Tax Reform Concerns: Unraveling the Misconceptions
By Peter Egwuatu, Assistant Business Editor
Amidst the buzz surrounding the upcoming tax reforms set to take effect on January 1, 2026, concerns have been raised among Nigerians. Will those without a Tax Identification Number (TIN) have their bank accounts blocked? Will tax authorities scrutinize every transaction? These questions reflect a broader anxiety about the impact of the reforms on individuals and businesses.
To address these concerns, Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has stepped forward to clarify the misconceptions. In a recent statement, Oyedele emphasized that the reforms are not about burdening citizens with higher tax rates or arbitrary revenue targets. Instead, they are a strategic move to rebuild trust between citizens and the state.
"Tax reform is not solely about rates and revenue," Oyedele explained. "It's about the social contract of trust between citizens and the state. It's about answering fundamental questions: Why should I pay tax? How is my money being spent? Is the system fair, ensuring everyone pays their fair share?"
Oyedele highlighted the importance of credible media engagement in addressing these questions. Tax policy, he noted, is susceptible to misinformation due to its direct impact on livelihoods. A robust tax system, he added, requires fair laws, honest administration, voluntary compliance, and vigilant public scrutiny of public funds.
The committee has also addressed frequently asked questions regarding the Nigeria Tax Act (NTA) 2025, which will come into effect in 2026. Here are some key clarifications:
Who is subject to taxation?
- The law applies to all individuals earning income in Nigeria, including workers, traders, content creators, influencers, and remote workers. It also applies to Nigerians earning income abroad if they are tax residents in Nigeria.
Will bank transactions be taxed?
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Will holding money in a bank account be taxed?
- No. Simply holding money in a bank account is not taxable. Only income, such as salary, business profit, or interest, is taxed.
Do students without jobs pay tax?
- No. If you have no taxable income, you won't pay tax.
Will tax authorities monitor bank accounts more closely?
- Yes. Authorities will find it easier to track compliance, but bank balances themselves will not be taxed. Only profits and income will be subject to taxation.
Will loans from lenders be taxed?
- No. Loans are not income and are not taxable. However, the interest earned by the lender will be taxed.
Do one-man businesses pay personal or company income tax?
- If registered as a business name (enterprise), you pay Personal Income Tax (PIT). If registered as a limited liability company, you pay Company Income Tax (CIT).
Will share sales be taxed?
- No, provided the value of shares sold does not exceed N150 million and the gain is not above N10 million. Gains above these thresholds become taxable.
Will pensions be taxed?
- No. Approved pension and retirement benefits remain tax-exempt.
Are military salaries taxable?
- No. Salaries of military officers are now exempt from tax.
Do creatives pay tax on foreign income?
- No. Authors, musicians, sportsmen, and other creatives must now pay Nigerian tax on income earned both within and outside Nigeria.
Are crypto gains taxable?
- Yes. Profits from crypto assets, NFTs, and other digital assets are taxable.
Who is exempt from Personal Income Tax?
- Individuals earning the national minimum wage or less, and those earning below N800,000 annually.
New Progressive Tax Bands (From 2026)
- First N800,000 @ 0%
- Next N2.2 million @ 15%
- Next N9 million @ 18%
- Next N13 million @ 21%
- Next N25 million @ 23%
- Above N50 million @ 25%
Will severance packages be taxed?
- Severance pay of N50 million or less is tax-free. Any excess above N50 million will be taxed using the progressive tax bands.
Will Nigeria tax dividends or rent earned abroad?
- No. Dividends, interest, rent, and royalties earned abroad are exempt if repatriated to Nigeria through approved banking channels.
Are disability pensions for injured soldiers taxable?
- No. Disability pensions for members of the armed forces are completely tax-exempt.
Will agricultural companies be taxed?
- No. Agricultural companies engaged in crop production, livestock, forestry, dairy, or cocoa processing will enjoy a five-year tax holiday from the commencement of operations.
Is income from government bonds taxable?
- No. All government bonds are tax-exempt.
What is rent relief under the new law?
- From 2026, individuals can claim rent relief of 20% of annual rent, capped at N500,000. Actual rent must be declared and verified.
Will individuals with N6 million annual income benefit?
- Under the new law, tax payable drops from N896,000 to N780,000, resulting in savings of N116,000 and higher take-home pay.
Will small companies with turnover below N50 million pay tax?
- No. Small companies with a turnover below N50 million are exempt.
Do remote workers pay tax?
- Yes, if your income is exempt in the organization's home country under a treaty or diplomatic arrangement.
Will foreigners earning a salary in Nigeria be taxed?
- No, if the employer is a startup or operates in tech or creative industries, and the income is already taxed in the foreigner's country of residence.
Will TIN holders be denied access to their bank accounts?
- No. Any person without a Tax Identification Number (TIN) can still have access to their bank account, but will be asked to supply it as time goes on. Those opening new bank accounts without TIN may face restrictions.
Oyedele emphasized that the reforms are designed to protect low-income earners, promote fairness, and improve voluntary compliance. The tax system, he assured, will support growth, inclusion, and accountability in Nigeria.
