•Federal Government allocated 10%, states 55%, local governments 35%
•Defines “derivation” as the place of consumption
•Approves establishment of Tax Appeal Tribunal
•Renames Federal Inland Revenue Service (FIRS) to Nigeria Revenue Service (NRS), with a new Executive Vice Chairman
•Tax agency granted 2% cost of collection
The Senate has successfully passed the Nigeria Revenue Service (Establishment) Bill, 2025, and the Nigeria Tax Administration Bill, 2025, in a recent plenary session.
This legislative progression came after a thorough presentation and review by the Senate Committee on Finance. The Senate retained the current 7.5% Value Added Tax (VAT) collected from consumers, confirming that the federal government will receive 10% of total tax revenue, while states and local governments will obtain 55% and 35%, respectively.
The bills define “derivation” clearly, establishing that VAT is to be allocated to the state where consumer goods and services are utilized.
Additionally, the Senate sanctioned the formation of a Tax Appeal Tribunal and approved the rebranding of FIRS to NRS. The new structure will feature a board of directors led by a non-executive Chairman, while the chief executive will hold the title of Executive Vice Chairman.
Moreover, the Senate endorsed a 2% operational cost for the NRS, applicable to revenue collected from both oil and non-oil sectors. The funding for the Tax Appeal Tribunal will be sourced from the Consolidated Revenue Fund, as appropriated by the National Assembly.
The legislation aims to enhance the qualifications for Tax Appeal Commissioners, ensuring efficient and credible resolution of tax disputes, while expanding the tribunal’s jurisdiction to encompass all federal and state tax legislation.
In addition, the Senate established the Office of the Tax Ombud, which will also be financed through the Consolidated Revenue Fund.
The Senate rejected a controversial provision from the finance committee concerning the disclosure of institutional information, deeming it draconian and self-serving.
Beneath the establishment of the NRS lies a commitment to providing a robust framework for tax administration and revenue management, designed to incentivize economic growth.
The NRS will assess tax liabilities for individuals and corporations and will work with pertinent government agencies to revise tax regimes, aiming to stimulate economic activity and combat tax fraud.
The new structure emphasizes a transparent appointment process for executive directors, ensuring representation from all geopolitical zones while maintaining a diverse board.
Lastly, the proposed bill outlined specific penalties for tax-related violations, emphasizing accountability and reinforcing the integrity of Nigeria’s tax system.
