National Assembly Considering VAT Increase from 7.5% to 10% by 2025

The National Assembly is deliberating on a new bill that seeks to raise the value-added tax (VAT) from the current 7.5% to 10% by 2025. According to a document obtained by SK Blog, the proposed legislation also outlines a gradual increase in VAT to 12.5% by 2026, continuing through 2029, with a final hike to 15% by 2030.

The VAT is a consumption tax applied at various stages of the supply chain, where value is added to goods and services. The bill’s breakdown specifies: “VAT shall be charged on all taxable supplies at the following rates: (a) 2025 – 10%; (b) 2026-2029 – 12.5%; and (c) 2030 onwards – 15%.”

This move aligns with recommendations from fiscal experts, including Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, who suggested earlier this year that a VAT hike is necessary. However, not all stakeholders are on board. Former Vice President Atiku Abubakar criticized the proposal in September, calling it a “regressive and punitive policy.”

Despite this opposition, the proposed changes follow earlier advice from the International Monetary Fund (IMF), which recommended that Nigeria raise its VAT rate to at least 10% by 2022.

Corporate Income Tax Reduction Also Proposed

In addition to the VAT increase, the bill introduces a reduction in corporate income tax (CIT). The CIT rate, currently at 30%, is expected to drop to 27.5% by 2025, with a further decrease to 25% in 2026. This reduction aims to encourage business growth and attract more investment into the country.

Small businesses with less than N20 million in annual turnover will remain exempt from CIT under the new bill. However, larger companies, particularly those with a turnover of N20 billion and above, will face an additional tax to ensure an effective tax rate of at least 15%, as specified in the document.

These proposed changes are part of broader fiscal reforms initiated by the presidential committee to improve Nigeria’s tax landscape, while also supporting businesses and enhancing government revenue. The withholding tax regulations, recently gazetted, are also set to take effect in January 2025, signaling a busy period of tax reforms in the coming year.