New Tax Law in Nigeria: Stricter Penalties for Non-Compliance
Nigeria has introduced a significant update to its tax administration system with the enactment of the Nigeria Tax Administration Act, 2025. This new law empowers the Federal Inland Revenue Service (FIRS), now rebranded as the Nigeria Revenue Service (NRS), to impose substantial fines and penalties on individuals and businesses that fail to meet their tax obligations.
The law was signed by President Bola Tinubu on June 26 and is set to take effect from January 1, 2026. It replaces previous fragmented tax enforcement provisions with a more comprehensive framework, outlining a wide range of offenses and corresponding penalties.
Key Offenses and Penalties
One of the primary offenses under the new law is failing to register with the relevant tax authority. A taxable person who neglects this requirement will face a fine of N50,000 in the first month of default and N25,000 for each subsequent month. Additionally, companies that award contracts to unregistered vendors will be penalized with a hefty N5 million fine.
Another critical offense involves failing to file tax returns. Individuals or businesses that do not submit their returns on time will be fined N100,000 in the first month of non-compliance and an additional N50,000 for each subsequent month. The law also mandates that those who provide incomplete or inaccurate returns may face similar penalties.
Failure to maintain proper accounting records is another serious violation. Individuals who do not keep accurate books and records of business transactions will be fined N10,000, while companies could face a fine of N50,000. If the tax authority requests specific records and they are not provided, the same penalties apply.
Address and Business Changes
The law also addresses the need for timely communication regarding changes in business operations. A taxable person who fails to notify the tax authority of a change of address within 30 days will be fined N100,000 for the first month of default and N45,000 for each subsequent month. Similarly, failure to report the permanent cessation of trade or business can result in administrative penalties.
Modernizing Tax Compliance
To encourage modernization in tax compliance, the Act makes it mandatory for businesses to allow the NRS to deploy fiscalisation technology. Failure to comply with this requirement results in a N1 million fine for the first day of refusal and N10,000 for each subsequent day. Businesses that do not process sales through the fiscalisation system will also face a N200,000 fine, pay 100% of the tax due, and accrue interest at the prevailing Central Bank of Nigeria (CBN) monetary policy rate.
Strict Measures for Tax Deduction and Remittance
The law imposes strict measures on those who fail to deduct or remit taxes. Any individual or entity that deducts, collects, or withholds tax but fails to remit it by the 21st day of the following month will be liable for several consequences. These include paying the amount deducted, an administrative penalty of 10% per annum of the unpaid tax, and interest at the CBN’s monetary policy rate. A conviction for such an offense could lead to up to three years in prison, a fine equal to the principal amount due, or both.
Non-Compliance with Notices and Summons
Individuals who fail to comply with notices, summons, or processes issued under the law will face administrative penalties. The initial fine is N100,000 for the first day of default, followed by N10,000 for each subsequent day of non-compliance. This applies to those who refuse to attend or provide answers to legal inquiries.
Conclusion
The Nigeria Tax Administration Act, 2025, marks a significant shift in the country’s approach to tax compliance. By introducing stricter penalties and modernizing enforcement mechanisms, the law aims to ensure greater transparency and accountability in tax matters. As the implementation date approaches, businesses and individuals must take these new regulations seriously to avoid severe financial and legal consequences.