Businesses in Nigeria risk paying more tax than required as companies adjust their accounting, classification and compliance systems to the country’s new tax regime, tax practitioners have warned.
The concern comes as the Nigeria Revenue Service (NRS) targets N40.71 trillion in revenue for 2026, representing a 44 percent increase from the N28.3 trillion collected in 2025.
The higher revenue target is expected to place greater pressure on businesses to ensure their tax positions are accurate, properly classified and supported by adequate documentation.
The NRS has said stronger compliance, improved audit quality and greater use of data from e-invoicing, government contracts and other sources will be important to achieving its 2026 target.
The agency also recorded more than 9,000 new taxpayers in January, highlighting the government’s continued efforts to widen the tax base.
Tax advisers, however, say businesses could face unnecessary tax costs if they continue to rely on practices developed under the previous tax regime.
According to practitioners, a company may remain compliant with its filing obligations while still paying more tax than necessary because it has failed to review whether its previous tax treatment remains appropriate under the new rules.
“One thing I’ve learned from reviewing businesses is that tax problems don’t come from non-compliance,” said Obi Onyinye, founder of a Lagos-based financial advisory firm.
Onyinye said some businesses continue to calculate and pay their taxes correctly based on the treatment they have historically used without checking whether changes in the tax law have created new exemptions or benefits.
She cited the case of a company that was paying the full 30 percent corporate income tax despite, according to her assessment, qualifying for the small-company exemption.
The company was potentially losing about $15,000 in unnecessary tax payments before the issue was identified, she said.
Under the new 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 new threshold represents a significant increase from the N25 million turnover limit under the previous regime.
The changes also extend to Value Added Tax, with the new framework expanding input VAT recovery to cover VAT incurred on services and fixed assets used to make taxable supplies.
Businesses must therefore reassess how they treat their transactions under the new VAT rules to avoid missing legitimate credits or applying incorrect treatments.
Victor Atanda, head of business development at Dutch Royal Integrated Resources, said misunderstanding what constitutes taxable income could also leave taxpayers either paying more than required or wrongly excluding income from their tax calculations.
“This is the biggest misconception in Nigerian tax discussions, even among professionals,” Atanda said.
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, returns relating to accounting periods beginning from January 1, 2026 will be administered under the new tax laws, while earlier accounting periods will remain subject to the previous regime.
For businesses, the transition therefore goes beyond simply changing the tax rate used in calculations.
Companies may need to review their tax classification, VAT treatment, allowable deductions, related-party transactions and supporting records to ensure their tax positions reflect the new requirements.
The growing use of e-invoicing and other data sources by the NRS also means discrepancies between accounting records and tax filings could become easier for authorities to identify.
As enforcement becomes more data-driven, businesses will need to ensure their financial records, invoices and tax returns are consistent and properly documented.
The key risk for companies is therefore not only failing to comply with the new tax regime but also continuing to operate under outdated practices that could result in unnecessary tax payments.
For businesses, reviewing their tax position under the new framework could ultimately be as important as meeting their filing deadlines.
