment income and what appears to be a typographical unrealistic gains or losses” instead of “unrealised gains or losses.”

By contrast, the Initial Gazette allowed the ETR to be calculated against “profits” that was defined as “net profit before tax as reported in the audited financial statement less 5% of depreciation and personnel cost…”, creating a second base which aligned more with the OECD rules. In some versions, both bases were included. This created ambiguity as to which of the bases to use (or whether to use both) in calculating the ETR.

The Final Act eliminates that alternative base and locks the computation to audited PBT excluding franked investment income and “unrealistic gains or losses”, thereby removing ambiguity and potential arbitrage between differing denominators. The typographical point is not trivial: given the accounting context, the reference to “unrealistic” is best understood as “unrealised”. But taxpayers should watch for an official clarification from the Nigeria Revenue Service (NRS) on this.

The impact may differ for companies. For some, it may raise the denominator relative to the Initial Gazette in some fact patterns.

Finally, the revenue threshold for determining Nigerian constituent entities of Multinational Enterprise groups subject to the METR rule has been changed from €750m (Euros) to £750m (Pounds). This appears to be an error and may require correction

VAT: exemption of betting stakes from VAT, no Electric Vehicle (EV) zero-rating; clearer headings and scope cues
The Final Act now exempts “stakes” from VAT, and this term has been defined as “amount waged on a game”. The express exemption clarifies that wagering stakes are outside VAT, and this is consistent with VAT principles that exclude mere transfers of money.

Also, the Initial Gazette’s zero-rating for EVs and their parts/semi-knock-down units has been omitted entirely in the Final Act. In practical terms, exported goods and services remain zero-rated, but EV-related supplies are not specially zero-rated under the approved text.

The Final Act also tidies several VAT headings and phrases in ways that subtly broaden or clarify scope. For example, “Business sold out” in the Initial Gazette is reframed as “Business restructuring,” a more transaction-agnostic concept that better accommodates a range of reorganisations.

Free zones and export processing zones: updated conditions and a hard stop for customs-territory sales
Free zone incentives are preserved but the conditions have been updated. Under the Second Schedule to the Final Act, supplies to “persons engaged in upstream, midstream or downstream petroleum or gas operations” are also exempt from
income tax.

The wordings of Paragraph 3 of the Second Schedule suggest that the petroleum or gas customer condition is an additional condition to be met by entities set up under the Nigeria Export Processing Zones Act (NEPZA), meaning that the profits of such entities are exempt from tax where their total sales arise from export, domestic sales are 25% or less, and their goods or services are sold to persons engaged in upstream, midstream or downstream petroleum or gas operations. This interpretation would be illogical, as it would effectively link NEPZA incentives to supplying non-resident oil and gas companies – an outcome that does not align with how NEPZA regimes are designed.

It appears that the intent behind including the petroleum/gas customer condition is for it to separately apply to approved entities under the Oil and Gas Free Zones Authority Act (OGFZA). There could also be alternative views as to whether it protects NEPZA entities that sell to such customers. It is therefore important that the NRS clarifies this.

More consequentially, paragraph 5 of the Second Schedule to the Final Act fixes 1 January 2028 as the date from which profits on sales to the customs territory become fully taxable, regardless of the percentage of domestic sales, and it removes the President’s discretion to extend that date by Order for up to 10 years from commencement. This hard stop gives certainty to the runway and limits policy discretion to prolong domestic sales relief beyond that date.

Both versions maintain the obligation for free zone entities to comply with general tax administration requirements such as registration, returns, and complying with deduction and remittance of withholding tax.

Petroleum royalties and decommissioning fund: Reorganised framework and simplified compliance
The condition to deposit 30% of decommissioning or abandonment fund to an accredited Nigerian bank, for provisions made to such fund to be tax deductible, has been updated. The Final Act now requires only 15% of the decommissioning or abandonment fund to be deposited to a Nigerian bank. The Final Act also removes the requirement for the Nigerian bank to be accredited and only requires the bank to confirm the deposit.

This change is pivotal, as it reduces the cash flow burden of the fund on petroleum and gas operators while also simplifying the compliance process for taxpayers.

Some readers have asked whether petroleum royalties were quietly dropped because a section numbered “Petroleum Royalty” appears deleted in the reorganised body of the Final Act. That reading is misleading.

While a section label may have been removed or renumbered, the Final Act contains a comprehensive Seventh Schedule titled “Petroleum Royalty,” including administration, determining chargeable volumes, price mechanisms and rate structures grounded in both production and price metrics. The Schedule also anchors cross-references back into Chapter Three and includes operative provisions for royalty administration within the text.

The continuity is substantive: the royalty framework under the NTA persists, albeit relocated and rationalised in a Schedule rather than a freestanding section in the main body. Any perceived omission is therefore a function of renumbering and relocation, not a policy retreat from petroleum royalties administration within the NTA.

Administrative drafting improvements: fewer ambiguities

Across the Act, the approved text shows an editorial discipline that is more than stylistic. Headings align better with transaction realities; and stray phrases from the Initial Gazette that would have created alternative computational bases or carveouts have been removed. Even where a typographical slip appears – “unrealistic” versus “unrealised”- context points to the intended accounting construct, and we can expect administrative guidance to confirm this.

These improvements matter because tax is administered one return, one audit and one dispute at a time; clarity upfront reduces friction later.

What businesses should do now:
The immediate priority is to recalibrate compliance and planning to the Final Act, not the earlier gazettes, no matter their source.
1. Exporters should revisit reliance on income tax exemptions and shift any remaining assumptions to VAT zero-rating and specific incentive frameworks, including the WHT exemption on dividends distributed by wholly export-oriented companies.
2. Companies near the small company threshold should test status under the higher N100 million turnover cap and ensure fixed asset positions and disclosures are aligned.
3. Groups modelling METR should standardise denominators to audited PBT with the updated specified exclusions and remove any draft-based alternative constructs.
4. Free zone operators must reassess sales mix strategies and plan for the hard 1 January 2028 transition for customs-territory sales, including systems to ring-fence domestic revenue and costs for post-2027 taxability. Entities operating under NEPZA and OGFZA must also seek clarity on the application of the exemption conditions.
5. Gaming and lottery operators should update systems and documentation to ensure that VAT is not charged on stakes, and that stakes are clearly distinguished from taxable supplies such as service fees, platform charges or other ancillary offerings. This prevents mischarges and reduces the risk of avoidable VAT disputes.
6. Petroleum operators should align to the new decommissioning and abandonment fund rules and map their royalty computations to the Seventh Schedule to ensure that pricing and volume determinations reflect the Schedule’s mechanisms and cross-references.

Conclusion
The final Act is not a light edit of the 2025 draft: it is a set of deliberate corrections and calibrations that narrow broad export income exemptions, clarify what entity is “small,” ground METR in audited net income, remove EV zero-rating, condition and time-limit free zone benefits, and preserve petroleum royalties through a comprehensive Schedule. For 2026, certainty lies in the final text, and aligning to it early will be the difference between clean compliance and avoidable disputes.

CREDIT: This article was first published on Proshare.co on January 11, 2026