The recently enacted Nigeria Tax Act 2025 has introduced sweeping reforms aimed at closing loopholes in tax evasion, with provisions that empower authorities to recover outstanding taxes from businesses even after liquidation.
A key provision, Section 24, mandates that companies which cease operations must settle any outstanding tax liabilities within six months of their closure. More significantly, the law extends the tax net to cover incomes or payments received after cessation — including post-liquidation receipts — requiring disclosure to tax authorities within one month of receipt.
According to the Act:
“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… receivers or liquidators receive or pay any sum… such sum shall be deemed… to have been received or paid… on the last day before such cessation occurred… and shall be disclosed… within one month.”
This means tax authorities can now pursue business promoters even after their enterprises are dissolved, significantly impacting exit strategies for investors and entrepreneurs.
Other Key Changes in the Act
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Partnership Transitions (Section 25): Moving between partnerships in the same line of trade will no longer be treated as starting or ending a business, eliminating previous compliance burdens for professional service providers.
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Employment Income (Section 26): Irregular payments such as large bonuses or commissions will now be taxed on a cash basis when paid, instead of on accrual. This could benefit employees’ cash flow but will require payroll adjustments by employers.
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Capital Gains Tax: Gains from asset disposals will be assessed using the preceding-year rule for most assets, including business-use assets, creating a uniform standard.
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Estate Taxation: For deceased individuals, any payments or receipts after death will be deemed to have been received by the deceased on the day before passing. This offers clarity for estate management but could increase tax exposure on inheritances.
The reforms, hailed as a major step in Nigeria’s fiscal modernization, are expected to strengthen compliance, widen the tax net, and increase government revenue. However, they may also pose new challenges for businesses looking to exit the Nigerian market.
