INTRODUCTION

Globally, the digital economy has taken center stage in economic growth considerations. In fact, in Nigeria, we see the active role of technology in every segment of development. For instance, “the People’s” Initial Public Offer (IPO)- the Dangote IPO has significantly leveraged digital platforms to drive participation in the IPO. Similarly, the first tele-robotic surgery in West Africa was conducted in Ogun State, again, thanks to technology. These show how technology is now one of the most significant drivers of economic growth in Nigeria due to the increasing dependence on technology backed products. From fintech, healthtech, proptech, technology companies are therefore increasingly shaping commercial activities across various sectors.

In recognition of this, tax laws must also align with and take cognizance of the increasing role, and dynamics of technology. It must therefore align with modern realities. In resolving this, the Nigeria Tax Act 2025 (NTA 2025) & Nigeria Tax Administration Act 2025 (NTAA 2025) make provisions that have expanded the tax base to cover digital and virtual assets while also clarifying the obligations of non-resident companies that provide technology backed services. The law also contains noteworthy incentives for technology companies. This Article therefore aims to highlight the relevant incentive provisions applicable to technology companies (tech companies).

GENERAL TAX OBLIGATIONS OF TECH COMPANIES

Generally, regardless of the relevant sector, all companies have general tax obligations which apply across board. Notably, tech companies, small and large, are obligated to register and obtain a Tax Identification (Tax ID). Similar to other forms of companies, tech companies are also liable to company income tax on their profits, except where they are small companies as defined by the NTA 2025. They are also liable to include value added tax (VAT) at the flat rate of 7.5% on their invoices for taxable services supplied and also comply with all relevant VAT compliance obligations in line with the provisions of the NTA 2025. This is especially noteworthy for digital service providers, software companies, online marketplaces, and subscription-based businesses whose services are supplied through digital platforms.

Similarly, payments made to tech companies (depending on the nature of the company’s business) may also be subjected to WHT at the relevant rates while gains on disposals by tech companies are also subject to capital gains tax.

TAXATION OF NON-RESIDENT TECHNOLOGY COMPANIES

Under Section 17(2)(a) of the NTA 2025, a non-resident company is taxable in Nigeria if it has either a Permanent Establishment (PE) or a Significant Economic Presence (SEP), and profits are taxed only to the extent they are attributable to that PE or SEP. Generally, a PE may arise where the non-resident has a fixed place of business in Nigeria; where it operates through an authorized agent or any other mode as defined under the NTA.

However, for tech-based and digital service providers specifically, the more relevant test is usually SEP rather than PE, since these companies typically have no physical footprint in Nigeria at all. A non-resident is deemed to have an SEP where it transmits data, signals, sounds, images, or messages into Nigeria, by itself or through another party, in connection with activities such as e-commerce, app stores, high-frequency trading, cloud computing, online advertising, digital content or gaming, search engines, online payments, data storage, or online teaching, provided profit can be attributed to that activity. In effect, a foreign tech company earning revenue from Nigerian users or transactions can be taxable in Nigeria purely on the strength of its digital footprint. Significantly, physical presence, or even repatriation of income into Nigeria, is not a precondition.

Where a non-resident company is found to have a PE or SEP and earns attributable profits, it becomes subject to Nigeria’s standard compliance obligations including filing of annual income tax returns and remittance of applicable taxes.

TAXATION OF VIRTUAL ASSET BUSINESSES

Under the Nigeria Tax Act and the accompanying NRS guidelines issued in 2026, Virtual Asset Service Providers now occupy a role that extends well beyond that of a market intermediary — they function as de facto tax collectors within the virtual asset ecosystem. Guideline 12.1 of the Guidelines on the Taxation of Virtual Assets sets out a detailed compliance framework that VASPs must adhere to, beginning with registration with the Nigeria Revenue Service. Before any customer account can be activated, VASPs are required to collect and verify that customer’s Tax Identification Number, effectively making TIN verification a precondition for onboarding.

Beyond registration and onboarding, VASPs carry substantive tax collection and remittance duties. They must collect applicable stamp duty, including in token units where relevant, and charge and account for VAT on taxable supplies. Where taxes are collected or withheld from customers, VASPs are obligated to remit these to the appropriate tax authority within the timeframe prescribed under the NTAA or the Deduction of Tax at Source (Withholding) Regulations. In addition, VASPs must file all required returns and maintain comprehensive transaction records in line with Section 31 and the Fifth Schedule to the NTAA — obligations that position them as a central compliance checkpoint for the regulator rather than a passive facilitator of transactions.

