Nigeria: Significant direct and indirect tax reforms in Nigeria Tax Act (NTA) 2025
Expansion of taxable presence for nonresident companies (NRCs) providing digital services in Nigeria
june 30, 2026
The Nigeria Tax Act (NTA) 2025 includes the following significant reforms to the tax system in Nigeria:
- Redefining residency: The legislation transitions the corporate residency test from an incorporation-based to a substance-oriented framework. A company is considered Nigerian when its central or effective place of management is in Nigeria, as determined by board minutes, approval authorities, and executive travel. The law's disjunctive use of “management or control” potentially lowers the residency threshold.
- Expanded concept of nexus: Taxable presence (nexus) rules have broadened.
- Permanent establishment (PE): Broadened triggers replace the “fixed base” concept to include physical locations, service furnishing, and contract splitting.
- Significant economic presence (SEP): The regime targets the digital economy, triggering a taxable presence for nonresident companies (NRCs) providing digital services when they derive value from Nigerian users.
- Payment-based taxation: Payments originating from Nigeria may trigger a withholding tax liability even without a PE or SEP.
- Profit allocation and minimum tax floors: Once nexus is established, profit attribution shifts to customer and user locations. The tax authority may compare a PE's profit margin against its global parent. The final tax liability for NRCs is the highest of: (1) actual PE profit; (2) a profit margin aligned with the global parent; (3) 4% of turnover; or (4) withholding tax incurred (5% to 20%), which acts as a final minimum tax.
- Sectoral impacts and compliance: The legislation defines digital assets and requires NRCs supplying goods or services to Nigeria to register for VAT and implement e-invoicing. Capital gains are now taxed at the applicable income tax rate (ranging from 30% to 85%), though rules for restructuring are relaxed to permit tax-neutral mergers. Failure by an NRC to register for a tax identification number may result in a doubled withholding tax rate.
Read a June 2026 report prepared by the KPMG member firm in Nigeria