Nigeria’s New Tax Law Aims to End Double Taxation, Targets Digital Economy

The Nigeria Revenue Service has detailed fresh measures under the country’s new tax laws designed to eliminate double taxation, widen the tax net, and enforce stronger compliance.

The provisions were outlined in a Frequently Asked Questions document issued by the NRS, which clarifies key aspects of the sweeping fiscal reforms.

A major focus of the new framework is preventing the same income from being taxed twice. The law provides unilateral relief and recognizes existing double taxation agreements. Nigerian residents who have already paid tax on foreign-sourced income can claim relief, subject to Nigerian rates and legal timelines.

“The Act provides for unilateral relief and recognition of double taxation agreements to avoid double taxation on foreign-sourced income,” the NRS stated.

In a significant move to capture revenue from the digital economy, the law stipulates that non-resident digital service providers with a significant economic presence in Nigeria are now liable for income tax and Value Added Tax on Nigerian-sourced income.

The regime also introduces incentives to stimulate local innovation. Companies can deduct up to five per cent of their turnover for research and development expenses incurred within Nigeria. Furthermore, dividends from wholly export-oriented businesses, as well as certain foreign-sourced income like interest and royalties repatriated through official channels, are exempt from tax.

The NRS warned of strict penalties for non-compliance. Failure to register for tax incurs an initial ₦50,000 penalty, plus ₦25,000 for each subsequent month of default. Late filing or failure to remit withheld taxes attracts additional fines and interest charges.

New filing obligations have been introduced for Virtual Asset Service Providers, who must now submit detailed monthly returns alongside annual filings.

The FAQs clarify the administrative roles under the new system: the NRS will administer taxes for companies, non-residents, petroleum operations, VAT, and stamp duties. State Internal Revenue Services retain responsibility for taxes on individuals, estates, trusts, and businesses within their jurisdictions.

The reforms, anchored by the Nigeria Tax Administration Act 2025, represent a major overhaul intended to boost revenue, improve transparency, and align Nigeria’s tax system with global standards, while balancing enforcement with targeted reliefs for businesses and investors.