Nigeria’s new Tax Laws and the limits of retroactive application

The new tax laws, Nigeria Tax Act (NTA) 2025 and Nigeria Tax Administration Act (NTAA) 2025, took effect on January 01, 2026. While these reforms promise to modernise the tax system and improve compliance, a recent notice issued by the Nigeria Revenue Service (NRS) to taxpayers raises important legal questions about whether the government can apply the new rules to income and profits earned before the laws were enacted.

Year of Assessment vs. Year of Income

The NRS notice instructs that income tax returns for the 2026 year of assessment (YOA) be prepared under the new laws. For upstream petroleum companies, whose assessment year coincides with the year of income, this poses no challenge. But for most other companies, the 2026 YOA relates to profits earned in 2025, when the NTA and NTAA were not yet in force.

In practice, this means the government is asking businesses to compute income tax for the 2025 financial year under laws that only came into force in 2026, effectively applying the law retroactively. This is legally controversial because Nigerian courts have consistently held that tax statutes are presumed to operate prospectively unless the legislature clearly states otherwise.

Lessons from Accugas Ltd v. FIRS

The issue is not new. In Accugas Ltd v FIRS, the Tax Appeal Tribunal rejected an argument that an amended tax law could apply to income earned in a previous accounting period. The Federal High Court upheld this decision, confirming that tax liability is determined by the law in force when income is earned, not by the administrative year of assessment. This precedent is highly relevant: while the NRS notice seeks to streamline filing for 2026, it risks conflicting with established judicial principles for non-upstream companies.

Transactional taxes: A consistent 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 January 01, 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 December 31, 2025, including filings, assessments, payments and credits. This saving provision implicitly recognises that the new law cannot disturb completed transactions. The difficulty arises when this logic is not consistently applied across the tax system.

Capital gains: A telling concession

Interestingly, the notice preserves the old capital gains tax act for disposals between January 01, 2025 and December 31, 2025. This recognises that capital gains crystallise at the time of disposal and cannot be retroactively reclassified under the new law. Yet, under the NTA, capital gains from 2026 onwards are integrated into income tax computations.

The result is a selective application: for the 2026 YOA, ordinary profits from 2025 would fall under the new law, while capital gains from the same period remain under the old law. Courts have consistently rejected such partial retroactivity, emphasising that tax obligations cannot be split between old and new laws without explicit legislative direction.

Limits of administrative guidance

Nigerian courts, including the Attorney-General of the Federation v. Nigeria LNG Limited and FIRS v. Halliburton (WA) Ltd, have affirmed that administrative notices cannot impose obligations beyond what the statute allows. In other words, tax liability arises by operation of law, not administrative convenience.

A safer path forward

A legally coherent and fair approach would be to apply the NTA and NTAA prospectively to income and gains arising in financial years from 1 January 2026. For non-upstream companies, this means the 2026 YOA (covering 2025 profits) remains under the repealed laws, while the new tax regime fully applies from the 2027 YOA.

Such an approach preserves predictability, transparency, and fairness that the National Tax Policy expressly seeks to promote, ensuring taxpayer confidence while safeguarding the credibility of Nigeria’s tax reform agenda. Retroactive application may seem administratively convenient, but it risks legal challenges and long-term uncertainty.

 

Victor Athe; Tax partner, Stransact.