Adebayo Gideo – Sunmola David & CO

Common CAC Filing Errors That Can Freeze Your Company in Nigeria (2026)

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In Nigeria’s current regulatory climate, compliance with the Corporate Affairs Commission (CAC) is more than routine paperwork — it is a statutory obligation under the Companies and Allied Matters Act (CAMA) 2020. Many business owners only discover compliance problems when they try to: At that moment, they are informed that their company has been flagged inactive or non-compliant. By then, a preventable oversight has already become a serious business interruption. Below are the most common CAC compliance errors — with the specific legal provisions involved. 1. Failure to File Annual Returns (Section 417 CAMA 2020) Section 417 of CAMA 2020 makes it clear: every company must file annual returns with the CAC, whether the company is active or dormant. There is no exemption for inactivity. When annual returns are not filed: Under Section 692 of CAMA 2020, the CAC has the power to strike off a company that fails to comply with statutory requirements. Many directors mistakenly believe that “no business activity” means “no filing requirement.” Legally, that assumption is incorrect. 2. Failure to Notify CAC of Changes in Directors or Shareholders (Sections 175 & 288 CAMA 2020) Business structures evolve — directors resign, new shareholders join, shares are transferred, or capital increases. However, Sections 175 and 288 of CAMA 2020 require companies to formally notify the CAC of such changes within the prescribed time. Common mistakes include: When these filings are not completed, there is a mismatch between: That inconsistency can delay transactions, trigger due diligence concerns, and complicate corporate governance processes. 3. Non-Disclosure of Persons with Significant Control (PSC) (Section 119 CAMA 2020) Section 119 of CAMA 2020 mandates disclosure of Persons with Significant Control (PSC) — commonly referred to as beneficial owners. This requirement was introduced to improve corporate transparency and align Nigeria with global anti-money laundering standards. Failure to disclose PSC details can: Beneficial ownership disclosure is no longer optional compliance — it is part of corporate credibility. 4. Abandoned or Rejected Portal Filings While not tied to a specific section alone, electronic filings submitted through the CAC portal must be properly completed and approved to satisfy statutory obligations under CAMA 2020. Frequent issues include: An incomplete or rejected filing does not satisfy statutory requirements. In law, it is treated as non-filing. Many companies believe they have complied — until a bank, regulator, or investor discovers the gap. 5. Failure to Maintain Statutory Registers (Sections 83 & 331 CAMA 2020) Beyond filings, CAMA also requires companies to maintain statutory registers. Under: In addition, PSC records must be properly documented under Section 119. Failure to maintain these registers may expose the company during: Good governance begins with proper record keeping. Legal Consequences of CAC Non-Compliance Where companies fail to meet obligations under CAMA 2020, the consequences may include: A company that is struck off ceases to legally exist — meaning it cannot sue, enter contracts, or operate lawfully. Even before striking off, non-compliance can effectively freeze operations. How to Prevent Your Company from Being Frozen To remain in good standing under CAMA 2020: ✔ File annual returns as required under Section 417✔ Notify CAC promptly of structural changes under Sections 175 & 288✔ Comply with PSC disclosure requirements under Section 119✔ Maintain statutory registers under Sections 83 & 331✔ Conduct periodic compliance reviews Proactive compliance protects your legal identity and business continuity Final Thoughts Incorporating a company is only the first step. Maintaining compliance under the Companies and Allied Matters Act 2020 is an ongoing legal responsibility. Non-compliance may not appear urgent — until it disrupts banking, contracts, funding, or regulatory approvals. At Sunmola David & Co, we conduct structured CAC compliance audits, regularize outstanding filings, and restore companies to good standing across Nigeria. Compliance is not paperwork.It is corporate protection.

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Clarification of Applicable VAT Rate under the Gazetted Tax Reform Acts

