In June 2025, President Bola Ahmed Tinubu signed into law four significant tax reform bills aimed at transforming Nigeria’s tax framework. The new laws — the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA) — collectively referred to as “the Acts”, mark a comprehensive reform of the nation’s tax system.
These Acts are designed to drive economic growth, increase government revenue, improve the ease of doing business, and strengthen tax administration at all levels of government. The new laws will officially take effect from January 1, 2026, and will be administered by a restructured body known as the Nigeria Revenue Service (NRS).
Focus on VAT: What’s New?
A major aspect of the reform under the Nigeria Tax Act is the reclassification of goods and services under the Value Added Tax (VAT) regime. The new law outlines 15 categories of goods and services exempted entirely from VAT, along with an additional 19 categories subject to VAT at a zero percent (0%) rate.
What is VAT?
Value Added Tax (VAT) is a consumption tax levied on the supply of goods and services in Nigeria. However, not all goods and services attract this tax. Some are completely exempt, while others are taxed at 0%, which has important implications for consumers and businesses.
Understanding these classifications is essential for tax compliance and cost-saving opportunities.
VAT Exemption vs. 0% VAT: What’s the Difference?
VAT-Exempt Items: No VAT is charged at any point in the supply chain. However, businesses cannot reclaim any input VAT (i.e., VAT paid on related business expenses) for these goods or services.
0% VAT Items: These goods and services are taxed at zero percent, meaning no VAT is charged to the end consumer — but input VAT can be reclaimed by businesses, making them tax-efficient.
✅ VAT-Exempt Goods and Services
These items are considered essential or beneficial to public welfare, and include:
- Oil and gas exports
- Crude petroleum and feed gas for gas processing
- Goods for humanitarian or donor-funded projects
- Baby products
- Locally produced sanitary towels, pads, and tampons
- Military hardware, arms, ammunition, and uniforms for Nigerian security agencies
- Shared passenger road-transport services
- Tractors, ploughs, and other farm equipment for agricultural use
- Supplies consumed within export processing or free trade zones (for approved activities)
- Goods and services for diplomatic missions under the Diplomatic Immunities and Privileges Act
- Educational plays and performances
- Land and buildings, including interest in them
- Money and securities, including related interests
- Government-issued licences
- Assistive and disability-related devices (e.g., wheelchairs, braille materials, hearing aids)
Items Subject to 0% VAT
These goods and services are still within the VAT system but are taxed at zero percent. This allows input VAT to be reclaimed and encourages support for essential sectors like food, health, and education:
- Basic food items
- All medical and pharmaceutical products, including herbal medicines
- Educational books and learning materials
- Fertilisers
- Locally made agricultural chemicals
- Locally produced veterinary medicine
- Locally manufactured animal feeds
- Live animals (e.g., cattle, goats, sheep, poultry)
- Agricultural seeds and seedlings
- Electricity generated by GENCOs and supplied to the national grid or NBET
- Electricity transmitted by TCN to DISCOs
- Medical services
- Tuition fees for nursery, primary, secondary, and tertiary education
- Exported goods (excluding oil and gas)
- Exported services
- Exported intangible (incorporeal) property
- Medical equipment
- Electric vehicles
- Components and semi-knockdown units used for assembling electric vehicles
This major tax reform aims to foster a more transparent, efficient, and inclusive tax system, positioning Nigeria for sustained economic development.
