New Tax? FG Clarifies on 4% Development Levy on Imported Goods, Nigerians React
- There seems to be a debate raging among Nigerians following the announcement of a 4% Development Levy on imported goods
- However, the Federal Inland Revenue Service (FIRS) has issued clarification on the levy on products
- The levy, which most Nigerians tagged new, is chargeable on imported products and is different from Customs duty
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
The Federal Inland Revenue Service has moved to calm rising concerns over Nigeria’s new tax laws, explaining that the much-debated 4 percent Development Levy on imported products is not a fresh charge.
Instead, it’s a consolidation of several pre-existing levies that businesses were already paying in separate streams.
Source: UGC
Development levy: Consolidation of existing charges
The clarification comes as the Nigeria Tax Act and the Nigeria Tax Administration Act continue to spark debate across the country.
Many individuals and companies have been seeking answers on whether the reforms will increase the cost of doing business or slow down imports.
According to government officials, the policies are designed to strengthen competitiveness, attract investment and ensure long-term fiscal stability.
According to the FIRS, the 4 per cent levy has been widely misunderstood. It replaces multiple charges from different agencies, including the Tertiary Education Tax, NITDA Levy, NASENI Levy and the Police Trust Fund Levy.
Before now, businesses often struggled with overlapping bills, uneven enforcement and rising compliance costs.
By merging these old levies into a single unified charge, the government believes it has created a more predictable fiscal space.
The agency adds that small businesses and non-resident companies are exempt, a move designed to shield the most vulnerable firms from economic pressure.
Tax analysts say this shift signals a broader effort to simplify Nigeria’s revenue systems, reduce red tape and communicate a more organised investment environment to global capital markets.
Free trade zones retain incentives under new rules
Another major concern was the future of Free Trade Zones. There were fears that the government was rolling back incentives that have drawn exporters into Nigeria for decades.
The FIRS says this is not the case. FTZ enterprises remain tax-exempt, with new rules introduced only to tighten oversight and curb misuse.
Companies operating within the zones can now sell up to 25 percent of their output into the domestic economy without losing tax benefits.
A three-year transition period is also in place to help affected firms adjust. Officials say these measures bring Nigeria in line with FTZ models used in the UAE and Malaysia, where zones serve as export-driven hubs for manufacturing, logistics and technology.
Minimum effective tax rate and global standards
The introduction of a 15 percent minimum Effective Tax Rate for large companies initially triggered strong reactions, but the FIRS says the policy aligns with global tax reforms endorsed by more than 140 countries under the OECD and G20 framework.
Without adopting this rule, Nigeria risked losing critical revenue to other jurisdictions through a system known as Top-Up Tax.
This allows the home country of a multinational to collect extra tax if the host country charges below the 15 percent threshold. By applying the rule domestically, Nigeria retains the revenue it would have otherwise forfeited.
The ETR also applies to big local companies to ensure fairness and discourage profit-shifting practices that distort the tax system.
New rules for chargeable gains, investment mobility
Capital gains taxation has been overhauled and renamed “chargeable gains” under the new law.
The updated framework comes with incentives aimed at helping investors and expanding capital mobility.
One of the most notable is the reinvestment relief, which allows anyone who sells shares and reinvests the proceeds into another Nigerian company within the same year to avoid paying gains tax.
Experts say this could boost funding for startups, private equity groups and emerging businesses.
According to a BusinessDay report, the law also protects small investors by exempting low-value transactions and updating capital loss rules.
At the same time, it closes loopholes that previously let firms mask business income as capital gains to reduce their tax liability.
A more predictable tax environment
Taken together, the reforms seek to introduce structure and clarity into Nigeria’s tax landscape.
Government officials maintain that the new system will build investor confidence, support industrial growth and create a sustainable revenue stream for national development without adding unnecessary burdens on citizens or businesses.
However, Many traders and importers have criticised the levy, stating that after suspending the controversial Free-on-Board (FOB) levy, the government is coming through the back door with the Development Levy.
John Okechukwu, an importer decried the levy, stating that it is putting unnecessary burden on Nigerians.
Source: Facebook
“I thought this government wanted to harmonise taxation and eliminate multiple taxes. This new levy is a huge burden on importers and Nigerians,” he said.
Another importer, Harrison Ibeh, said the new levy is not different from the suspended FOB charge.
“When you defeat the government in one argument, they go through another channel to introduce the same thing you rejected. The Development Levy will affect Nigerians and importers,” he said.
What Nigerians must know about TINs on personal accounts
Legit.ng earlier reported that the government has clarified that Tax Identification Numbers (TINs) are not required for strictly personal bank accounts under the new tax reforms.
TINs become mandatory only when an account is used for business transactions, the Presidential Committee on Fiscal Policy and Tax Reforms confirmed.
Chairman Taiwo Oyedele explained that authorities can detect business activity in personal accounts through Bank Verification Number (BVN) patterns, urging individuals to conduct self-assessment.
Don't miss out! Join Legit.ng's Sports News channel on WhatsApp now!
Source: Legit.ng
