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Nigerian companies benefiting from tax incentives are facing stricter compliance requirements under new tax administration rules, fanning fears of losing reliefs and increasing operational costs for businesses already navigating a fragile economic environment.

At the centre of the reforms is a requirement for companies in priority sectors or those benefiting from targeted tax incentives to file annual tax incentive returns, separate from their regular income tax filings, significantly expanding compliance obligations.

“This is no longer business as usual, where you just enjoy incentives,” said Adeyemi Michael, tax partner at Andersen. “Once you benefit from specialised tax incentives, you are now required to file additional returns beyond your annual income tax filings.”

Michael explained that the new provisions, contained in Sections 26 and 27 of Nigeria’s tax framework, introduce a structured reporting system that allows authorities to track how firms utilise tax incentives in real time.

“These returns are distinct from income tax returns. They are incentive-based disclosures that must be filed annually and cover all specialised tax benefits enjoyed by a company,” he said.

The stricter compliance rules come as concerns grow over how much tax incentives cost Nigeria and whether they are actually working.

In a webinar hosted by Deloitte, Toluwalogo Odutayo, a tax partner at Deloitte Tax & Regulatory Services, said that Nigeria loses about N6 trillion annually to tax incentives, raising questions about whether these reliefs are delivering commensurate economic value.

This figure indicates that ongoing reforms are aimed at removing inefficiencies and disincentives within the tax system to stimulate economic activity while supporting inclusive growth and wealth creation.

Industry experts say this revenue loss has strengthened the government’s resolve to shift toward stricter monitoring and more transparent reporting of incentive utilisation.

The new reporting framework is designed to close longstanding information gaps that have historically made it difficult for regulators to assess whether tax incentives are delivering intended economic benefits.

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Under the system, companies are required to submit their incentive returns to relevant state tax authorities, which must then transmit the data to federal authorities, creating a centralised repository of information accessible for policy and enforcement purposes.

Michael noted that this replaces the previous system, where companies were often invited, sometimes years later, to justify their use of incentives during investigative reviews.

“Instead of waiting for periodic probes, the expectation now is that this information is already available to the authorities as part of routine filings,” he said.

For businesses, the immediate impact is a rise in compliance costs and internal restructuring efforts aimed at meeting the new requirements.

The tightening of compliance rules aligns with a broader shift in Nigeria’s fiscal strategy, as authorities seek to maximise revenue and ensure tax incentives generate measurable economic value.

According to a PwC report titled Nigeria Tax Reform 2025: Sectoral Analysis, the government is replacing the Pioneer Status Incentive with a new Economic Development Tax Incentive (EDTI), designed to better align tax reliefs with sectors of national priority.

The report notes that the transition signals a move away from broad-based exemptions toward more targeted and performance-driven incentives.

“The reforms reflect a broader policy direction focused on curbing revenue leakages, improving transparency, and ensuring incentives deliver real economic value,” the report said.

Marvis Oduogu, Lead, Taxation at Stren & Blan Partners, said companies have already begun adjusting their operations in response to the stricter disclosure requirements tied to tax incentives.

“Companies are restructuring, merging with complementary businesses, adjusting branch operations, and reorganising record-keeping to meet eligibility requirements,” Oduogu said.

The changes, he explained, are not just about staying eligible for incentives but also about meeting the expanded reporting obligations, which are increasing compliance costs and forcing firms to rethink how they structure their operations.

These adjustments are adding to operational complexity at a time when firms are already contending with inflation, currency volatility, and high financing costs.

Analysts say the combination of stricter disclosure requirements and more targeted incentives increases the stakes for firms.

Failure to meet the new reporting standards could result in companies losing access to tax benefits, effectively increasing their tax liabilities and weakening margins.

Beyond financial costs, the new framework also introduces reputational and regulatory risks, particularly for firms unable to demonstrate that incentives are being used in line with policy objectives.

For now, tax experts say companies must prioritise early compliance planning, strengthen internal reporting systems, and seek professional guidance to avoid falling foul of the new rules.