A particularly significant obligation is the requirement for VASPs to withhold and remit 1% of the gross disposal proceeds arising from transactions falling under Categories 1, 3, and 5 directly to the NRS. This withholding duty effectively embeds tax collection into the transaction flow itself, rather than relying on after-the-fact self-assessment by individual traders. Failure to meet any of these obligations exposes a VASP to penalties, underscoring the NRS’s intent to enforce compliance through the platforms that sit closest to the transactions, rather than through the often-untraceable end users.

KEY INCENTIVES FOR TECHNOLOGY COMPANIES

While the NTA broadens the tax obligations applicable to businesses operating in the digital economy, it also provides incentives aimed at encouraging investment, innovation and the growth of technology businesses. The key incentives relevant to technology companies include the following:

– Economic Development Tax Incentive (EDTI)

The Economic Development Tax Incentive (EDTI) provided under Sections 167-180 of the NTA 2025, replaces the former Pioneer Status Incentive and is available to companies operating in designated priority sectors subject to the applicable conditions under the Act. Essentially, a qualifying company may obtain an Economic Development Incentive Certificate and benefit from a tax credit equivalent to 5% of qualifying capital expenditure incurred annually for a period of five years. Any unutilized tax credit may be carried forward in accordance with the provisions of the Act.

– Exemption from Industrial Training Fund Contributions

Under Section 25(5) of the Nigeria Startup Act 2022 (NSA), a labelled startup is exempt from the 1% contribution of annual payroll costs to the Industrial Training Fund where it provides in-house training to its employees during the period of its startup label. The exemption therefore provides a direct reduction in the statutory employment-related costs of qualifying labelled startups, while encouraging them to invest in the training and development of their employees.

– Withholding Tax Reduction for Payments to Labelled Startups

Section 25(4) of the NSA provides that payments made by a labelled startup to a non-resident company for technical, consulting, professional, or management services are subject to withholding tax at 5%. The withholding tax constitutes the final tax payable by the non-resident company on the relevant income. This provision reduces the withholding tax exposure associated with engaging foreign service providers and may therefore reduce the tax cost of accessing specialized technical and professional services by labelled startups. This provision is reproduced in Section 51(8), of the NTAA 2025.

– Research and Development Incentive

Section 165 of the NTA 2025 permits companies to deduct qualifying research and development expenses incurred during a year of assessment. Notably, the deduction is limited to 5% of the company’s turnover for the relevant year. Where the outcome of the research is subsequently sold or transferred for commercial exploitation, the proceeds become taxable. For technology companies whose operations involve product development, software development, technological research, or other qualifying research activities, the provision offers a tax deduction for qualifying expenditure incurred in developing new products, services, or processes.

– Incentive for Investors

Furthermore, the NTA 2025 makes provisions which exempt gains accruing from the disposal of assets by an angel investor, venture capitalist, private equity fund, accelerators or incubators with respect to a labelled startup from income tax. This is subject to the provision that the assets must have been held in Nigeria for a minimum of 24months. This encourages investment in technology companies.

CONCLUSION

The Nigeria Tax Act, 2025 introduces a broader tax framework for technology companies, particularly in relation to non-resident digital businesses and virtual asset activities. At the same time, it retains and introduces incentives aimed at supporting investment, research and development, and the growth of eligible technology businesses. Technology companies should therefore assess both their expanded tax obligations and the incentives for which they may qualify under the new framework.

Authors: ‘Tobiloba Adekoya is a Senior Associate in WTS Blackwoodstone

                     Maryjane Unanka is an Associate at WTS Blackwoodstone

WTS Blackwoodstone, is an international business law firm, that delivers innovative solutions across diverse client needs, specializing in core practice areas such as International Tax, Tax Advisory & Compliance, Corporate and Commercial law, and Transactional Services for companies operating in Nigeria. As the Nigerian partners of WTS Global, operating in over 100 countries, WTS Blackwoodstone aligns with a global tax practice that offers a comprehensive range of tax services.

CONTACT US:

Website: https://wtsblackwoodstone.com/             

LinkedIn: https://www.linkedin.com/company/wtsblackwoodstone/mycompany/        

Instagram: https://www.instagram.com/wtsblackwoodstone/

Email: [email protected]