The federal government is proposing an increase in the Value Added Tax (VAT) from 7.5% to 10% by 2025. The executive bill aiming to legalize this adjustment has already been submitted to the National Assembly.
According to a report by The Cable, the bill outlines a phased VAT increase, starting with a 10% rate by 2025. It further proposes raising VAT to 12.5% from 2026 through 2029, and to 15% by 2030.
“VAT shall be charged on the value of all taxable supplies at the following rates: 10% in 2025, 12.5% from 2026 to 2029, and 15% from 2030 onwards,” the document states.
Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, had previously suggested on May 8 that an increase in VAT rates was necessary. However, on September 9, Finance Minister Wale Edun clarified that the VAT rate had not yet been changed.
Alongside the proposed VAT hike, the bill includes a reduction in Corporate Income Tax (CIT). The CIT would be reduced from 30% to 27.5% by 2025, and further lowered to 25% by 2026. Companies with a turnover below ₦20 million will remain exempt from paying CIT.
According to the document, “Tax shall be levied, for each year of assessment, on the total profits of every company. Small companies will pay zero percent, while other companies will be taxed at 27.5% in 2025 and 25% starting from 2026.”
Additionally, the bill mandates that any company with an effective tax rate below 15% must pay an additional tax to align its effective rate with the 15% threshold. This applies to multinational enterprise (MNE) groups and companies with turnovers exceeding ₦20 billion annually.
The committee, led by Oyedele, had earlier proposed a 5% reduction in CIT to stimulate business growth and attract investors.
In a related move, the federal government recently gazetted new withholding tax regulations, set to take effect on January 1, 2025.
