As Nigeria hurtles toward 2025, a tidal wave of new tax proposals is rolling through the corridors of power in Abuja, setting the stage for what some might call a fiscal revolution — or rebellion, depending on which side of the balance sheet you stand. Four tax reform bills currently before parliament have one unifying mantra: “Tax all the taxable.” For Nigerian businesses, particularly the nascent tech startups, the proposed tax bills could signal a seismic shift in how they operate, fundraise, and, ultimately, survive. The government’s motivation is clear: with oil revenues dwindling and a tax-to-GDP ratio stuck at a paltry 6%, Nigeria needs new streams of revenue.

The centerpiece of this legislative overhaul is the Nigeria Tax Bill, 2024, which spares no detail in its ambition to leave no coin untapped. From corporate profits earned abroad to dividends, joint ventures, and even foreign investments, the bill aims to create a tax regime that is both expansive and precise. But while the Nigerian government sees these tax measures as essential to closing fiscal gaps, businesses — especially tech startups — view them with a mix of trepidation and disbelief.

Unpacking the Nigeria Tax Bill, 2024

The Nigeria Tax Bill, 2024, is a masterpiece of legal thoroughness, sparing no taxable entity from scrutiny. Key provisions include:

Corporate Profits Are Always Taxable

• Nigerian companies must pay taxes on profits wherever they arise, even if the income never touches Nigerian soil. The government deems these profits “Nigerian” regardless of where they are earned or kept.
• For multinational companies, the bill introduces a “top-up” mechanism: if a foreign subsidiary pays less than Nigeria’s minimum effective tax rate (15%), the Nigerian parent company must bridge the gap.

Dividend Taxation Tightens

• Dividends declared out of untaxed profits are no longer safe. Companies must now pay taxes on these dividends as though they were their entire profit for the fiscal year.
• Non-resident recipients of such dividends aren’t exempt, further expanding the tax base.

Non-Residents, Welcome to the Tax Net

• Foreign individuals or companies with a “significant economic presence” in Nigeria will now face tax obligations. This includes income derived from assets located in Nigeria or deemed to be Nigerian by law.
• Gains from selling shares in Nigerian companies — especially when they alter ownership structures — are now taxable.

Joint Ventures and Partnerships

• Profits from joint ventures or partnerships will be taxed separately for each participating entity, whether they are Nigerian residents or foreign investors.

VAT Increases

• Value Added Tax (VAT) is set to rise incrementally: from 10% in 2025 to 12.5% by 2026, and eventually hitting 15% in 2030. While this aligns with international benchmarks, businesses brace for its inflationary ripple effects.

Relief Mechanisms Exist — But with Conditions

• Double taxation relief is available for Nigerian residents taxed abroad, but only if the income is repatriated through “government-approved channels.”
• Small companies remain exempt from corporate tax, providing a buffer for early-stage startups.

Implications for Tech Startups

Nigeria’s tech ecosystem, the darling of the country’s diversification strategy, sits at a precarious crossroads. Here’s how these reforms could impact them:

1. The Compliance Conundrum

Tech startups often operate across borders, juggling revenue streams from multiple jurisdictions. The new provisions demand a level of tax compliance that might overwhelm lean teams. Startups will need to invest heavily in legal and financial expertise to navigate these requirements.

2. Foreign Investors May Think Twice

Nigeria has been a magnet for venture capital, but the tax bill introduces uncertainties:

• Gains from equity sales are taxable, potentially reducing the allure of Nigerian startups for investors seeking clean exits.
• Dividend taxation, particularly on untaxed profits, further complicates return-on-investment calculations.

3. Complications for Multinationals

Startups affiliated with foreign entities or those with cross-border operations face the additional headache of reconciling Nigerian tax obligations with international business structures. Ensuring compliance without breaking the bank on legal and accounting fees will be a challenge.

4. Rising Operational Costs

Higher VAT rates and mandatory top-up taxes will increase the cost of doing business. Startups may need to pass on these costs to consumers, risking demand in an already price-sensitive market.

5. Early-Stage Startups Catch a Break

The 0% corporate tax rate for small companies offers some relief to fledgling startups. However, this exemption disappears as businesses grow, adding pressure during critical scaling phases.

Government’s Rationale: Plugging the Gaps

For the Nigerian government, these reforms are about necessity, not choice. Officials argue that with oil revenue unreliable and debt servicing consuming significant portions of the budget, broadening the tax base is imperative.

The logic is clear, but critics worry about unintended consequences. Will the drive to tax everything — from digital services to foreign investments — end up stifling economic growth?

For startups, the government’s “tax-all-the-taxable” mantra feels like a grudging acknowledgment of their success. After years of being called the future of Nigeria’s economy, they now find themselves the star players on the tax collector’s radar. Meanwhile, for the government, it’s a win-win: businesses that comply will bolster revenues; those that struggle can always be labeled as lacking patriotic commitment.

Any Strategies for Survival?

Nigerians, not just tech startups, aren’t taking these reforms lying down. Advocacy groups are already lobbying for sector-specific exemptions and deletions. Internally, companies are exploring ways to adapt:

• Restructuring operations to minimize exposure to cross-border tax liabilities.
• Leveraging the small company tax exemption during early growth stages.
• Prioritizing local partnerships to reduce international tax complexities.

A Defining Year for Nigeria’s Economy

The Nigeria Tax Bill, 2024, is ambitious — some might say audacious. Whether it transforms Nigeria’s fiscal landscape or overwhelms its most innovative industries remains to be seen. For now, startups face a new reality: innovation alone isn’t enough; compliance, efficiency, and resilience will determine their survival.

As 2025 dawns, the Nigerian tech community stands at a crossroads, calculators in hand, poised to navigate a tax regime that, much like their own products, promises to be disruptive. The only question is whether this disruption will lead to growth — or retreat.