By John Umeh
The Federal Inland Revenue Service (FIRS) has moved to clear confusion around the 4% Development Levy on imported goods, emphasizing that it is not a new tax but a consolidation of existing charges. The agency said the measure is part of broader reforms aimed at making Nigeria’s tax system simpler, more predictable, and more attractive to investors.
FIRS issued the clarification following widespread public concerns over the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), which are set to take effect from January 2026. Misinterpretations of the new laws, especially regarding the levy, had generated anxiety among businesses and investors.
Understanding the 4% Levy
According to FIRS, the 4% Development Levy is designed to replace several fragmented taxes and levies that businesses previously paid separately. These include:
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Tertiary Education Tax
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NITDA Levy
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NASENI Levy
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Police Trust Fund Levy
“By consolidating these levies, businesses face fewer administrative hurdles, reduced compliance costs, and greater predictability in planning,” the agency said.
The levy exempts small businesses and non-resident companies, ensuring that the reforms do not disproportionately affect those most vulnerable to economic fluctuations.
Free Trade Zones Remain Protected
FIRS also clarified that Free Trade Zone (FTZ) incentives remain fully intact. Under the new rules, companies in FTZs may sell up to 25% of their products in Nigeria without losing tax exemptions. A three-year transition period will allow firms to adjust, helping prevent previous abuses where FTZ licenses were used to circumvent domestic taxation.
“These reforms bring Nigeria’s FTZ framework in line with international best practices, as seen in the UAE and Malaysia, where zones primarily serve export activities,” FIRS explained.
Minimum Tax Rate Introduced
The reforms also introduce a 15% minimum Effective Tax Rate (ETR) for large domestic and multinational companies. This move ensures compliance with the OECD/G20 global tax agreement and prevents revenue loss to foreign jurisdictions through the “Top-Up Tax” mechanism.
“This ensures that profits generated in Nigeria are taxed fairly and retained within the country, while maintaining a level playing field for all companies,” FIRS stated.
Investor-Friendly Measures
The new tax laws modernize the approach to capital gains, now called chargeable gains, with several incentives for investors:
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Reinvestment Relief: Tax exemptions for gains reinvested in Nigerian companies within the same year.
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Protection for small investors by exempting low-value transactions.
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Closing loopholes previously exploited to disguise business income as capital gains.
These changes aim to encourage reinvestment, increase transparency, and simplify compliance for all investors.
Capital Gains Tax Clarification
FIRS and the Presidential Fiscal Policy and Tax Reforms Committee have reassured investors that the new rules will not retroactively tax gains made before 2026. The calculation of capital gains will use the higher of the purchase price or the market value as of December 31, 2025, giving businesses a fair reference point.
“Investors can now plan with confidence, knowing that past transactions will not be penalized under the new law,” Taiwo Oyedele, committee chairman, said.
Why This Matters
FIRS described the 4% Development Levy as part of a strategic overhaul of Nigeria’s tax system designed to:
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Simplify compliance and reporting for businesses
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Reduce uncertainty in tax obligations
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Maintain incentives for investors and FTZ participants
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Ensure fiscal sustainability and transparency
The agency emphasized that rather than imposing new burdens, the reforms consolidate fragmented levies, protect investors, and align Nigeria with global tax best practices.
