The Lagos State Government has introduced tax reforms in 2025 aimed at supporting Micro, Small, and Medium Enterprises (MSMEs). These reforms are designed to enhance profitability, improve competitiveness, and drive business growth.
The changes were detailed in the Lagos State Employment Trust Fund (LSETF) report, Resilience and Opportunities: A Review of 2024 and Outlook for MSMEs in Nigeria in 2025.
Key tax reforms for MSMEs
The government has implemented several tax measures to provide relief for MSMEs:
1. Corporate Income Tax Reduction
Corporate income tax has been reduced from 30% to 25% over the next two years. This phased reduction is expected to lower financial burdens on small businesses and increase their ability to reinvest in operations.
Read also: Outlook for SMEs in Nigeria: Cautious optimism for 2025
2. Zero-rated VAT on exports
Exports by MSMEs are now exempt from Value Added Tax (VAT). This measure is expected to make Nigerian products more competitive in international markets and encourage export activities.
3. Tax exemptions for small businesses
MSMEs with annual turnovers of N50 million or less are now exempt from VAT, withholding tax, and corporate income tax. This exemption reduces financial pressure on smaller businesses and allows them to focus on expansion and sustainability.
4. Simplified tax compliance
The government has harmonised multiple taxes into a single levy. This reduces administrative costs and simplifies compliance for small businesses, enabling them to focus more on their operations.
5. Creation of a tax ombudsman
A tax ombudsman has been established to oversee tax-related disputes. This office will ensure that MSMEs receive fair treatment in tax matters and protect businesses from unfair tax practices.
Expected impact
These reforms are expected to ease the financial strain on MSMEs, allowing them to allocate resources more effectively. Reduced tax obligations will lower operational costs, enabling businesses to reinvest in staff, technology, and expansion. The exemption of VAT on exports is expected to encourage more businesses to enter global markets, increasing Nigeria’s trade footprint.
The establishment of a tax ombudsman provides a structured mechanism for addressing tax-related concerns, ensuring that businesses are treated fairly. The streamlined tax compliance process is set to reduce bureaucracy, making it easier for small businesses to operate.
