Nigeria’s New Tax Law Tackles Double Taxation and Boosts Digital Economy Compliance

The Federal Government of Nigeria has unveiled new tax measures aimed at curbing double taxation, expanding the tax net, and promoting compliance under the country’s updated tax laws. According to a Frequently Asked Questions document obtained from the Nigeria Revenue Service (NRS), the reforms provide clear guidelines on foreign-sourced income, digital services, penalties for defaulters, and incentives for research and development. These measures are part of a broader effort to modernize the tax system and increase revenue mobilization.

One of the key features of the law is its approach to double taxation. Nigerian residents whose income is taxed abroad can now claim relief under the new provisions, which also recognize existing double taxation agreements. The goal, NRS explains, is to encourage cross-border investment while protecting taxpayers from being taxed twice on the same income. Collective investment schemes are similarly addressed, with income taxed at the scheme level and distributions treated as dividends for investors.

The legislation also targets the digital economy. Non-resident digital service providers with significant economic presence in Nigeria are now liable to income tax and value-added tax on Nigerian-sourced income. This move aligns Nigeria with global trends in taxing digital transactions and ensures fair revenue capture from emerging sectors. Companies are also encouraged to invest in innovation, with up to 5% of turnover deductible for research and development expenses incurred domestically.

Compliance and enforcement have been strengthened under the new framework. All taxable persons—including individuals, companies, ministries, non-residents, and virtual asset service providers—must register with the appropriate tax authority and maintain accurate records. Penalties for non-compliance include administrative fines, interest, and potential prosecution, while special filing obligations have been introduced for virtual asset service providers to ensure transparency in digital asset transactions.

Overall, the Nigeria Tax Administration Act 2025 represents one of the most comprehensive overhauls of the country’s tax system in decades. By addressing double taxation, modernizing administration, and balancing revenue collection with investment incentives, the law aims to raise Nigeria’s tax-to-GDP ratio, improve transparency, and reduce reliance on borrowing, all while aligning the country’s tax policies with global best practices.

source: punch