FIRS Says 4% Development Levy Is Merger of Existing Charges, Not New Tax

The Federal Inland Revenue Service (FIRS) has moved to calm public concerns over the controversial 4% Development Levy on imported goods, insisting that the charge is not an additional tax but a consolidation of several levies already in place.

In separate statements reacting to growing criticism of the new Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA), the agency said most of the anxiety around the reforms stems from misinterpretation. It explained that the levy merges previously separate payments such as the Tertiary Education Tax, NITDA Levy, NASENI Levy and the Police Trust Fund Levy.

According to the Service, bringing these charges under one umbrella is meant to simplify compliance, reduce the unpredictability businesses face, and eliminate the era of multiple agencies imposing different levies on companies. Small businesses and non-resident firms are exempted from the new structure.

The clarification comes as businesses and individuals express worry that the tax reforms taking effect from January 2026 could increase their financial burden. FIRS, however, insists that the changes are designed to strengthen Nigeria’s competitiveness and promote a more predictable fiscal environment.

A significant portion of public concern has centred on free trade zones (FTZs), with some analysts suggesting that the government was reducing long-standing incentives. But FIRS said the reform maintains the tax-exempt status of FTZ operators. Companies in the zones will now be able to sell up to 25% of their output in the domestic market without losing exemptions, and a three-year transition window has been introduced to ease adjustment. The agency said the move also prevents abuse, where some companies used FTZ licences to evade taxes while competing locally.

On the global minimum tax requirement, the agency reiterated that the introduction of a 15% minimum effective tax rate (ETR) for large multinational and domestic companies aligns Nigeria with international standards agreed by over 140 countries under the OECD/G20 framework. Without implementing it, Nigeria risked losing revenue to the “top-up tax” mechanism that allows foreign governments to collect additional tax from their companies operating in countries with lower rates.

The reforms also introduce an updated approach to capital gains—now termed chargeable gains—with several incentives aimed at stimulating investment. Among them is a reinvestment relief that exempts investors from tax on gains if proceeds from share sales are reinvested in another Nigerian company within the same year. The rules also modernise how losses are treated, exempt low-value transactions to shield small investors and close loopholes that allowed companies disguise business income as capital gains.

Government officials maintain that the new tax laws aim to create a coordinated and transparent system that boosts investor confidence, safeguards incentives and supports long-term fiscal stability.