Nigeria’s new Tax Act, coming into effect January 1, 2026, brings both good news and serious warnings for taxpayers. The law offers clearer rules and better incentives, but it also means stricter enforcement and higher costs for those who don’t comply. These are the penalties for noncompliance as stipulated in the new tax law.
Surcharges
The biggest change is how the government now handles late tax payments. Under Section 142 of the Nigeria Tax Administration Act, 2025, instead of just penalties, there are now surcharges. Think of them as automatic interest charges that start accumulating the moment you miss a payment deadline.
One of the most consequential innovations in the new law is the introduction of surcharges or automatic interest charges that replace the old penalty system for late payment. Under Section 142 of the Nigeria Tax Administration Act, 2025, any tax not paid by the due date now begins to attract a surcharge immediately. This surcharge is calculated daily or monthly depending on the tax type. These surcharges are not discretionary, instead they are automatic and compounding.
If, for example, a company delays in remitting Value Added Tax (VAT) or under-declares its Company Income Tax, the outstanding amount starts to accrue a surcharge, often at rates around 10% per annum for corporate taxes and 1% per month for certain consumption-based taxes.
Penalties
Besides surcharges, the 2025 Act tightens the web of accountability for incorrect declarations and careless compliance.
Under Section 147(1), taxpayers who make false, misleading, or incomplete returns face financial penalties proportionate to the amount underreported. Where the misstatement is deliberate, additional penalties or even criminal sanctions may follow under Section 154. For individuals and sole proprietors, these fines can range from ₦50,000 to ₦500,000. The fine depends on the gravity of the offence. For corporate entities, the figures climb significantly higher, often calculated as a percentage of unpaid tax.
Failure to file returns altogether is treated even more harshly. The NTAA mandates daily accumulating fines until compliance is achieved. In serious cases, Section 159(3) authorizes temporary closure of non-compliant business premises. This administrative was previously reserved only for severe infractions but now apply more broadly.
Perhaps the most significant philosophical shift lies in Section 161. The law now allows the personal liability of company directors and officers for willful or negligent tax breaches. This means that company directors and officers will now be personally held liable for their company’s non-compliance.
VAT and Duties
The new Act takes special aim at VAT and stamp duties, two areas where compliance has often been blurred by misunderstanding or informality.
For VAT, the rules are unambiguous. The moment your business collects VAT from customers, that money ceases to be yours, it becomes trust money held for the state. Under Section 122(2), using VAT collections as working capital constitutes misappropriation and is punishable by heavy fines and potential prosecution.
Businesses must now display their VAT registration number prominently, issue compliant invoices, and maintain complete VAT accounts. Even if the correct VAT amount is eventually remitted, Section 125(3) makes clear that incomplete documentation or late filing can still attract penalties.
The stamp duty provisions, anchored in Sections 176–182, impose strict deadlines for stamping eligible documents, including contracts, leases, share transfers and similar instruments. Failure to stamp within the required period renders such documents inadmissible in court and exposes them to back-duty assessments with penalties. In essence, an unstamped agreement has become not just a tax violation, but a potential business risk: it may be unenforceable when you most need legal protection.
When Things Go Wrong: Refunds, Waivers, and Appeals
No tax system, however advanced, is free of error. The drafters of the 2025 Act anticipated this and accordingly embedded clear mechanisms for redress and fairness.
Under Section 167, taxpayers who overpay or are wrongly assessed may apply for a refund, provided they do so within the prescribed limitation period (usually two years). Such claims must be supported by verifiable documentation and, once approved, are to be refunded or credited against future liabilities. In cases of hardship, Section 168(2) empowers the tax authority to grant waivers of surcharges or penalties in “exceptional and demonstrable circumstances.” These waivers are discretionary but governed by internal criteria to prevent abuse.
And if all else fails, your right to challenge an assessment remains intact. The Tax Appeal Tribunal (TAT), established under Sections 170–175, provides a structured, time-bound avenue for resolution. You must file an objection within 30 days of receiving your assessment notice. The process is strictly procedural: failure to object within time bars you from later appeal.
The Tribunal’s decision may be appealed to the Federal High Court on points of law only to ensure that disputes are decided efficiently without endless litigation.
How Taxpal Can Help
Navigating these new regulations doesn’t have to be overwhelming. Taxpal is a comprehensive tax management platform designed to simplify tax processes for individuals, corporations and payroll companies.
Their platform offers:
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To get started, visit their website and choose the option that suits you best, whether it’s a consultation or portal access. They will help you turn tax compliance from a burden into a manageable part of your business operations.
