Jtax Consult

1. Introduction

The Nigerian tax landscape has undergone fundamental transformation following the enactment of the Nigeria Tax Act 2025 (NTA 2025) and its accompanying legislation, including the Nigeria Tax Administration Act (NTAA 2025) and the Nigeria Revenue Service (Establishment) Act 2025 (NRSEA 2025), which replaced the former FIRS with the newly established Nigeria Revenue Service (NRS). These statutes were signed into law on 26 June 2025, marking the most comprehensive overhaul of tax administration in recent Nigerian history. [adesanyapartners.com]

However, in early 2026, the NRS issued administrative notices directing Corporate Taxpayers to compute returns for the 2026 Year of Assessment (YOA) based on the provisions of the new Acts, even though such returns relate to 2025 financial year. This directive suggests the retrospective application of the NTA and NTAA. [stransact.com]

See below the intended application:

a. Application to Transactional Taxes

The provisions of the NTA and NTAA shall apply to transactional taxes—including Stamp Duties, Value Added Tax (VAT), and Withholding Tax—for transactions occurring on or after 1st January 2026.

b. Validity of Pre‑Commencement VAT Actions

All actions lawfully undertaken under the repealed VAT Act on or before 31st December 2025—including filings, assessments, payments, and credits—shall remain valid and effective. These actions are preserved and shall be recognised for purposes of income tax filings in 2026 under the NTA and NTAA.

c. Income Tax Returns for 2026 Year of Assessment

Income tax returns due for the 2026 Year of Assessment shall be prepared, filed, and assessed in accordance with the provisions of the NTA and NTAA, regardless of the actual filing date in 2026 or thereafter.

d. Treatment of Chargeable Gains – Transitional Period

Chargeable gains arising from the disposal of chargeable assets between 1st January 2025 and 31st December 2025 shall be assessed and filed under the provisions of the repealed Capital Gains Tax Act.

e. Treatment of Chargeable Gains from 1st January 2026

Chargeable gains from disposals occurring on or after 1st January 2026 shall be subject to the provisions of the NTA and NTAA, and such gains shall form part of total profits for income tax purposes.

The position on Income Tax Returns for 2026 Year of Assessment appears to contradict earlier statements by members of the government’s Fiscal Review Committee, who emphasized the prospective nature of the reforms and assured taxpayers that the new tax regime would not be applied to transactions predating its commencement.

This article evaluates the pros, cons, and legal implications of applying the NTA 2025 retrospectively to 2025 financials.

2. Context: What the NRS Notice Says

According to the NRS notice analyzed in February 2026 commentary, the Service expressly stated that “income tax returns due for filing in the 2026 Year of Assessment shall be prepared, filed, and assessed in accordance with the NTA and NTAA.” [stransact.com]

This instruction interacts differently with various groups:

• Upstream petroleum companies: Nigeria uses an actual-year basis, so 2026 YOA relates to 2026 income.
• All other companies: Nigeria uses a preceding-year basis, so 2026 YOA relates to 2025 income.

Thus, for the overwhelming majority of companies, 2025 income—earned before 1 January 2026—would be assessed under laws that were not in force when the income was generated.

This raises both constitutional and administrative law issues.

3. Why the Issue Matters: The Presumption Against Retroactive Fiscal Obligations

Nigerian courts have repeatedly held that statutes particularly tax statutes cannot apply retrospectively unless expressly stated by the legislature. Key decisions such as Uwaifo v. Attorney-General, Bendel State and Attorney-General of the Federation v. Abubakar affirm that tax legislation must be construed strictly and cannot alter liabilities arising before their enactment unless Parliament clearly provides for such retroactivity. [stransact.com]

Nothing in the NTA or NTAA expressly authorizes retrospective operation.

This places the NRS notice in potentially direct conflict with:

• Legislative intent (since the Acts specify no retroactive clause),
• Judicial precedent,
• Constitutional protections for taxpayers.

4. Pros of Applying the NTA 2025 to 2025 Financials

Although controversial, several administrative, fiscal, and policy-driven benefits might motivate the NRS’ stance.

4.1 Administrative Simplicity and Uniformity

Applying the new law for the 2026 YOA regardless of the year of income—creates cleaner administrative lines and reduces transitional issues.

• The NTA 2025 consolidates a sprawling framework of previously separate acts such as CITA, VAT Act, Stamp Duties Act, and others. [shqlegal.com]
• A uniform YOA cut oversimplifies compliance monitoring and reduces system integration challenges at the newly established NRS.

This administrative uniformity could help facilitate more seamless implementation of the ambitious national tax reforms, which aim to modernize and harmonize Nigeria’s tax administration. [adesanyapartners.com]

4.2 Increased Revenue Generation Potential

Nigeria’s tax reforms, including the introduction of new levies (e.g., the Development Levy) and increased CGT rates, were explicitly intended to boost government revenue. [pwc.com]

Retroactive application may temporarily increase government receipts during the transition by subjecting 2025 profits to:

• Higher CGT rates (from 10% to 30%) for companies, [pwc.com]
• The new Development Levy at 4% of assessable profits, [pwc.com]
• Application of 15% Effective Tax Rate, will be a major financial shock for Tax Payers
• Broader tax bases under consolidated rules.

Given Nigeria’s urgent fiscal needs and budget deficits, this could be seen as an attractive short‑term revenue measure.

