The Nigeria Tax Act (2025)
President Bola Tinubu on 26th June 2025 signed the Nigeria Tax Act (NTA) and 3 other new tax laws aimed at modernising and streamlining the country’s tax system. The Acts comprehensively overhaul the Nigerian tax landscape to drive economic growth, increase revenue generation, improve the business environment and enhance effective tax administration across the different levels of government.In the new tax law, the Value Added Tax rate remains at 7.5% despite initial proposals to increase to 12.5%. Here are things you need to know and how it influences the real estate market.
1. Increased exemption threshold for small companies:
Small companies are now exempt from Companies Income Tax, Capital Gains Tax. Small companies are defined as companies with annual gross turnovers of NGN100million (previously NGN25million) and below and total fixed assets not exceeding NGN250million.
Impact:
This will likely boost small-scale real estate developers. Lower taxes may reduce costs, encouraging more affordable housing supply and stabilizing prices. Buyers could benefit from cheaper properties if savings are passed on, while ownership may shift toward small incorporated firms. However, weak enforcement or tax avoidance could limit impact. Overall, the reform aims to stimulate market activity, increase competition, and improve housing affordability, but success depends on compliance and developer reinvestment strategies.
2. Introduction of rent relief:
The NTA introduces a rent relief which is 20% of annual rent paid, subject to a maximum of ₦500,000, whichever is lower. However, to claim this relief, declarations must be made regarding the actual rent paid, and the tax authority has the right to request additional relevant information. The takeaway from this is that individuals that live in their own accommodation cannot claim such relief.
Impact:
The new 20% rent relief (up to ₦500,000 per year) reduces taxable income for tenants, making renting more attractive compared to homeownership, which does not qualify for relief. This could boost rental demand, encouraging landlords to formalize lease agreements and issue receipts for tax compliance. However, if demand rises, landlords may increase rents, partially offsetting tenant savings. The policy has no direct benefit for homeowners, potentially slowing demand for property purchases. Overall, it supports renters’ affordability but may not significantly impact housing prices or ownership rates. Its effectiveness depends on enforcement and landlord cooperation in providing verifiable rent documentation. Also, the rent relief appears misaligned with Nigeria’s economic realities, particularly in high-cost urban centers like Lagos and Abuja where rental prices significantly exceed the relief cap.
The scheme raises several implementation questions that require clarification:
(1) the methodology for prorating relief when rent is paid mid-year (e.g., May payments),
(2) the exclusion of homeowners from claiming relief despite housing affordability challenges, and
(3) whether employees need pre-approval from tax authorities to claim the benefit.
These ambiguities, combined with the relief’s modest cap that doesn’t reflect actual rental costs in major cities, may limit the policy’s effectiveness in addressing housing affordability for formal sector workers. The current structure risks being more symbolic than substantive in its impact.
3. Chargeable gains and assets:
According to Section 34 of the NTA, chargeable assets include all types of property, including shares, options, rights, debts, digital assets, intangible property, and foreign currencies. The NTA increases the Capital Gains Tax rate from 10% to 30% for companies.
Impact:
The new Capital Gains Tax (CGT) exemptions for Nigerian shares, waiving taxes on gains below ₦10 million and proceeds under ₦150 million, could divert investment away from real estate toward the stock market, particularly for retail investors seeking tax-efficient returns. Unlike equities, real estate sales remain fully taxable, making property less attractive for short-term gains. This may reduce speculative flipping in housing markets, leading to tighter supply and longer holding periods. High-net-worth investors might restructure holdings through corporate entities to qualify for exemptions. Overall, the reform favors equities, potentially dampening liquidity in real estate but encouraging more strategic, long-term property investments. While the stock market may see increased activity, the real estate sector could experience slower turnover, with investors prioritizing stable rental income or capital appreciation over quick sales to avoid CGT liabilities. The long-term impact hinges on whether these tax shifts meaningfully alter asset allocation trends among Nigerian investors.
4. Effective Tax Rate (ETR):
The NTA introduces an ETR of 15% of net income of a company. This provision applies to companies with turnover exceeding ₦50 billion, and companies that are part of a multinational enterprise (MNE) group with an aggregate turnover of at least €750 million or its equivalent.
Impact:
The introduction of a 15% Effective Tax Rate (ETR) for large real estate firms (with turnover exceeding ₦50 billion) will significantly increase the tax burden for major developers and multinational investors, reducing their post-tax profits and potentially making REITs less attractive compared to tax-advantaged assets. This could lead to restructured investment strategies, with some multinational enterprises (MNEs) reducing FDI in high-value commercial real estate, while developers may shift projects to Free Trade Zones (FTZs) like Lekki (Lagos), Centenary City, Abuja Technology Village Free Zone (abuja) to avoid the tax. If large firms pass on the added costs, luxury and commercial property prices could rise, exacerbating affordability challenges. Meanwhile, mid-sized developers (below ₦50bn turnover) stand to benefit, gaining a competitive edge in residential real estate and potentially increasing their market share. Overall, the policy may reshape investment flows, favoring tax-efficient zones and smaller developers while potentially dampening high-end real estate growth.
5. Introduction of Development Levy:
The new 4% Development Levy under Section 59 of the NTA consolidates multiple existing levies into a single tax on assessable profits, excluding small companies (turnover ≤₦100m) and non-resident firms.
Impact:
For the real estate sector, this increases operational costs for large and mid-sized developers, potentially leading to higher commercial rents or squeezed profit margins, while exempting smaller players and giving them a competitive advantage. The levy may discourage large-scale and foreign-backed projects due to reduced returns, particularly in high-end and commercial segments. However, it simplifies compliance by replacing fragmented taxes. Overall, the policy could slow premium real estate growth but incentivize smaller developers and tax-efficient projects like affordable housing.
Conclusion
Nigeria’s comprehensive tax reforms under the Nigeria Tax Act (NTA) represent a bold step toward modernizing the fiscal system, but their impact on the real estate market will be nuanced. While measures like the small company tax exemption and rent relief aim to stimulate affordability and formalize rental markets, their effectiveness may be limited by structural challenges, particularly in high-cost cities like Lagos and Abuja, where rental prices dwarf proposed relief caps. The Capital Gains Tax (CGT) exemptions for equities could divert investment from real estate to stocks, reducing speculative flipping but potentially tightening housing supply. Meanwhile, the 15% Effective Tax Rate (ETR) and 4% Development Levy risk stifling large-scale and foreign-backed developments, pushing projects into free zones while favouring mid-sized and affordable housing developers.
For the reforms to achieve their goals, clarity in implementation (e.g., rent relief mechanics), enforcement against tax avoidance, and balancing incentives across sectors will be critical. The real estate sector may see a shift toward smaller developers, tax-efficient zones, and long-term holdings, but policymakers must address gaps such as the exclusion of homeowners and inadequate relief caps to ensure housing affordability and sustainable growth. Ultimately, these changes could reshape Nigeria’s property market, but their success hinges on adaptive strategies from investors and complementary policies to mitigate unintended consequences.
Sources: KPMG Nigeria, “The Nigeria Tax Act1 (NTA), 2025“
PwC Africa, “The Nigerian Tax Reform Acts: Top 20 changes to know and top 6 things to do” (June 2025)
The Punch, “Things to know about Nigeria’s new tax laws” (June 2025)
Leave a Reply