FG eliminates VAT on food, education, healthcare, reveals start date

The Federal Government of Nigeria has eliminated Value Added Tax (VAT) on essential goods and services like food, education, healthcare, public transport, residential rent, and exports. This change aims to ease inflationary pressure and reduce living costs for low-income households.

By Rhalialt Arhuoizah

Key Details:

- Effective Date: The new tax laws will take effect on January 1, 2026, allowing a six-month transition period for preparation and public education.
- VAT Rate: The VAT rate remains at 7.5%, but its scope has been expanded to exempt essential goods and services.
- Benefits:
- Low-Income Households: Will benefit from reduced living costs due to VAT exemptions on essentials like food, healthcare, and education.
- Small Businesses: Businesses with an annual turnover below ₦50 million will be exempt from company income tax and can file simpler tax returns without audited accounts.
- Large Businesses: Corporate tax rates will drop from 30% to 27.5% in 2025 and 25% thereafter, with tax credits for VAT paid on expenses and assets .

Objectives:

- Simplify Tax System: Reduce bureaucratic hurdles and overlap taxes to make compliance easier.
- Increase Revenue Efficiency: Boost Nigeria's tax-to-GDP ratio from 10% to 18% by 2026 without raising taxes on essential goods.
- Reduce Financial Burden: Provide relief for low-income households and small businesses while ensuring high-income earners contribute more .