4.3 Supporting the Broad Reform Objective of Harmonization

The NRSEA 2025 seeks to centralize revenue collection and resolve structural inefficiencies in the prior multi-agency system. [adesanyapartners.com]

A clean transition from all old tax laws to the new consolidated NTA framework—beginning immediately with the first applicable YOA—might align more strongly with the political and policy mandate for reform consistency.

5. Cons of Retrospective Application

Despite the potential administrative or fiscal reasoning, the disadvantages—especially legal risks—are substantial.

5.1 Violation of the Constitutional Presumption of Prospectivity

As established under Nigerian jurisprudence, taxpayers cannot be bound by tax laws that were not in force at the time the taxable event occurred, unless explicitly provided by legislation.

The NTA and NTAA contain no provisions authorizing retrospective enforcement. [stransact.com]

Thus, the NRS circular risks being ultra vires, i.e., outside its legal authority.

5.2 Breach of Legitimate Expectation

Statements from government officials, including members of the Fiscal Review Committee, suggested a prospective application. Retroactive application:

• Violates taxpayer expectations,
• Undermines trust in administrative assurances,
• Contradicts Nigeria’s stated intent to create a stable fiscal environment to attract investment. [shqlegal.com]

5.3 Exposure to Litigation and Administrative Disputes

The Tax Appeal Tribunal has ruled on a similar issue in Accugas Limited v FIRS, where the tribunal held that a tax amendment could not apply to income earned in a year prior to the amendment’s commencement date. [stransact.com]

This case directly parallels the current NRS directive.

If the NRS proceeds with retrospective enforcement, affected companies are likely to:

• Challenge assessments at the TAT,
• Seek judicial review for invalid administrative action,
• Argue breach of constitutional protections and statutory interpretation norms.

5.4 Increased Compliance Costs and Operational Confusion

Businesses have already prepared 2025 accounts under the old statutory framework. A sudden retrospective shift requires:

• Recomputing taxable profit,
• Redoing deferred tax calculations,
• Reassessing tax deductions or incentives that no longer exist under the new Act,
• Updating ERP and accounting systems already set for 2025.

These costs contradict the stated reform objective of reducing compliance burdens. [adesanyapartners.com]

5.5 Potential Conflict With International Investment Commitments

Nigeria’s tax reforms were partly designed to align with OECD BEPS and improve Nigeria’s investment climate. [shqlegal.com]

Retroactive taxation is viewed internationally as:

• An indicator of regulatory unpredictability,
• A deterrent to foreign direct investment (FDI),
• A breach of fair administrative practice.

This could undermine the credibility Nigeria seeks to build with multinational groups.

6. Legal Implications

The retrospective application of a tax law carries serious legal consequences in Nigeria.

6.1 Risk of the NRS Act Being Interpreted Narrowly

The NRSEA 2025 empowers the NRS to administer taxes but does not authorize it to expand temporal tax obligations. [irs.gm.gov.ng]

Thus, the NRS circular risks being struck down as exceeding administrative authority.

6.2 Conflict Between Administrative Guidance and Statutory Provisions

Administrative circulars cannot override Acts of Parliament.

Since:

• The NTA 2025 commenced on 1 January 2026, and
• Contains no express retrospective mandate,

               Any administrative attempt to apply it backwards is invalid.

Courts are likely to interpret the circular as an unlawful attempt to:

• Rewrite statutory commencement dates,
• Alter vested rights in existing financial periods,
• Create tax liabilities that did not exist at the time income was earned.

6.3 Potential for Judicial Declaration of Invalidity of Assessments

If taxpayers file challenges, the TAT—and potentially the higher courts—may:

• Nullify assessments made under the retrospective interpretation,
• Order refunds or credit adjustments,
• Issue judicial warnings limiting administrative powers.

This would echo the reasoning in Accugas v FIRS (Finance Act 2019 precedents). [stransact.com]

6.4 Implications for the Legitimacy of the Entire Reform Process

A central goal of the 2025 reforms was legal clarity and predictability. [adesanyapartners.com]

If the first major administrative action taken under the new regime is legally contentious:

• Taxpayers may question the NRS’ independence and professionalism,
• Confidence in the harmonized framework may weaken,
• Political critics may allege fiscal overreach.

7. Conclusion and Recommendations

The NRS directive requiring corporate taxpayers to compute 2025 financial-year profits using the NTA 2025 constitutes, in substance, retroactive taxation. This directly conflicts with Nigerian statutory interpretation principles, judicial precedents, and constitutional protections against retrospective financial burdens.

While the NRS may argue administrative convenience and uniformity, these benefits do not outweigh the substantial legal and economic risks. Retroactive application threatens investor confidence, increases compliance burdens, and exposes the NRS to protracted litigation.

Recommended Path Forward

1. Clarify Administrative Guidance
   The NRS should issue a revised circular affirming that the NTA 2025 applies prospectively, beginning with income earned from 1 January 2026.
2. Tax Payer also expect guidelines that is aligned with the law signed by the National Assembly, the fiscal committee has done us proud, NRS should avoid steps that can erode confidence of the Corporate Nigeria.
3. Transitional Provisions
   The Ministry of Finance should release formal transitional regulations to guide:
   • Deferred tax treatment,
   • Existing incentives,
   • Filing obligations for the first transitional year.
4. Stakeholder Engagement
   Reopening consultations with business groups, tax professionals, and multinational enterprises is essential to avoid disruptive interpretations.
5. Legal Safeguards for 2025 Financials
   Explicit legislative clarification possibly via amendment could prevent future disputes about temporal scope.