Businesses retain approved tax incentives under new tax framework

The Federal Government has assured businesses that tax incentives granted under repealed tax laws will remain valid until their expiration dates, a move experts say provides certainty for investors but raises fresh questions about the cost of tax waivers to public finances.

The clarification, contained in the newly released transition guidelines for the Tax Acts 2025, means companies already benefiting from incentives and exemptions approved under previous tax laws will continue to enjoy those benefits until they lapse, even as the new tax framework takes effect.

New and pending applications, however, will be assessed under the provisions of the new tax laws.

“The transition guidelines have added a layer of administrative clarity for taxpayers, revenue authorities, and practitioners across the board,” said Ruth Chukwu, an associate at G. Elias.

According to her, the guidelines make clear that existing tax incentives and exemptions granted under repealed laws remain valid until their expiration dates, while new applications and pending requests will be considered under the Tax Acts 2025.

The assurance addresses one of the key concerns surrounding the implementation of Nigeria’s tax reforms, particularly whether businesses that made investment decisions based on existing incentive regimes could lose those benefits before the end of their approved tenures.

“The development brings much-needed clarity on the continuity of approved incentives and reliefs, helping businesses plan compliance and reporting obligations with reduced regulatory uncertainty,” said Tobiloba Adeboye, a chartered accountant and tax professional.

The incentives issue remains significant because of the scale of revenue involved. Nigeria’s 2021 Tax Expenditure Statement estimated revenue foregone from tax incentives and exemptions at about N6.8 trillion, equivalent to roughly 4 percent of gross domestic product at the time.

More recent government estimates have varied, with officials citing annual tax waivers worth about N6 trillion in 2024 and as much as N8 trillion in 2025.

The decision comes as Nigeria transitions from the Pioneer Status Incentive (PSI) regime to the Economic Development Incentive (EDI), a new framework introduced under the Nigeria Tax Act 2025.

According to EY, the shift represents a move away from blanket income tax holidays towards a performance-based incentive structure tied to actual capital investment and economic contribution.

The advisory firm noted that businesses currently benefiting from PSI relief or planning new investments in Nigeria would need to reassess their eligibility, project economics, and compliance obligations under the new framework.

The firm, however, said tax authorities had emphasised the need for transition arrangements to provide certainty for existing beneficiaries while the new system is being implemented.

At the centre of the debate is the Pioneer Status Incentive (PSI), one of Nigeria’s flagship investment promotion schemes administered by the Nigerian Investment Promotion Commission (NIPC).

Data from the commission show that between 2017 and the second quarter of 2025, 693 applications were received under the scheme, of which 304 were approved and 149 companies remain active beneficiaries under transitional arrangements.

The scheme has attracted approximately N8.7 trillion in investment commitments and supported nearly 59,000 direct jobs, according to NIPC data, with manufacturing accounting for a significant share of beneficiaries.

The transition guidelines appear aimed at preventing disruption to investment projects approved under the old regime.

Analysts say abruptly withdrawing incentives could have exposed the government to legal disputes and weakened investor confidence, particularly for companies that made long-term capital commitments based on existing tax reliefs.

Supporters of the incentives argue that preserving existing approvals is necessary to maintain investor confidence and avoid policy reversals that could discourage long-term investment.

Adedoyin Odumbo, a financial controller and tax adviser, said the guidelines reinforce the principle that the reforms are not retroactive.

He noted that tax matters relating to periods before January 1, 2026, will continue to be governed by existing laws, while incentives already granted will remain effective until expiry.

The guidelines form part of broader efforts by the government to ensure a smooth transition to the new tax framework, which takes effect from January 1, 2026.

They also clarify the treatment of tax disputes, returns, accounting periods, transaction taxes, and cross-regime contracts, while establishing that new tax laws cannot be applied retroactively.

While the preservation of existing incentives is expected to reassure investors, analysts say attention is likely to shift toward whether the government can balance investment promotion objectives with its push to increase domestic revenue mobilisation.

Nigeria’s tax reforms are expected to broaden the tax base, improve compliance, and simplify administration.

However, the continuing debate over the scale and effectiveness of tax incentives suggests scrutiny of tax expenditures will remain a major feature of fiscal policy discussions in the years ahead.