Nigeria’s 15% minimum effective tax rate: who pays top-up tax under the Nigeria Tax Act

Image: Atej2* / Wikimedia Commons, CC BY-SA 4.0

Section 6(3) makes Nigerian parents liable for low-taxed foreign subsidiaries; section 57 applies to large and multinational groups.

Jurisdiction NigeriaPractice TaxSector Banking and Financial Services

The Nigeria Tax Act 2025 introduced a 15% Minimum Effective Tax Rate (METR), intended to ensure that companies of significant scale bear a minimum tax burden notwithstanding incentives, exemptions or reliefs. ÆLEX published an analysis of the provisions in August 2026.

Two mechanisms

The METR is implemented principally through sections 6(3) and 57 of the Act, which apply to different taxpayers through different mechanisms.

Section 6(3) applies where a non-resident company is a subsidiary of a Nigerian company, or a member of a multinational group headed by a Nigerian company, and the income tax it pays in a year produces an effective tax rate below 15%. The Nigerian parent becomes liable to a top-up tax in Nigeria sufficient to raise the subsidiary’s effective rate to 15%. According to ÆLEX, this applies regardless of the Nigerian parent’s turnover or size, and the liability falls on the parent, not the foreign subsidiary.

Section 57 applies the minimum rate to large domestic companies and constituent entities of multinational groups operating in Nigeria, requiring additional tax where their effective rate falls below 15%.

Context

The METR mirrors the OECD’s Pillar Two global minimum tax, under which a 15% minimum applies to groups with consolidated revenue above €750m. Nigeria did not join the 2021 two-pillar agreement, but its rules follow the same logic and protect its taxing rights where other jurisdictions apply top-up taxes.

Practical implications

Nigerian-headquartered groups with subsidiaries in low-tax jurisdictions, including holding and treasury companies in Mauritius, the UAE or elsewhere, should model effective tax rates for each subsidiary and anticipate top-up liability in Nigeria. Companies relying on pioneer status, free zone or sector incentives should assess whether those incentives reduce their effective rate below 15%, which would erode the incentive’s value. The computation of the effective rate, including the treatment of deferred tax and timing differences, will require guidance from the Nigeria Revenue Service. Groups should review structures and incentive applications before year-end computations.