Tax Treatment Of Non-Governmental Organisations Under The Tax Reforms Acts, 2025

By ATER, Solomon Vendaga^·

Abstract

This paper had examined the tax treatment of NGOs under Nigeria’s 2025 Tax Reform laws, comprising the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Act, and the Joint Revenue Board Act. Its objective was to clarify the scope of NGO tax obligations, situate their exemptions within statutory and judicial constructions, and evaluate the implications of the reforms for compliance and accountability. Findings revealed that while NGOs continue to enjoy exemptions under provisions relating to Companies Income Tax, Capital Gains Tax, and Value Added Tax, these privileges are now balanced by heightened obligations. The reforms impose stricter requirements for registration, filing of returns, withholding tax deductions, and proactive disclosure of tax planning arrangements, with substantially increased penalties for default. The study further identified persistent challenges, including inadequate tax education, and risks of evasion and corruption, which threaten effective compliance. The paper recommends, among others, the rollout of simplified tax guidelines and targeted capacity-building programmes, the adoption of robust governance and transparency mechanisms by NGOs, and the scaling up of digital tax infrastructure. Ultimately, the reforms are not merely about compliance; they offer an opportunity for government and NGOs alike to strengthen transparency, rebuild trust in Nigeria’s tax system, and contribute to broader economic sustainability.

Keywords: Nigerian Tax Reform Acts 2025; Non-Governmental Organisations (NGOs); Tax Compliance; Tax Exemption; Transparency.

• Introduction

Taxation constitutes the most reliable and sustainable mechanism through which modern states mobilise revenue for governance and development.[1] In Nigeria, this fiscal instrument has assumed heightened significance against the backdrop of declining global crude oil prices and the accelerating transition of traditional crude export destinations to alternative energy sources, largely driven by environmental imperatives and the urgency of addressing climate change.[2] The country’s historic dependence on oil receipts has thus exposed structural vulnerabilities, rendering the diversification of revenue through taxation an economic and constitutional necessity.[3]

Notwithstanding its relevance, the concept of tax itself resists simple definition. Nigerian tax statutes, notably, do not provide a precise definition of the term. Rather, they offer descriptive provisions. This failure of the Nigerian tax laws to provide a comprehensive definition of the term tax can be attributed to the fact that when you define, you limit and if limitation is placed on what is to be taxed, then the government may be denying itself new things to be taxed.  Notwithstanding this, few definitions in the tax laws will be provided.

The Nigeria Tax Act, 2025 in section 202 defines the term to ‘mean any imposition, duty, levy, royalty or revenue accruing to government in full or in Part under this Act or any other law’. Likewise, the Nigerian Revenue Service (Establishment) Act, 2025 defines tax in section 42 to ‘include any duty, levy or other revenue accruable to the Government in full or in part under this Act, the laws listed in the Second Schedule to this Act or any other law’.

The laws referred to the Act in the Second Schedules include:

Nigeria Tax Act, 2025; Nigeria Tax Administration Act, 2025; Laws imposing collection of taxes, fees and levies collected by other Government entities including signature bonus, pipeline fees, penalty for gas flared, depot levies and licences, fees for Oil Exploration Licence (OEL), Oil Mining Licence (OML), Oil Production Licence (OPL), royalties, rents (productive and non -productive), fees for licences to operate drilling rigs, fees for oil pipeline licences, haulage fees and all such fees prevalent in the oil industry but not limited to the above listed; All regulations, proclamations, order, government notices or rules issued in terms of these legislations or any revenue of the government; and any other law for the assessment, collection and accounting of revenue accruable to the Government of the Federation as may be made by the National Assembly or regulation incidental to those laws, conferring any power, duty and obligation on the Service, or where no administrative provisions have been made for such tax, duty or levy.

So, any imposition under the above legal arrangement is qualified as a tax according to the law. But looking at the purpose of tax, the above definitions lack coverage of essential ingredients. Hence, recourse shall be had to judicial pronouncements and opinion of scholars as to its meaning.  However, judicial constructions have equally grappled with the definitional question. From the Australian case of Mathew v. Chicory Marketing Board (Vict.)[4] which described tax as “the compulsory extraction of money by a public authority for public purposes,” to other pronouncements viewing tax as “a debt to government”[5] or “an enforced contribution exacted pursuant to legislative authority,”[6] case law reveals a plurality of perspectives rather than a unified doctrinal clarity.

