TAXATION BY PROXY UNDER THE NIGERIA TAX ACT 2025 – KEY IMPLICATIONS FOR COMPANIES, OFFICERS, AND INDIVIDUALS (COIS)

A. INTRODUCTION

Reforms to tax laws come with pros, as well as repercussions that go beyond the mere textual aspects of the law. One of such landmarks is the introduction of the Nigeria Tax Act 2025 (“NTA”), coming into effect 1 January 2026, which introduces a major shift in how taxpayers – both corporate and individuals – may be assessed and held liable for tax. The Act essentially expands the idea of who can be assessed for tax, and it does so in a way that it will affect companies, directors, trustees, and individuals who rely on representatives.

It becomes imperative to note that the concept “taxation by proxy” itself is not entirely new. However, the way the NTA frames it is much clearer and far more deliberate than previous provisions, specifically the Companies and Income Tax Act (“CITA”) and the Personal Income Tax Act (“PITA”). If clients use agents, hold assets in family names, or operate through trustees and administrators, the changes matter, and this is worth discussing.

This briefing note gives a quick run-through of one of the more consequential provisions in the NTA, fundamentally re-engineering the concept of chargeability to tax.

B. UNDERSTANDING TAX CHARGEABILITY STRICTO SENSO

The term “chargeable” in tax parlance refers to that which is “subject to taxation; liable to be taxed.”[1] From this, one derives the concept of “chargeability” to mean the legal capacity of income, property, or persons to fall within the taxing power of the State.

Although neither the NTA 2025 nor its companion statute, the Nigeria Tax Administration Act, 2025 (NTAA 2025), defines “chargeability,” the provisions make clear that both corporate and individual taxpayers can no longer shield themselves behind intermediaries.

C. COMPANY CHARGEABILITY: PRESERVING AND EXTENDING THE CITA FRAMEWORK

Section 5(1) of the NTA 2025 preserves the long-standing principle [2]that a company may assessed:

1. in its own name;
2. in the name of a principal officer, attorney, factor, agent, or representative of the company in Nigeria; or
3. in the name of a receiver, liquidator, or administrator, in the same manner or amount as the company itself.

The above largely mirrors Section 47 of the extant Companies Income Tax Act (CITA). However, the NTA’s 2025 restatement is more deliberate: it emphasizes that liability travels with the company’s affairs, regardless of whether they are in the hands of directors, insolvency practitioners, or local representatives. From another standpoint, what this means is that liability can follow the person managing or handling the taxpayer’s affairs at that time, even if they are not the beneficial owner.

The implication is clear: tax liabilities will not dissolve merely because a company restructures, goes into liquidation, or seeks to distance itself, perhaps through any agency arrangements.

By this liability, principal officers must ensure that the company’s tax controls are functioning, as their names may become the target of assessments. In the same vein, local representatives of foreign entities can now be directly assessed if the company is non-resident. Equally, for companies in distress or restructuring, the liability does not “pause” because a liquidator has stepped in.

D. INDIVIDUAL CHARGEABILITY: CLOSING LONG-STANDING COMPLIANCE LOOPHOLES AND EXPANDING REACH

One of the stunning aspects of the tax reform lies in section 5(2) of the NTA 2025. This is where the Act makes the biggest change, as it extends assessment authority to individuals in a way that goes beyond the PITA. It provides that an individual may be charged:

1. in his or her own name;
2. in the name of a family, trustee, or estate; or
3. in the name of an administrator, attorney, agent, or representative.

Under the extant Personal Income Tax Act (PITA), chargeability was tethered almost exclusively to the named taxpayer. However, the NTA 2025 expressly extended liability to trustees, estates, and other representatives, dismantling long-standing evasion strategies where individuals concealed income or assets under family arrangements or fiduciary covers. To simply put this, the PITA never dealt with these structures cleanly, but the NTA does.

For tax administrators, this “look-through” provision represents a sharper instrument for enforcing tax compliance. Individuals relying on third parties for asset management should expect elevated scrutiny. Families also holding properties collectively can no longer invoke evasion strategies, as such structures are now transparent for tax purposes.

For clients who use fiduciary arrangements — whether formal or informal — this will require a rethink of how records are kept and how transparent those structures now are for tax purposes.

E. PRINCIPAL OFFICER LIABILITY UNDER THE NTAA AND COMPLIANCE OBLIGATIONS

Although section 5 of the NTA 2025 is silent on the personal compliance duties of company officers, section 45 of the NTAA 2025 fills the gap. It imposes explicit compliance obligations on managers and principal officers of companies.

These duties include-

1.    Timely and accurate filing of tax returns;

2.    Full remittance of tax deductions and collection; and

3.    Maintenance of corporate tax compliance processes.

The implication is that a director or principal officer who neglects these obligations risks personal liability, separate from the company. This tax regime reflects a deliberate policy choice: accountability is no longer diffused within the corporate entity; it attaches to identifiable human decision-makers. Boards and management teams should be aware of this shift.

F. WHAT MAKES “TAXATION BY PROXY” TRANSFORMATIVE?

The practical effect of these provisions is that the Tax Administrators are no longer restricted to chasing the primary taxpayer alone but offers a multi-layered framework for enforcement. By law, it can now proceed against:

1. A company, acting through its directors, agents, or liquidators;
2. An individual, through trustees, administrators, or family representatives; and
3. The principal officers, who are personally responsible for all tax compliance obligations.

This multi-layered net fundamentally alters the risk calculus for taxpayers, significantly broadening the routes available to tax administrators for assessment and collection. Attempts to evade liability by hiding behind legal forms or fiduciary arrangements are now squarely addressed by the statute.

G. WHY THE REFORM MATTERS

In practical terms, the tax authority no longer needs to wait for the “main” taxpayer. It has multiple entry points for enforcement:

1. directors and officers of companies,
2. local representatives of foreign entities,
3. trustees or family representatives holding assets,
4. estate administrators,
5. and any proxy managing the taxpayer’s affairs.

This gives the tax authority a lot more room to act quickly, especially in cases involving non-residents, estates, or complex family property arrangements.

CONCLUSION

The Nigeria Tax Act, 2025, signals a decisive turn in tax administration. By codifying taxation by proxy, it ensures that there is no tax avoidance and that liability flows not just to the entity or individual, but also to those who act on their behalf as intermediaries. For companies, this implies that directors and principal officers must treat tax compliance as a core fiduciary responsibility. Officers now have personal responsibilities.

For individuals using proxies, it means that family arrangements, estates, and trusteeships are no longer safe harbours from tax assessment or liability.  That is, the income and assets held by other people are no longer out of sight. Relatedly, for foreign entities, local agents can now be assessed directly.

The NTA 2025 pushes Nigeria firmly toward a representative-based enforcement model. The idea is to prevent tax leakage by focusing on the people who actually handle the taxpayer’s affairs, not just the named taxpayer.

As the commencement date approaches, clients should review their structures, management arrangements, and fiduciary setups to understand where exposure may now lie.

At AO2LAW, we maintain a foremost financial services advisory practice situated within our Commercial and Criminal Law Practice Group (CCLP). Our Practice brings to bear our expertise in core Financial Services and Technology Advisory, Regulatory Compliance, Mergers and Acquisitions, Maritime, and Capital Market services.  

For further information on the foregoing (none of which is legal advice) or related matters, please generally contact us at cclp@ao2law.com, or specifically contact the authors