The National Assembly is currently deliberating on a proposed bill aimed at increasing the Value-Added Tax (VAT) from 7.5% to 10%, which is scheduled to take effect by 2025, as outlined in an executive bil.
According to the bill, the VAT rate is set to rise further to 12.5% from 2026 through 2029, with a potential increase to 15% starting in 2030. This structured approach reflects a gradual escalation in tax rates over the next several years.
On May 8, 2024, Mr. Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, emphasized the necessity of raising the VAT rate. This recommendation has sparked debate as former Vice President Atiku Abubakar criticized the proposed increase as a “regressive and punitive policy.”
In conjunction with the VAT increase, the bill also proposes a reduction in the corporate income tax (CIT) from 30% to 27.5% by 2025, with a further decrease to 25% by 2026.
Notably, companies with an annual turnover of less than N20 million would be exempt from CIT obligations.
The proposed tax structure includes specific provisions:
- VAT Rates:
- 10% for the year of assessment in 2025.
- 12.5% for assessments from 2026 to 2029.
- 15% for assessments starting in 2030.
- Corporate Income Tax Rates:
- Small companies will be taxed at 0%.
- Other companies will face a rate of 27.5% in 2025 and 25% from 2026 onward.
Moreover, if a company’s effective tax rate falls below 15%, it will be required to pay an additional tax that raises its effective rate back to this threshold.