Generally, tax has been conceptualised as a compulsory monetary exaction imposed by governmental authority on persons, corporate bodies, property, or transactions, to yield public revenue. Its obligatory character is underscored by the fact that liability is anchored on residency within the state’s jurisdiction rather than on citizenship.

Within this fiscal architecture, Non-Governmental Organisations (NGOs) occupy a particularly delicate position. NGOs are indispensable actors in Nigeria’s developmental landscape, often filling critical gaps through service provision, policy advocacy, and community mobilisation. Their operations, however, intersect with the tax regime in ways that have historically been characterised by ambiguity, inconsistent treatment, and at times inadequate regulatory guidance.

The enactment of the 2025 Tax Reform laws comprising the Nigeria Tax Act (NTA),[7] the Nigeria Tax Administration Act (NTAA),[8] the Nigeria Revenue Service Act (NRSA),[9] and the Joint Revenue Board Act (JRBA)[10] marks a watershed in Nigeria’s tax jurisprudence. Signed into law by President Bola Ahmed Tinubu on 26 June 2025, these statutes collectively constitute a comprehensive restructuring of the country’s tax ecosystem. For NGOs, they introduce novel obligations and compliance standards, but equally present opportunities for enhanced legitimacy, accountability, and fiscal integration.

This paper, therefore, seeks to interrogate the place of NGOs within Nigeria’s reformed tax framework. It aims to elucidate the scope of their tax obligations, situating the discourse within both statutory and judicial constructions of taxation, while critically assessing the implications of the 2025 reforms for the regulatory and operational environment of NGOs.

• Non-Governmental Organisations

NGO has been defined as a “not-for-profit association of persons incorporated as a company limited by guarantee under PART B of the Companies and Allied Matters Act (CAMA) 2020 (as amended) or under any other law in force in Nigeria, or registered under the laws of a foreign jurisdiction and approved as such in Nigeria”.[11]

The above definition of an NGO as a “not-for-profit association of persons incorporated as a company limited by guarantee under Part B of CAMA 2020 or under any other law in force in Nigeria, or registered under the laws of a foreign jurisdiction and approved as such in Nigeria” is misleading when considered against Nigerian law. While it correctly recognises the not-for-profit nature of NGOs and the use of companies limited by guarantee under section 26 of CAMA, it fails to capture the equally valid route of incorporation under Part F of CAMA as incorporated trustees, which is the most common vehicle for NGOs in Nigeria. The definition also obscures important legal differences between the two regimes, such as the Attorney-General’s consent required for companies limited by guarantee, the CAC’s broad powers of oversight and suspension of trustees under section 839, and the distinct rules on property ownership and governance. Moreover, the foreign registration clause is vague, as registration abroad does not automatically confer legal personality in Nigeria without compliance with local requirements. In effect, the definition narrows the scope of NGOs in Nigeria by overemphasising one statutory form while ignoring the plural legal options and regulatory nuances provided under CAMA 2020.

It is also important to note here that the challenge with the above definition is expected as there is no single generally accepted definition of what NGOs are. On this lack of particularity of definition of NGO, the World Bank had this to say;

The diversity of NGOs strains any simple definition. They include many groups and institutions that are entirely or largely independent of government and that have primarily humanitarian or cooperative rather than commercial objectives. They are private agencies in industrial countries that support international development; indigenous groups organized regionally or nationally; and member-groups in villages. NGOs include charitable and religious associations that mobilize private funds for development, distribute food and family planning services and promote community organization. They also include independent cooperatives, community associations, water-user societies, women’s groups and pastoral associations. Citizen Groups that raise awareness and influence policy are also NGOs.[12]

From the World Bank’s description, it is clear that NGOs occupy a pivotal position in addressing Nigeria’s social, economic, and environmental challenges. They serve as vital agents in the delivery of essential services, advocacy for policy reform, and the facilitation of community development initiatives. Despite these notable contributions, the taxation of NGOs in Nigeria raises complex legal and institutional challenges that undermine their operational efficiency and financial sustainability.

