National Assembly Proposes VAT Increase to 10% by 2025

The National Assembly is considering a bill to raise the Value-Added Tax (VAT) from the current 7.5% to 10% by 2025.

The executive proposal also outlines plans for further increases, with VAT expected to reach 12.5% between 2026 and 2029, and potentially 15% by 2030.

Mr. Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, emphasized the necessity of increasing the VAT rate in a statement on May 8, 2024.

In addition to the VAT changes, the bill suggests 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 below N20 million will be exempt from CIT.

The proposed tax rates are as follows:

• For the 2025 assessment year: VAT at 10%
• For the 2026 to 2029 assessment years: VAT at 12.5%
• For the 2030 assessment year and beyond: VAT at 15%

Regarding corporate tax, the bill stipulates:

• Small companies will be taxed at 0%.
• Other companies will face a 27.5% rate in 2025 and 25% starting in 2026.

Furthermore, if any company’s effective tax rate falls below 15% in a given assessment year, it will be required to pay an additional tax to ensure its rate meets the minimum threshold.

This reform aims to address tax equity, particularly for multinational enterprises and companies with annual revenues exceeding N20 billion, in accordance with guidelines set by the tax authorities.