Increases taxes on investment and introduces minimum effective tax rate for certain MNEs

26 Jun 2025

On 26 June 2025, Nigeria adopted the Nigeria Tax Act 2025, consolidating multiple tax laws into a single instrument. Key changes affecting foreign investment include the following:

• Capital gains tax (CGT): The CGT rate for companies has been increased from 10 per cent to 30 per cent, aligning it with the corporate income tax rate. Previously, corporate CGT was set at 10 per cent and indirect share transfers were often exempt. Under the new law, gains from indirect share transfers involving Nigerian assets are now subject to CGT. However, relief is available for smaller transactions: where the total value of share disposals in any Nigerian company is less than ₦150 million (approximately $100,000) within a 12-month period, and the chargeable gain does not exceed ₦10 million (approximately $6,657), such disposals are exempt from CGT. This provision strengthens Nigeria’s taxing rights over foreign entities operating in the country.
• Minimum effective tax rate (ETR): Multinational companies with global revenues exceeding €750 million (approximately $877 million or ₦50 billion in Nigeria) must pay a minimum ETR of 15 per cent on profits derived from Nigerian operations. A top-up tax will apply if the actual tax paid is below this threshold.
• Controlled foreign corporation (CFC) rules: Corresponding to the ETR provision, the Act introduces CFC rules requiring Nigerian parent companies to pay the shortfall if any foreign subsidiary is taxed below the 15 per cent minimum rate. This measure seeks to discourage profit shifting to low-tax jurisdictions.
• Economic Development Tax Incentive (EDTI): The EDTI replaces the Pioneer Status incentive with a stricter, credit-based framework tied to investment size and sector priority, replacing tax exemptions. It provides a 5 per cent annual tax credit on qualifying capital expenditure for up to five years, with carry-forward provisions. The credit may not be applied against additional taxes arising from minimum ETR adjustments.
• Minimum tax for foreign companies: Foreign companies earning income from Nigeria are now taxed based on actual profits, with a minimum tax of 4 per cent of turnover where no withholding tax is applicable. The tax payable by a non-resident company may not be less than the applicable withholding tax rate or 4 per cent of the income, whichever is higher. While foreign income was previously taxable, the specification of a 4 per cent minimum on turnover is a new provision.
• Digital and virtual asset taxation: Gains from digital or virtual assets are now subject to tax. Losses from such assets are deductible only against profits from the same business category.
• Foreign transport operators: Foreign airlines and shipping companies are now required to pay tax of at least 2 per cent of income from passengers or cargo loaded in Nigeria. They must also file a monthly income return, in addition to the annual tax return.
• Free Zones: The tax exemptions for exports of up to 25 per cent of sales to the customs territory will no longer apply from 1 January 2028, subject to President's extension. The value added tax and withholding tax should apply on services provided to free-zone entities from and in the customs territory, and entities must now provide evidence of export proceeds to claim tax exemptions.

 

Nature of measure:

• Treatment and operation

Type:

• Promotion and facilitation (Investment incentives, Special economic zones)

Industry:

• Not industry specific

Sources:

• Government of Nigeria, Nigeria Tax Act 2025, https://tat.gov.ng/Nigeria-Tax-Act-2025.pdf?utm, 26 May 2025
• EY, Nigeria Tax Act 2025 Signed into Law: Highlights, https://www.ey.com/en_gl/technical/tax-alerts/nigeria-tax-act-2025-has-been-signed-highlights?utm, 30 Jun 2025