• The Tax Treatment of Non-Governmental Organisations Prior to Tax Reforms Acts, 2025

As earlier noted under the Companies and Allied Matters Act, 2020, NGOs may be incorporated in two principal forms. First, by virtue of section 823, they may be registered as incorporated trustees for the advancement of purposes such as religion, education, literature, science, social development, culture, sports, or charity. Alternatively, section 26 permits their registration as a company limited by guarantee, typically established to promote commerce, art, science, religion, sports, culture, education, research, or charitable endeavours. Unlike commercial companies, entities incorporated under section 26 are expressly prohibited from engaging in profit-making ventures for distribution to members.

It should be noted that prior to the enactment of the Finance Act 2020, the legal framework required NGOs to comply with certain tax obligations, particularly the filing of annual income tax returns pursuant to section 55 of the Companies Income Tax Act (CITA) and compliance with Value Added Tax (VAT) requirements on the supply or acquisition of taxable goods and services. Nonetheless, exemptions existed under section 23(1)(c) CITA, section 26(1)(a) of the Capital Gains Tax Act (CGTA), and section 19(1) together with paragraphs 1 and 13 of the Third Schedule to the Personal Income Tax Act (PITA). Collectively, these provisions exempted from taxation the profits or income of any institution recognised as a statutory or registered friendly society, or a company engaged in ecclesiastical, charitable, or educational activities of a public character, provided such income was not derived from a trade or business conducted by the institution.[13]

The crux of the difficulty lay in the absence of a statutory definition of the phrase “activities of a public character”. This ambiguity generated significant controversy, as NGOs frequently relied on this lacuna to shield themselves from certain tax liabilities.

In an attempt to provide clarity, the Federal Inland Revenue Service (FIRS) issued a Circular on 27 August 2010, outlining the tax exemption status of NGOs. The Circular emphasised that any income derived by an NGO from trade or business was taxable under CITA. It further stated that returns on investments of NGO assets would be liable to income tax, and that Capital Gains Tax (CGT) would apply where assets were disposed of at a gain. However, rather than resolving the uncertainty, the Circular provoked further debate, as the underlying statutes remained silent on key terminologies essential for determining the tax obligations of NGOs. NGOs often contended that, provided their activities were of a public nature and no profits were distributed to members, such income ought to remain exempt. Similarly, they invoked section 26 CGTA to resist liability on gains realised from asset disposals.

The Finance Act 2020 sought to remedy this longstanding ambiguity by introducing a statutory definition of ‘public character’. Specifically, section 105 of CITA (as amended by Section 21(b) of the Finance Act 2020) provides that an organisation or institution shall be regarded as of public character if it is duly registered under the relevant Nigerian law and does not distribute or share its profits in any manner with its members or promoters.[14] While this definition offered some clarity, it arguably reversed the broader protection previously enjoyed by NGOs under the indeterminate legal framework.

Subsequently, FIRS issued a Circular on 31 March 2021 titled the ‘Guidelines on the Tax Treatment of Non-Governmental Organisations’ to further guide the tax treatment of NGOs. The Circular reiterated that the income of an NGO must be wholly applied towards its stated objectives and for the benefit of the public. Importantly, it clarified that the distribution of assets, whether in cash or in-kind (for example, gifting a vehicle or other property for the personal use of members or promoters), would be deemed a distribution of profits and therefore subject to tax. [15]  Simply say where an NGO engages in any trade or business, or invests its assets in any institution, the profit or income derived therefrom (active or passive) is liable to tax appropriately. As such, incomes or profits liable to tax include proceeds from sale of goods or merchandise, provision of consultancy, professional or other services for a fee, and investment income, such as interest, rent, royalty, dividend or similar income.

Thus, for an NGOs to be exempted, it must (a) be registered by the relevant law in Nigeria; (b) not derive their profits or gains from activities of a commercial nature; and (c) ensure that their profits or gains do not inure to the private benefit, that is, they must not distribute or share their profits or gains in any manner whatsoever with their members or promoters.[16] 

• Tax Obligations of NGOs under the Nigerian Tax Reforms Acts, 2025
  • Registration and Filling of Tax Returns

All Non-Governmental Organisations (NGOs) are required to register for tax purposes and obtain a Tax Identification Number (TIN).[17] For NGOs that register under section 26 of CAMA 2020 and also engage in profit activities, they must also file annual Companies Income Tax (CIT) returns with the Nigeria Revenue Service (NRS). The administrative penalties for failure to file tax returns, or for filing incomplete or inaccurate returns, have been significantly increased. Formerly set at ₦25,000 for the first month of default and ₦5,000 for each subsequent month, the penalties now stand at ₦100,000 for the first month and ₦50,000 for each subsequent month of continued non-compliance.[18]

