The newly passed Nigeria Tax Act 2025 has tightened tax evasion provisions, enabling authorities to compel corporate entities to pay outstanding tax obligations on incomes received after the business was liquidated.
Under Section 24, businesses that cease operations in Nigeria may still pay their tax obligations six months after their corporate existence ends.
The legislation also introduces stringent post-liquidation disclosure requirements, mandating businesses to notify tax authorities within one month of receiving any sum that should have been included in pre-cessation profits.
“Where a trade, business, profession or vocation permanently ceases to carry on operations in Nigeria in an accounting period, the assessable profits for the relevant year of assessment shall be the amount of the profits from the beginning of the accounting period to the date of cessation and the tax shall be payable within six months from the date of cessation.
“Where, after the date of cessation, the trade, business, profession or vocation or its receivers or liquidators, receive or pay any sum, which ought to have been included in or deducted from the profits of that trade or business if it had been received or paid prior to that date, such sum shall be deemed for the purpose of this Act to have been received or paid by the trade, business, profession or vocation on the last day before such cessation occurred and such sums shall be disclosed to the relevant tax authority within one month of the receipt or payment,” the section states.
This extends Nigeria’s tax reach beyond operational periods, potentially complicating exit strategies for business promoters who would want to exit the economy with tax obligations.
It also suggests that tax authorities would go after business promoters even after their enterprises are liquidated for the purpose of collecting taxes that were unreported during the life of their businesses.
For individuals changing business partnerships, section 25 provides relief, clarifying that moving between partnerships in the same trade does not constitute cessation or commencement of business.
This addresses a grey area that had previously created unnecessary compliance burdens for professional service providers.
Employment income provisions under section 26 now treat irregular payments differently, with bonuses and commissions exceeding monthly intervals deemed taxable on payment dates rather than accrual dates.
This shift from accruals to cash basis treatment as irregular payments could provide cash flow advantages for employees but requires adjusted payroll planning for employers.
Capital gains taxation also sees refined timing rules, with chargeable gains from asset disposals assessed based on the year preceding the assessment year, except for business-use assets, which follow the same preceding-year rule. This creates uniformity that was previously absent.
The Act’s treatment of deceased individuals’ estates under section 24(4) establishes that post-death receipts or payments are deemed received by the deceased on the last day before death, providing clarity for estate administration.
But it potentially increases tax obligation on inheritances.
