News Report – July 23, 2025
In a significant shift to revamp its corporate tax landscape, the Federal Government of Nigeria has officially scrapped the controversial Excess Dividend Tax (EDT), marking the end of a longstanding policy that has drawn criticism from businesses and tax professionals for years.
The removal of the EDT forms a central part of the government’s comprehensive fiscal reforms aimed at closing legal loopholes, improving compliance, and fostering a more business-friendly environment. The move has been hailed by industry stakeholders as a progressive step toward promoting equity and certainty within Nigeria’s tax system.
Introduced under Section 19 of the Companies Income Tax Act, the EDT was widely condemned for taxing dividends paid out of retained earnings or already taxed profits—a practice seen as a form of double taxation. Its abolition is expected to encourage reinvestment, enhance investor confidence, and eliminate the risk of penalizing companies for retaining and later distributing legitimate earnings.
According to tax experts, the repeal will provide clearer guidelines for corporate profit distribution and simplify the tax reporting process for firms across multiple sectors. The reform aligns with President Bola Tinubu’s administration’s broader economic agenda to streamline tax operations and improve Nigeria’s global ease-of-doing-business rankings.
“This is a long-overdue correction. The Excess Dividend Tax had created confusion and unnecessary tax burdens on compliant businesses. Its removal signals a more predictable and transparent tax regime,” a senior tax consultant noted.
The Federal Inland Revenue Service (FIRS) has pledged to issue fresh implementation guidelines and advisory notices to support taxpayers during the transition phase.
With this policy shift, Nigeria aims to position itself as a more competitive investment destination and ensure that taxation no longer stifles economic productivity or capital formation in the corporate sector.