• Obligation as to Deductions

Since it is only NGOs who are exempted from the payment of taxes and not employees/ promoters, they are required, under the PAYE obligation, to deduct tax at source from salaries and other emoluments of employees, directors, officers, etc. and remit the same to the relevant tax authorities in the currency of payment of the emoluments. Failure to deduct the tax makes the NGO liable to an administrative penalty of 40% of the amount not deducted.[19]

• Withholding Tax Obligation

Whenever an NGO pays an organisation, individual or an unincorporated entity rent, royalty, management fees, consultancy fees, technical service fees, agency fees, supplies and contracts, appropriate withholding tax must be deducted and remitted to the relevant tax authority in the currency of the transactions. Failure to withhold the tax makes the NGO liable to an administrative penalty of 40% of the amount not deducted.[20]

• Exemptions

The phrase tax exemption is not expressly defined under the NTA or any other Nigerian tax legislation. However, in Northern Nigeria Investment Ltd v Federal Board of Inland Revenue,[21] Per Belgore J. defined the expression “exempt income” as follows: “exempt income is income primarily subject to tax but exempt under another provision of the law.” The true position, therefore, is not that exempt income is never subject to tax. Rather, “exempt income is income subject to tax under a particular provision of the law, but only taken out of the taxing law by the relevant exempting provision.” In this light, exempt income is properly understood as income which is ordinarily liable to tax but expressly excluded through another statutory provision. Similarly, in Australian Mutual Provident Society v IRC,[22] it was observed that the words “exempted from taxation” in section 86 of the Australian Act did not extend to income that was never within the reach of New Zealand tax laws.

Against this backdrop, the exemption of NGOs from tax under Nigerian law must be appreciated. NGOs, though capable of generating income that would ordinarily fall within the tax net, may benefit from explicit exempting provisions in NTA, which remove such income from taxation. It is this distinction between income inherently outside the scope of tax and income exempted by statutory provision that clarifies the legal basis for the tax exemptions NGOs enjoy in Nigeria. The exemptions enjoyed by NGOs under the tax regime in Nigeria will be considered below:

NGOs are exempted from Capital Gains Tax (CGT) on gains realised from the disposal of chargeable assets, provided that such gains are not derived from assets acquired for non-approved activities and are applied exclusively towards the organisation’s approved objectives.

With respect to Value Added Tax (VAT), goods purchased by NGOs for use in humanitarian donor-funded projects are zero-rated.[23] However, VAT applies to goods procured for non-humanitarian purposes. NGOs are equally liable to pay VAT on services they procure or consume, except where such services are specifically exempt under the Nigeria Tax Administration Act.

Additionally, NGOs are required to self-account for VAT on taxable goods and services supplied by non-resident vendors or entities not authorised to charge VAT. They must also charge VAT on all taxable goods and services they supply and remit same to the NRS. VAT returns are to be filed monthly, on or before the 21st day of the following month.[24]

• Conclusion and Recommendations

The 2025 Tax Reform laws signal a decisive shift in Nigeria’s fiscal landscape, with significant implications for NGOs alongside other taxpayers. While a six-month transition period has been granted until 1 January 2026, during which existing rates and processes remain valid, NGOs must begin to align with the new compliance architecture, including updated TIN requirements and digital infrastructure. Importantly, the penalties for non-compliance have been significantly increased, and proactive disclosure of tax planning arrangements is now mandatory. For NGOs, this new regime underscores the need for robust governance structures, diligent record-keeping, and proactive engagement with regulators/Relevant Tax Authorities, and educating stakeholders. This is key to navigating this exciting new chapter in Nigeria’s fiscal evolution.  Ultimately, these reforms are not merely about compliance; they present an opportunity for NGOs and other stakeholders to strengthen transparency, rebuild trust in the tax system, and contribute to unlocking Nigeria’s broader economic potential. To ensure a robust tax regime for NGOs, the following are recommended:

