Need For SMEs To Leverage New Tax Regime

In a developed economy, Tax is the most prominent non-oil revenue spinner critical for infrastructural development.

The people are willing to pay because they can see amenities provided by their own governments through the tax they collects.  This brew trust in people to continue to pay tax, mostly at will. Hence, tax has been instituionalised, such that, evading it is a criminal offence that warrants jail terms.

But in developing economy like Nigeria, trust deficit has made tax collection an herculian task. People aren’t willing to pay tax, not because they don’t have the money to pay, but because, they still do not trust government to use the money judiciously, judging from antecedent.

Moreover, the current tax regime which ends this year, collects more from the poor than the rich. Hence, nano and small and medium enterprises (SMEs) face heavy and multiple taxations while some rich and big companies that ought to pay more aren’t, instead threatening with litigation.

However, a new dawn seems to be on the orison, especially, for SMEs, as some, who were paying taxes in the current regime, will no longer pay in the new regime. This is aside eradicating multiple taxation for businesses. In the end, it seems to be a win-win for SMEs.

The New Tax Regime

Nigeria’s new tax regime, established by four landmark bills signed into law by President Bola Tinubu in June 2025, represents a comprehensive overhaul of the country’s fiscal system. The new laws, most of which take effect from January 1, 2026, aim to simplify tax administration, expand the tax base to include high-net-worth individuals and the digital economy, and reduce the burden on low-income earners and small businesses.

Benefits To SMEs

No doubt, SMEs is the bedrock and engine room of the nation’s economy considering their widespread impacts on creation of jobs, poverty alleviation and economic growth.

However, as critical as they are, they continue to face harsh operating environment as they literarily had to provide everything for their businesses to survive. They had to fund the business with their personal savings, generates electricity, water and so on with less input from government. In the midst of these, they are still heavily taxed, in some instance, multiple taxation, despite some of them are struggling for survive.

However, the tax reforms Act 2025 seems to bring a ray of light to these economic actors, as it eradicates arbitrary taxation and multiple taxes.

The tax reform introduces graduated thresholds and simplified tax regimes that shield small businesses from excessive fiscal burdens.

Moreover, a business entity that generates less than N100 million annually are exempted from Corporate Tax, a big advantage to struggling SMEs.

Speaking at a briefing in Lagos recently, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Professor Taiwo Oyedele said, micro-enterprises are exempted from certain taxes, while small businesses benefit from reduced rates and simplified filing requirements. This approach, he said, recognises the reality of Nigeria’s business environment, where many enterprises operate with limited capital and informal structures. By lowering the cost of compliance, he noted that, the reform encourages businesses to formalise without fear of punitive enforcement.

Formalisation comes with tangible benefits. Registered SMEs gain access to credit, government procurement opportunities and structured business support. Over time, this strengthens enterprise resilience and contributes to sustainable job creation.

The adoption of digital tax platforms further enhances accessibility, enabling small businesses to file returns and make payments with minimal disruption. Collectively, these measures foster inclusive growth and strengthen the productive base of the economy.

With January 1st, 2026, the commencement date for the new tax reforms, moving closer, thousands of Nigerian businesses are now shifting to e-Invoicing, it was learnt.

Afri Invoice records shows uptick as businesses are now rushing to digitalise their invoicing systems before the Federal Inland Revenue Service (FIRS) new tax reforms come into force.

This shift will fundamentally change how business transactions are recorded and taxed across the country.

According to the founder and CEO of Afri Invoice, Mark Odenore: “As the new tax laws take effect, many Nigerian businesses will need to adapt their invoicing processes. At this critical juncture, we’re offering incentives to businesses that start their digital invoicing journey early.

“We understand the challenges of manual invoicing and tax compliance, and we want to support businesses in making this transition as smooth as possible, “ it pointed out.