New Tax Law Imposes N1 Million Daily Penalty

With just three days to the full implementation of the new tax laws, businesses are expected to brace for consequences as the Nigeria Tax Administration Act 2025 rolls out stringent penalties for taxpayers who fail to meet new technology-driven compliance requirements.

The Act, published in the Federal Republic of Nigeria Official Gazette on June 26, 2025, and effective January 1, 2026, emphasizes digital compliance, particularly the use of technology and fiscalisation systems in processing taxable transactions.

Under Section 103 of the Act, any individual or business that fails to deploy technology as directed by the relevant tax authority faces steep financial consequences. The law stipulates that a defaulting taxpayer, after 30 days of receiving a notice, “is liable to an administrative penalty of N1 million for the first day of default and N10,000 for each subsequent day of default.”

The new tax law also targets lapses in electronic transaction reporting. Section 104 states, “a taxable person that fails to process a taxable supply through the fiscalisation system is liable to an administrative penalty of N200,000 plus 100 percent of the tax due and an interest at the prevailing Central Bank of Nigeria Monetary Policy rate per annum.”

Beyond technology compliance, the Act tightens sanctions on tax deduction and withholding obligations. Section 105 provides that, “a person who has an obligation to collect, deduct or withhold tax under the relevant tax laws, and fails to collect, deduct or withhold the tax due is liable to an administrative penalty of 40 percent of the amount not deducted.”

The law further introduces penalties for failures related to attribution and notification. Section 106 stipulates that “a person who is required to make attribution but fails to do so or having done so, fails to notify the relevant tax authority, is liable to pay an administrative penalty of N1 million.”

These provisions are contained in Chapter Four of the Nigeria Tax Administration Act 2025, which outlines offences and penalties of general application. The Act applies to all persons required to comply with Nigerian tax laws and seeks to standardize tax administration across federal, state and local government levels.

Meanwhile, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, affirmed that the Federal Government remains on track to commence full implementation of Nigeria’s landmark tax reform laws on January 1, 2026.

Oyedele, describing the reforms as people-focused and growth-driven, noted that about 97 per cent of small businesses would be exempt from corporate income tax, VAT, and withholding tax, while larger businesses would also benefit from lower effective tax rates. “The whole idea is to promote economic growth, inclusivity and shared prosperity. These reforms are designed to provide relief to Nigerians, not to impose additional hardship,” he said.

He further affirmed the government’s readiness for the law, which takes full effect on Thursday, saying, “preparation started from day one. Since the laws were signed, we have spent the last six months on capacity building, system upgrades and extensive sensitisation.

“Tax reform of this scale is a work in progress, you don’t get perfection immediately, but you improve continuously.”

He explained that the early commencement of two of the laws was intentional, to allow key institutions, including the Office of the Tax Ombudsman, to be properly established and operational before the full rollout.