"Taxes affect everyone, but these reforms could change how much you get to keep."
The Nigeria Tax Reform Bill is making headlines, promising to simplify how taxes are handled and collected across the country. For everyday Nigerians, this could mean changes to how much you pay on your income, what you spend on essentials, and how businesses handle their taxes.
For retail investors—whether you’re saving, buying stocks, or investing in property—these changes matter even more. Taxes shape how you grow your wealth, so understanding the possible changes to the existing bill is crucial.
In this article, we’ll break it down:
- What’s new in the Tax Reform Bill?
- How do these changes affect you and your investments?
- Simple steps to make the most of the reforms and protect your finances.
Let’s dive in and simplify what this all means for you.
What Could be Changing in Nigeria’s Tax Laws?
Reforms aim to make taxes fairer and easier to understand. Here are some key highlights:
Personal Income Tax (PIT): Good News for the Working Class
If you earn less than ₦800,000 a year, you no longer have to pay personal income tax. If you earn more, the tax system now works like this:
- Your first ₦800,000: No tax.
- The next ₦2.2 million: 15% tax.
- Earnings beyond that are taxed at increasing rates, with the highest being 25% for incomes above ₦50 million.
What this means for you: If you’re in the low-income bracket, you get to keep more of your money and possibly increase your disposable income for more savings and investments. For higher earners, the system is now fairer, with higher taxes for bigger incomes.
Business Taxes: Helping Small Businesses Thrive
Small businesses are getting a boost. If your company earns less than ₦50 million a year, you no longer need to pay company income tax (CIT). For bigger companies, the tax rate will drop from 30% to 25% over the next two years.
What this means for you: If you’re running a small business or investing in one, this creates room to reinvest profits and grow.
Simplifying Taxes for Everyone
Previously, businesses paid separate taxes like the education tax and National Agency for Science and Engineering Infrastructure (NASENI) levy. These will now be combined into a single 2% development levy.
What this means for you: This reduces confusion and makes filing taxes simpler, whether you’re a business owner or an investor with multiple income sources.
No VAT on Essentials
To ease the pressure of rising costs, especially on essential goods like food and healthcare, these will now be exempt from VAT. The government also shifted how VAT revenue is shared, with 90% going to states and local governments to benefit local services.
What this means for you: Everyday expenses like groceries and medical bills might become slightly more affordable.
How Does This Affect Retail Investors?
The reforms bring both opportunities and responsibilities for retail investors. Here’s how:
- Accountability is Key: If you’re earning money from dividends, rent, or selling shares, you’ll need to report your income properly. The reforms require everyone to have a Tax Identification Number (TIN), so make sure yours is up to date to avoid penalties.
- Smarter Investing: With these reforms, investments in government bonds (which are tax-exempt) are even more attractive. They help you earn without worrying about tax deductions.
- Easier Tax Filing: Thanks to technology-driven platforms, filing taxes and resolving disputes will now be faster and more straightforward.
What Should You Do Next?
If the Tax Reform Bill is passed, the above changes are here to stay, but they don’t have to overwhelm you. Here’s how you can take control:
- Learn About the Changes: Understand which taxes apply to you. For example, if you earn dividends from stocks, find out if they’re taxed and plan accordingly. Tools like LearnIN on the InvestNaija app make this simple.
- Invest Smartly: Focus on tax-efficient investments. Government bonds, tax-free savings, and structured funds can protect your income from heavy tax deductions.
Here’s a fun fact: In Nigeria, if you sell shares and earn over ₦100 million in a year, you can skip the 10% Capital Gains Tax by reinvesting the proceeds into new stocks within the same tax year. It’s a savvy way to keep your portfolio growing while staying tax-efficient!
- Automate Your Savings: Use tools like SaveIN to automatically set aside money for taxes or investments. This keeps you prepared and helps you avoid surprises.
The Good and the Challenging
These reforms bring plenty of benefits:
- Good for Low Earners: Many Nigerians will now keep more of their income.
- Easier for Businesses: Simplified taxes mean more time for growth.
But there are challenges too:
- More Oversight: Stricter monitoring means you’ll need to keep better records.
- Higher Fines: Mistakes in tax filings can lead to penalties, so staying organised is essential.
Conclusion: Stay Ahead, Stay Informed
The Nigeria Tax Reform Bill is a chance to rethink how you handle your finances. Whether it’s spending less on essentials or investing more wisely, these changes can work in your favour, if you’re prepared.
With InvestNaija, you can grow your wealth and make informed financial decisions.
Download the InvestNaija app today from the Apple App Store or Google Play Store and take control of your finances.
1 Comment
Thanks for this!