Nigeria is entering a new era of taxation with the implementation of its 2025 Tax Reform Acts, which will take full effect on January 1, 2026. The reforms consolidate multiple tax statutes, expand the tax base, modernise administration, and aim to improve compliance.
In recent weeks, rumors on social media have suggested that the government could randomly deduct funds from bank accounts and require detailed documentation for every transaction. However, the reality is more reassuring. The government cannot withdraw money from accounts arbitrarily. Salaried workers pay personal income tax through payroll, while businesses and freelancers file annual returns. Bank accounts are only scrutinized under specific conditions.
Banks are required to report accounts with quarterly inflows exceeding ₦25 million for individuals and ₦100 million for corporates. Routine transactions, salaries, small-business revenue, and daily transfers are largely unaffected. If thresholds are exceeded, the Nigeria Revenue Service (NRS) compares inflows with declared taxes, contacting the account holder only if discrepancies arise. Gifts, school fees, community contributions, or properly documented savings are not taxable.
The claim that people must “fill in descriptions for every transaction” is a misconception. Authorities focus on high-volume accounts, and most small accounts, micro-businesses, and digital wallets are not targeted. The reforms primarily focus on large, well-resourced individuals and businesses.
The 2025 reforms introduce a fairer, more transparent system:
Personal Income Tax (PIT): Individuals earning less than ₦800,000 annually are fully exempt; tax rates range from 0% to 25% based on earnings.
Small businesses: Companies with annual turnover below ₦100 million are exempt from corporate income tax, capital gains tax, and the development levy.
Large businesses: Companies above these thresholds face a minimum 15% effective tax; a 4% development levy replaces multiple sector-specific levies.
Value-added tax (VAT) remains at 7.5%, and mandatory electronic invoicing enhances accountability without affecting ordinary consumers. Digital economy services and virtual asset transactions are taxed, but standard accounts and small payments are not the focus.
The reforms are designed to modernise taxation, enhance transparency, and target high inflows and large earners without disrupting everyday banking. By understanding thresholds, keeping proper documentation, and responding to legitimate inquiries, individuals and small businesses can remain compliant without stress.
The 2025 Tax Reforms are Nigeria’s most comprehensive overhaul in decades, simplifying the tax code, broadening the base, modernising enforcement, and introducing incentives for compliant businesses. Companies and individuals must review structures, reporting systems, and tax planning strategies to stay compliant.
For guidance on tax obligations or record documentation, it is advised to consult a qualified tax professional or review the laws directly to safeguard finances and maximise the benefits of the new system.
