Nigeria has ushered in a stringent new era of fiscal compliance with the full implementation of the 2026 Tax Administration Act, which took effect on January 4, 2026. The law introduces a comprehensive regime of severe penalties designed to clamp down on tax avoidance, targeting both individuals and corporate entities across the nation.
Hefty Administrative Fines for Non-Compliance
The Act specifies steep financial penalties for a range of administrative failures. A taxable person who fails to register for tax faces an initial penalty of N50,000 for the first month of default, followed by N25,000 for each subsequent month. Similarly, failure to file returns or the submission of knowingly incomplete or inaccurate returns attracts a fine of N100,000 for the first month and N50,000 for every month thereafter.
The law also places responsibility on companies and statutory bodies, mandating a fine of N5 million for awarding contracts to persons not registered for tax. Other administrative penalties include fines of N10,000 for individuals and N50,000 for companies that fail to maintain proper books and records.
Criminal Sanctions and Director Liability
Beyond administrative fines, the Act prescribes serious criminal sanctions for more severe offences. These include fraud, making false declarations, counterfeiting tax documents, and obstructing tax officers. Penalties for these criminal acts range from fines of up to N2 million to imprisonment for terms of up to 10 years, or a combination of both.
Critically, the law establishes a principle of accountability for corporate leadership. Directors, officers, partners, trustees, or managers can be held personally liable for offences committed by their organisation, unless they can prove the crime occurred without their knowledge or consent.
Targeting Specific Sectors and Digital Compliance
The legislation casts a wide net, introducing sector-specific penalties. Virtual Asset Service Providers (VASPs) that default can face penalties of up to N10 million or have their operating licenses suspended. The law also mandates technological compliance, imposing a fine of N200,000 plus 100% of the tax due on taxpayers who fail to process taxable supplies through the prescribed fiscalisation system.
Furthermore, individuals or organisations that refuse access to tax authorities for technology deployment after a 30-day notice period are liable to a fine of N1 million for the first day and N10,000 for each additional day of default. Those obligated to collect or withhold tax but fail to do so face a penalty of 40% of the amount not deducted.
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has emphasized that the reforms aim to clarify tax obligations, dispelling the misconception that taxation is only for large corporations or the wealthy. He stated that under Nigeria's system, liability is primarily determined by income generation and profit, not social status or business size.
