Nigerian businesses may be paying more tax than necessary because some companies are still relying on accounting and tax practices from the previous tax regime, tax practitioners have warned.
The concern comes as businesses adjust to Nigeria’s new tax laws while the Nigeria Revenue Service (NRS) intensifies efforts to improve compliance and increase government revenue.
The NRS is targeting N40.71 trillion in revenue for 2026, 44 percent higher than the N28.3 trillion collected in 2025. The agency is also increasing its use of data from e-invoicing, government contracts and other sources to strengthen tax audits and compliance.
Businesses could miss tax exemptions
Tax advisers say companies that continue using their old tax treatment could remain compliant with filing requirements while still paying more than they legally need to.
Obi Onyinye, founder of a financial advisory firm in Lagos, said some businesses correctly calculate and pay taxes based on the treatment they have historically used without checking whether the same approach remains valid under the new laws.
She cited a company that was paying the full 30 percent Companies Income Tax despite potentially qualifying for the small-company exemption. The company was at risk of losing about $15,000 before the issue was identified.
Under the Nigeria Tax Act, companies with annual gross turnover of N100 million or less and fixed assets not exceeding N250 million qualify as small companies and are exempt from Companies Income Tax, subject to the conditions of the law.
The turnover threshold was previously N25 million, meaning more businesses may now fall within the small-company category.
VAT treatment also changing
The changes are not limited to corporate income tax.
The new tax framework expands input VAT recovery to cover VAT incurred on services and fixed assets used to make taxable supplies. It also introduces changes to zero-rated supplies and VAT administration.
Businesses that have not reviewed their VAT treatment could therefore miss legitimate tax credits or apply outdated rules to their transactions.
Victor Atanda, head of business development at Dutch Royal Integrated Resources, said misunderstandings around what qualifies as taxable income could also lead businesses to either pay more tax than required or wrongly exclude income from their calculations.
Transition requires tax review
The Federal Ministry of Finance issued transition guidelines in June to help taxpayers move from the repealed tax laws to the new framework.
Under the guidelines, tax returns covering accounting periods beginning from January 1, 2026 are administered under the new tax laws, while earlier periods remain subject to the previous regime.
Tax advisers say businesses therefore need to review more than their tax rates. They should reassess their company classification, VAT treatment, allowable deductions, related-party transactions and supporting documentation.
With the NRS increasingly relying on digital records and e-invoicing for compliance and audits, businesses will also need to ensure that their accounting records match the information contained in their tax filings.
For companies operating on tight margins, identifying legitimate exemptions, deductions and tax credits could have a direct impact on cash flow and profitability.
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Businesses Risk Overpaying Tax Under Nigeria’s New Tax Rules
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Nigerian businesses risk overpaying tax as new rules expose outdated practices, with advisers urging firms to review exemptions, VAT and deductions.
