Nigeria will begin enforcing technology-driven tax compliance rules on January 1, 2026, imposing steep daily penalties on businesses that fail to comply.
Nigeria will begin full enforcement of a far-reaching tax reform law on January 1, 2026, introducing some of the toughest compliance penalties the country has seen as authorities push for a digitally driven tax system.
Under the Nigeria Tax Administration Act 2025, businesses and individuals that fail to meet new technology and reporting requirements could face fines starting at ₦1 million ($650), for the first day of default, followed by daily penalties until compliance is achieved.
The law, published in the Federal Republic of Nigeria Official Gazette on June 26, 2025, gives tax authorities expanded powers to mandate the use of approved digital systems for processing and reporting taxable transactions. Companies have just days left before the rules take full effect.
A key provision targets businesses that fail to deploy tax technology as directed. After a 30-day notice period, defaulters will be fined one million naira on the first day of non-compliance and an additional ₦10,000 for every subsequent day, according to Section 103 of the Act.
The legislation also tightens enforcement around electronic transaction reporting. Section 104 stipulates that any taxable supply not processed through the required focalization system will attract a penalty of ₦200,000, plus 100 percent of the unpaid tax and interest calculated at the Central Bank of Nigeria’s prevailing monetary policy rate.
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Beyond digital reporting, the Act imposes tougher sanctions on failures to deduct or withhold taxes. Entities that fail to collect or withhold required taxes will be liable for an administrative penalty equivalent to 40 percent of the amount not deducted. Additional penalties apply for failures in attribution and notification, with fines of up to one million naira.
The provisions apply nationwide and are designed to standardize tax administration across federal, state, and local governments, according to the legislation.
Despite concerns among businesses, the government says the reforms are designed to support growth rather than impose new burdens. Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, said authorities are fully prepared for implementation.
Oyedele said about 97 percent of small businesses will be exempt from corporate income tax, value-added tax, and withholding tax, while larger companies will benefit from lower effective tax rates.
“The whole idea is to promote economic growth, inclusivity, and shared prosperity,” he said, adding that the reforms aim to provide relief rather than hardship.
He said the government has spent the past six months upgrading systems, building capacity, and sensitizing stakeholders, noting that large-scale tax reform is an ongoing process that will be refined over time.