- July 10, 2025
- Posted by: admin
- Category: Tax
The Nigerian tax landscape is changing, and for Consumer Goods, TMT (Technology, Media, and Telecommunications), and other service-driven sectors, these new laws mean more than just policy updates; they signal a shift in how you structure, account, and forecast your business finances.
Following the signing of Nigeria’s latest tax reforms into law, several industry-specific provisions have emerged that will directly affect your compliance costs, R&D decisions, staff structure, and VAT input claims.
At FSC Professional Services, we’ve broken down the 12 key changes you must pay attention to, and how to position your business for compliance and strategic advantage.
1. Initial Allowance Removal Increases Cash Tax Burden
The removal of the initial allowance on qualifying capital expenditure will now lead to higher cash tax in the year assets are acquired. For capital-intensive sectors like FMCG and telecommunications, this could significantly affect cash flow planning.
What to do: Rethink your asset acquisition calendar and integrate the timing of capital spend into your tax planning models.
2. New Incentives for Hiring Staff Earning Below ₦100,001
There is now a 50% tax deduction on staff costs where employees earn less than ₦100,001 per month, provided there’s a net increase in total staff strength.
Why it matters: FMCG and retail-heavy businesses employing low to mid-level workers can reduce their effective tax burden while expanding operations.
3. Thin Capitalization Rules Now Apply to All Related-Party Loans
Previously, thin cap restrictions targeted only foreign-related party loans. Now, the rule has been expanded to cover all related-party loans, including local inter-company arrangements.
Action step: Review existing intra-group financing structures. Over-leverage on related loans could now lead to disallowed interest deductions.
4. Free Trade Zones (FTZs) Now Face Transaction Taxes
FTZs are no longer fully exempt. New transitional provisions and transaction taxes now apply to business dealings between FTZ enterprises and entities within Nigeria’s customs territory.
Heads up: Consumer brands producing in FTZs and selling locally will need to adjust pricing and supply chain assumptions.
5. Surcharge on Fossil Fuel Will Raise Operational Costs
Expect a cost increase on logistics and production as a surcharge is imposed on fossil fuel use.
Industries affected: FMCG, logistics, and food processing businesses with significant transportation needs will bear the brunt.
6. Higher R&D Deductibility Threshold: A Win for Innovation
Tax deductibility for R&D expenses has increased from 5% of turnover to 10% of total profit. This offers better tax treatment for companies investing in product development, quality improvement, and tech upgrades.
Tip: FMCG and tech companies should explore product innovation and upgrade plans as part of their tax efficiency strategy.
7. Reduced Proration of Capital Allowance with Non-Taxable Income
Entities with non-taxable income will now prorate capital allowance based on 10% instead of 20%, effectively increasing their tax liability.
Example: A company enjoying a partial tax holiday must now reassess its capital allowance claims to avoid overstatement.
Why You Must File Your Company Tax Returns Today (Or Risk Daily Penalties)
8. Expanded Zero-Rated Items Will Lower Costs in Select Sectors
More goods and services are now classified as zero-rated, notably in medical and pharmaceutical products.
Relief: Manufacturers and distributors in these segments can now enjoy VAT refunds or zero-rated inputs, improving cash flow.
9. Pioneer Status Transforms into Economic Development Incentives (EDI)
The popular Pioneer Status Incentive (PSI) now evolves into EDI, with revised sectors, tenures, and eligibility.
Action: Review your sector eligibility. Qualifying industries may benefit from up to 5 years of tax holidays under new terms.
10. Input VAT Claim Now Allowed for Telecom Interconnect Charges
Telecom operators can finally claim input VAT on interconnect charges, resolving a long-standing industry issue.
Win for TMT: This significantly improves cash recovery in the telco value chain and reduces VAT leakage.
11. Non-Resident Shipping and Air Transport Now Taxed on EBIT
Instead of applying flat turnover-based presumptive tax, non-resident operators are now taxed by multiplying turnover by EBIT margin.
Implication: Shipping and logistics firms operating offshore but earning locally must recompute profits using new guidelines.
12. Gaming & Lottery Businesses Now Explicitly Taxed Under NTA
There is now clear legal backing for taxing gaming and lottery operators under the Nigerian Tax Administration framework.
Key change: Gaming startups and digital betting platforms must now incorporate formal tax compliance processes and register with appropriate tax authorities.
What This Means for Your Business
These changes are far-reaching and nuanced. They reflect a broader government effort to:
-
Expand the tax base
-
Improve transparency
-
Incentivise local employment and innovation
-
Encourage formalisation of digital businesses
If you operate in consumer goods, telecoms, logistics, e-commerce, or healthcare, these reforms will impact how you budget, recruit, structure deals, and report profits.
How FSC Can Help You Navigate These Changes
At FSC Professional Services, we support growing businesses in Lagos and across Nigeria to:
- Identify eligible tax incentives
- Optimise capital allowance claims
- Comply with VAT and WHT filing
- Reclassify assets under new rules
- Streamline group finance to meet thin cap provisions
- Prepare audit-ready financials under current laws
Final Word
The tax landscape is no longer what it used to be. While the reforms are aimed at driving compliance and encouraging growth, they also introduce complexity and increased scrutiny.
.
Don’t get caught unprepared. If you’re unsure how these updates affect your business, let’s talk.
FSC Professionals will help you stay compliant, cut tax waste, and reposition for strategic growth.