Under the new Nigeria Tax Act, 2025, financial institutions now play an active role in tax collection, taxpayer identification and fiscal intelligence.
1. Now Statutory Agents
The Nigeria Tax Act, 2025, gives explicit recognition to banks and other financial institutions as “tax intermediaries” under Sections 109–113. This means that, legally, banks, besides being neutral facilitators of transactions, are also statutory agents bound by law to assist the government in:
- Verifying taxpayer identity before account opening,
- Linking every account to a valid Tax Identification Number (TIN),
- Providing transaction information for tax assessments or investigations, and
- Ensuring that payments designated as taxes reach the proper government accounts through the Single Tax Account (STA) system.
The logic is that if tax administration is to be digital, it must rest upon the infrastructure already built by the banking system.
2. Mandatory TIN Verification for Account Holders
One of the most practical and transformative provisions of the new law is the mandatory linkage of bank accounts to the TIN. According to the NTAA: “No financial institution shall open or operate any account for any person or body corporate unless such person has furnished a valid Tax Identification Number.”
This applies to both individuals and businesses. For individuals, the TIN may be drawn automatically from their National Identification Number (NIN) database. For companies, it must correspond with the registration details from the Corporate Affairs Commission (CAC). In essence, no TIN, no account.
3. Channels for the Single Tax Account (STA)
Banks are now the primary conduits through which taxpayers make payments into their Single Tax Accounts. Under the STA model, every tax payment — whether for VAT, income tax, or PAYE — must go through an approved financial institution or payment processor.
Banks are responsible for real-time remittance of tax proceeds to the designated government account. The bank’s system interfaces directly with the NRS e-Tax platform to instantly generate receipts and automatically record transactions in the taxpayer’s STA profile. This reform eliminates manual reconciliations and the delays that once characterized tax remittance.
4. Duty to Report and Share Information
Another significant change is the mandatory reporting obligation imposed on banks. Under Sections 112–113 of the Act, financial institutions must periodically provide tax authorities with:
- Lists of new accounts opened,
- Transaction summaries of high-value accounts,
- Details of foreign transfers, and
- Information relevant to tax investigations, when requested.
This reporting framework aligns Nigeria with the global Common Reporting Standard (CRS) and Automatic Exchange of Information (AEOI) regimes. These international mechanisms allow governments to track offshore assets and undeclared income. Crucially, the law also balances this duty with privacy safeguards: the tax authority can only use the data for tax purposes and must keep it confidential unless a court authorizes disclosure or the taxpayer consents.
5. The “Know Your Taxpayer” (KYT) Requirement
The new law introduces what can be called a “Know Your Taxpayer” (KYT) obligation, that is, the fiscal twin of the existing Know Your Customer (KYC) rule in banking. Just as banks must verify a customer’s identity before onboarding, they must now verify the tax identity of every client. This includes confirming the validity of the TIN through the NRS or JTB database, ensuring that the taxpayer’s name, address, and business registration match official records, and flagging discrepancies that may indicate tax evasion or fraud.
6. Role in Tax Collection and Withholding
The NRS and State Internal Revenue Services (SIRS) now authorize banks to act as collection agents for certain types of taxes, particularly: withholding Taxes, Value Added Tax (VAT) on certain digital transactions, and Stamp Duties on electronic transfers and documents.
In practice, this means that when a qualifying transaction occurs, the bank can deduct the applicable tax at source and remit it directly to the relevant authority. This automatic deduction system, already used for electronic transfers above specified thresholds, is now extended and formalized under the 2025 Act.
7. Collaboration With the NRS and Anti-Fraud Agencies
Banks are now embedded within a broader network of fiscal enforcement. The National Tax Compliance and Enforcement Unit (NTCEU), established under the 2025 Act, works closely with banks, the Central Bank of Nigeria (CBN), and the Economic and Financial Crimes Commission (EFCC) to trace and recover unpaid taxes.
Through this collaboration:
- Banks can be instructed to freeze or place liens on accounts linked to confirmed tax debts, pending resolution.
- Tax recovery orders can be executed electronically, reducing the need for physical court orders.
- Suspicious financial activity suggestive of tax evasion can trigger compliance investigations.
8. Protecting Taxpayer Privacy and Banking Secrecy
The law carefully balances enforcement with rights protection. Section 114 of the NTA establishes that:“No information obtained under this Act shall be disclosed to any unauthorized person except for the purpose of tax administration or by order of a competent court.”
Thus, while banks must cooperate with tax authorities, they are equally bound to protect taxpayer confidentiality.
What this Means for Businesses and Individuals
For the ordinary taxpayer, these reforms mean:
- A more accountable tax environment — your bank transactions now reflect your fiscal footprint.
- Easier compliance — taxes can be paid directly through your bank’s online platform.
- Less paperwork — automatic receipts and digital records replace manual filings.
For businesses, especially SMEs:
- Cash-based operations will increasingly face scrutiny, this will help push more enterprises into the formal economy.
- Consistent use of your STA through your bank builds a digital reputation for fiscal integrity, which could influence access to credit and partnerships.
At A Glance
| Function | Old Role | New Role (2025 Act) |
|---|---|---|
| Account Opening | Basic KYC | KYC + Mandatory TIN Verification (KYT) |
| Tax Payment | Manual deposit into government accounts | Digital payment through Single Tax Account (STA) |
| Record Sharing | Optional and limited | Mandatory periodic reporting to FIRS/SIRS |
| Tax Collection | Indirect | Direct deduction (withholding, VAT, stamp duty) |
| Enforcement | None | Can freeze accounts on lawful instruction |
| Privacy | General confidentiality | Statutory confidentiality with enforcement exceptions |
