Nigeria’s New Tax Laws and the Limits of Administrative Power

Introduction: Reform Raises Old Legal Questions

The Nigeria Revenue Service (NRS) has issued formal notices to taxpayers announcing the commencement of the Nigeria Tax Act, 2025 (NTA) and the Nigeria Tax Administration Act, 2025 (NTAA), with effect from 1 January 2026. The notice, intended to provide “clarifications for ease of compliance and transition”, instead raises fundamental legal questions about the temporal application of tax laws, the scope of administrative authority, and the continued relevance of settled judicial principles. At the heart of the controversy is whether the NRS can, through administrative guidance, apply a new tax regime to income and transactions that arose before the commencement of the legislation.

Year of Assessment Versus Year of Income

The notice states unequivocally that “income tax returns due for filing in the 2026 Year of Assessment shall be prepared, filed, and assessed in accordance with the provisions of the NTA and NTAA.” On its face, this appears administratively tidy. In law, however, it is far from straightforward. For upstream petroleum companies, the year of assessment coincides with the year of income (i.e. actual year basis of assessment). For all other companies, Nigeria operates a preceding-year basis of assessment. Consequently, income reported in the 2026 Year of Assessment for non-upstream companies relates to profits earned in the 2025 financial year, at a time when the NTA and NTAA were not in force.

Requiring taxpayers to compute 2025 income under a legal regime that only commenced on 1 January 2026 amounts, in substance, to retroactive taxation.

The Presumption Against Retroactivity in Tax Law

Nigerian courts have long held that statutes are presumed to operate prospectively unless the legislature clearly provides otherwise. This presumption is particularly strong in tax law, where statutes impose compulsory financial burdens. In Uwaifo v. Attorney-General, Bendel State and Attorney-General of the Federation v. Abubakar, the Supreme Court cautioned against interpretations that retrospectively alter substantive rights or liabilities. Nothing in the NTA or NTAA expressly authorizes the retrospective application of income tax provisions to profits earned before their commencement. In the absence of such language, administrative notices cannot lawfully supply what the legislature has withheld.

The Accugas Case: A Direct Judicial Answer

This issue is not novel. In Accugas Limited v. Federal Inland Revenue Service, the Tax Appeal Tribunal was confronted with an argument strikingly similar to the one now implicit in the NRS notice. The tax authority contended that because an amended tax law (Finance Act, 2019) was in force in the relevant Year of Assessment, it should apply to income earned in an earlier accounting period. The Tribunal rejected that argument in clear terms. It held that for companies assessed on a preceding-year basis, tax liability is governed by the law in force during the year the income was earned, not the year in which the assessment is made. The Year of Assessment, the Tribunal explained, is an administrative construct; it cannot be used as a legal mechanism to impose new tax rules on prior-year income. On appeal, the Federal High Court affirmed this reasoning, giving it binding judicial weight. The lesson from the Accugas case is unmistakable: the timing of assessment cannot override the timing of income. Against this backdrop, the directive that 2026 YOA returns must be assessed under the NTA and NTAA “irrespective of the actual filing date” sits on legally fragile ground for non-upstream taxpayers.

Read more: The Limits of Regulatory Authority and the Imperative of Legislative Clarity

Transactional Taxes: A Selective Temporal Approach

The NRS notice adopts a different approach for transactional taxes. It states that the provisions of the NTA and NTAA shall apply to VAT, Stamp Duties and Withholding Tax “in respect of transactions occurring on or after 1 January 2026”. This is orthodox and uncontroversial. Transactional taxes attach to discrete events, and the applicable law is the law in force at the time the transaction occurs. The notice further preserves the validity of all VAT actions lawfully undertaken before 31 December 2025, including filings, assessments, payments and credits. This saving provision implicitly recognizes that the new law cannot disturb completed transactions.

The difficulty arises when this logic is not consistently applied across the tax system.

Capital Gains: An Important but Telling Concession

The notice expressly provides that chargeable gains arising from disposals between 1 January 2025 and 31 December 2025 “shall be assessed and filed in accordance with the provisions of the repealed Capital Gains Tax Act”. Only disposals occurring on or after 1 January 2026 are brought under the new regime. This concession is significant. It acknowledges that capital gains crystallize at the point of disposal and must be governed by the law in force at that time. It also acknowledges, implicitly, that applying the new law to 2025 disposals would be impermissibly retrospective. Yet this creates an immediate tension with the broader directive on income tax for the 2026 Year of Assessment.

Read more: One Law, Two Scripts: Navigating the Material Discrepancies in the Nigeria Tax Act 2025 - Eben Joels

Capital Gains as Income: A Structural Conflict

One of the most far-reaching reforms introduced by the NTA is the integration of capital gains into income tax computations. Under the new regime, chargeable gains from 1 January 2026 form part of total profits for income tax purposes. This reform makes the NRS’s transitional position even more delicate. The notice states that “income tax returns due for filing in the 2026 Year of Assessment shall be prepared, filed, and assessed in accordance with the provisions of the NTA and NTAA”. For non-upstream companies, the 2026 YOA relates to 2025 income. This would, in effect, require taxpayers to apply the new law to 2025 profits (except for capital gains, which are preserved under the old law). The result is a selective temporal application: one part of a company’s income (capital gains) is governed by the old statute, while the rest (ordinary profits, other transaction taxes) falls under the new law, all within the same assessment year. Nigerian courts, including in Accugas Ltd v. FIRS, have consistently rejected such selective retroactive application, holding that tax liability is determined by the law in force at the time income is earned, not by the year of assessment. In short, the NRS notice recognizes the impossibility of retroactively reclassifying capital gains yet attempts to do so implicitly for all other income in the same period, creating a legal and administrative contradiction that cannot be ignored. Tax law does not support such selective temporal logic. A single transaction carried out in 2025 cannot, as a matter of principle, be partly governed by repealed legislation and partly by new legislation absent explicit statutory direction.

The Limits of Administrative Guidance

Courts have consistently held that administrative circulars and notices cannot impose tax obligations beyond what the statute authorizes. In Attorney-General of the Federation v. Nigeria LNG Limited and FBIR v. Halliburton (WA) Ltd, the courts emphasized that tax liability arises strictly by operation of law, not by administrative convenience. The NRS notice, however well-intentioned, cannot override the statutory presumption against retroactivity or displace binding judicial authority, including the Accugas decision”.

A Safer Path Forward

A legally coherent transition would be to apply the NTA and NTAA prospectively to income and gains arising from financial years beginning on or after 1 January 2026. For non-upstream companies, this would mean that the 2026 Year of Assessment, which relates to 2025 income, remains governed by the repealed laws, with the new regime fully taking effect from the 2027 Year of Assessment. Such an approach would align administrative practice with judicial precedent, preserve taxpayer certainty, and protect the credibility of Nigeria’s ambitious tax reform agenda. A tax system that commands respect and compliance is one that is predictable, transparent and anchored in the rule of law. Nigeria’s tax reform agenda will be best served by ensuring that these principles are not sacrificed in the rush to implementation.