1. The government should establish a specialised inter-agency framework to harmonise the roles of tax authorities in relation to NGOs. Such coordination will curtail overlapping jurisdictions, foster consistency, and improve the efficiency of enforcement mechanisms.
2. NGOs should prioritise continuous education and capacity development on tax laws, particularly in light of the 2025 reforms. Internal training and collaboration with professional bodies can bridge knowledge gaps and prevent inadvertent violations.
3. Tax authorities should design simplified guidelines tailored to NGOs, supported by regular workshops, seminars, and explanatory notes. This will demystify complex provisions of NTA and related legislation, thereby reducing compliance barriers.
4. NGOs must adopt strong internal governance structures, transparent financial reporting, and independent audits. These practices will not only facilitate compliance but also enhance stakeholder confidence and donor trust.
5. Both government and NGOs must commit to curbing tax evasion. NRS should work on a whistleblower protection mechanism and leverage digital platforms to reduce discretion and bribery risks, while NGOs must institutionalise ethical codes of conduct.
6. The deployment of digital tax infrastructure under the 2025 reforms should be scaled up. Government should ensure accessibility and user-friendliness, while NGOs should integrate technology into their financial management to ease compliance with reporting requirements.
7. Finally, during the six-month transitional window, government must provide targeted technical assistance to NGOs, especially smaller organisations, ensuring that they are adequately prepared for the full commencement of the new regime.

• ATER, Solomon Vendaga, LL. B (Abuja), BL (Port Harcourt), Legal Practitioner, Research and Programs Associate, Sabilaw Foundation. soloater12@gmail.com, Tel: +234(0)7045965859.

[1] Chioma Nwabachili, ‘Legitimizing the Taxation of Religious Institutions, Privately owned Educational Institutions and Non-governmental Organisations in Nigeria’ (2022) 8(2) International Journal of Law 52, 52

[2] Meshach N Umenweke, Matthew Izuchukwu Anushiem, Uchenna MaryJane Anushiem and Chinaza Michael Egwuatu, ‘An Appraisal of the Statutory Tax Obligations of Non-Profit Organisations in Nigeria’ (2024) 15(2) Nnamdi Azikiwe University Journal of International Law and Jurisprudence (NAUJILJ) 137, 137

[3] Ibid

[4] (1938) 60 CLR 263

[5] Shell v. FBIR (2004) FNLR 859 at 46

[6] Moore v. The Commonwealth (1951)82 C.L.R, 547

[7] No 7 2025

[8] No 5 2025

[9] No 4 2025

[10] No 6 of 2025

[11] Umenweke et al (n 2) 138

[12] World Bank Definitions of an NGO <https://www.gdrc.org/ngo/wb-define.html> accessed 3 October 2025

[13] Vincent Okoukoni and Somtochi Onyiliofor, ‘Finance Act 2020 – Public Character & Impact on the Taxation of NGOs’ (Mondaq, 26 May 2021) <https://www.mondaq.com/nigeria/withholding-tax/1073068/finance-act-2020–public-character—impact-on-the-taxation-of-ngos> accessed 25 August, 2025

[14] This definition is incorporated into the Tax Reforms Acts, specifically, section 202 of the Nigeria Tax Act, 2025 provides that “public character” with respect to any organisation or institution means organisation or institution – (a) that is registered in accordance with relevant law in Nigeria; and (b) does not distribute or share its profit in any manner to members or promoters.

[15] Wole Obayomi, KPMG NG Tax Alert: Issue No. 4.8 | April 2021, FIRS issues guidelines on the taxation of NGOs <https://kpmg.com/ng/en/home/insights/2021/04/firs-issues-guidelines-on-the-taxation-ofngos.html>  assessed 24 August 2025

[16] The 3 conditions are construed conjunctively hence, they are to be fulfilled altogether to warrant the exemption of an NGO from tax liabilities. See the cases of Rev. M. F. Shodipo v FBIR (1974) 1 NTC 273; Best Children International Schools Ltd. v FIRS (2018) LPELR-46727(CA).

[17] S 4 Nigeria Tax Act, 2025

[18] S. 101 Nigeria Tax Administration Act, 2025

[19] S 105, Nigeria Tax Administration Act, 2025

[20] S 105, Nigeria Tax Administration Act, 2025

[21] [1976] FRCR 93.

[22] [1962] A.C. 135.

[23] S 187, Nigeria Tax Act, 2025

[24] Ibid., s 22 (1)

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