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VAT RATE POSITION FOR 2026‎This note clarifies the applicable Value Added Tax (VAT) rate for the 2026 fiscal year‎‎1. Legal Status The clarification above is particularly important in light of widespread public speculation and policy commentary surrounding tax reform in Nigeria. In fiscal matters, only provisions that have successfully passed through the full legislative process — passage by the National Assembly, presidential assent, and formal gazetting — possess binding legal authority. Any policy proposal, draft bill, consultation paper, or executive recommendation that does not complete this constitutional process remains legally inoperative.‎2. Unapproved Proposals In Nigeria’s tax administration framework, certainty and legality are fundamental principles. Tax rates cannot be adjusted by press briefings, committee recommendations, policy drafts, or media reports. The doctrine of legality in taxation requires that any imposition, variation, or increase in tax must be clearly enacted by statute. Consequently, unless and until the VAT rate is expressly amended in the body of an existing Act and duly gazetted, no administrative authority is empowered to enforce a different rate.‎The proposed escalation to 12.5% (2026–2029) and 15% (from 2030) formed part of pre-legislative discussions only and were not enacted.‎‎3. Applicable Rate From a compliance perspective, businesses must exercise caution not to rely on speculative projections or unofficial communications when determining VAT computations. Charging a rate higher than the legally prescribed 7.5% may expose businesses to refund claims, reputational risk, customer disputes, and possible regulatory complications. Conversely, undercharging based on misinformation could create exposure to assessments, penalties, and interest if the law were ever formally amended. It is also important to emphasize that tax reform conversations often involve phased proposals intended to stimulate economic debate. However, policy intention does not equal enforceable law. The distinction between legislative intent and enacted law must always be maintained in professional tax practice. ‎4. Statutory Reference For corporate governance purposes, finance departments, tax consultants, auditors, and compliance officers should ensure that their accounting systems, ERP configurations, invoice templates, and tax reporting schedules remain aligned strictly with the gazetted statutory rate. Internal circulars may be issued within organizations to prevent premature rate adjustments based on public discourse.‎VAT provisions are contained in the Value Added Tax sections of the Nigeria Tax Act, 2025, which reaffirm the existing rate without amendment.‎‎Conclusion Finally, continuous monitoring of official publications — including subsequent amendment Acts and Federal Government Gazettes — remains essential. Should any lawful amendment occur, implementation must only commence from the legally effective date specified in the amendment legislation.‎Until amended by a subsequent Act of the National Assembly and duly gazetted, 7.5% remains the only lawful VAT rate in Nigeria

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Stamp Duty Compliance Under the Nigeria Tax Act, 2025

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What Every Business and Property Owner Must Know The Nigeria Tax Act, 2025 (NTA) has significantly strengthened stamp duty enforcement in Nigeria. Stamp duty is no longer a routine administrative step — it is now a critical legal requirement that determines whether agreements are enforceable in court. Recent legal and commercial experiences show that unstamped documents are being rejected as evidence, causing businesses to lose otherwise valid claims and contractual rights. Stamp duty is a compulsory tax imposed on certain legal documents (“chargeable instruments”). A document that is not properly stamped may be: Legally inadmissibleUnenforceable Stamp duty applies not just to property deals but to many business transactions. (a) Shorter Stamping Timeline Most instruments must now be stamped within: 30 DAYS of execution (Previously 40 days under the old Stamp Duties Act).Late stamping now attracts stricter consequences. (b) Wider Scope of Transactions Covered Stamp duty now clearly applies to: Real property transfers, Intangible asset transfers (e.g., intellectual property, digital business assets, goodwill) Mineral and natural resource rights (oil, gas, solid minerals)Business restructuring documents; (mergers, consolidations, demergers) Barter and non-cash transactionsTax is based on fair market value, not just cash paid. (c) Principal Instrument Rule (Group Transactions) Where multiple documents relate to the same transaction: This prevents double taxation but requires proper structuring. General rule:The person who benefits from the transaction pays. For example: Stamp duty is charged either: (a) Ad Valorem (Based on Value) Example: Property or asset transfer: commonly 2% of consideration (b) Fixed Duty Under the Schedule, agreements and contracts not otherwise specified may attract a ₦1,000 fixed duty. No. It is a legal obligation and Failure to comply may lead to: Monthly penalties, Financial sanctions, Possible imprisonment under the Act,Court rejection of the document Under the NTA, courts are less willing to allow late validation of unstamped instruments. An unstamped document can result in: Lost court cases, Invalid security agreements, Disputes with vendors and investors, Regulatory exposure, Financial losses far exceeding the duty payable The cost of compliance is small. The cost of non-compliance can be catastrophic. STAMP DUTY COMPLIANCE CHECKLIST Every business should implement the following: Ensure all chargeable documents are stamped immediately after execution. Create an internal list of: Contracts, Leases, Loan agreements, Share transfers, Property documents, Business restructuring documents 3.Maintain a Stamp Duty Register Track: Document name, Date signed, Stamp duty amount, Date stamped, Receipt reference 4.Involve Tax Professionals Before Execution Especially for: Merger & Acquisition, Asset transfers, Joint Ventures, IP Transfers 5.Regularise Old Unstamped Agreements: (Do not wait until a dispute arises). 7.Treat Stamp Duty as Part of Execution: It should be done at signing, not as an afterthought. Conclusion Stamp duty compliance under the Nigeria Tax Act, 2025 is now a legal risk management issue, not just a tax matter. Proper stamping protects: Your contracts, Asset, Court rights, financial interests Businesses that ignore this requirement may discover too late that their strongest agreements carry no legal weight.

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Why Lagos Businesses Are Increasingly Exposed to Tax Enforcement Risks

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In recent months, enforcement intensity within Lagos has increased significantly. Businesses operating in Nigeria’s commercial capital must recognize that regulatory compliance is no longer optional. The Lagos State Internal Revenue Service (LIRS) has expanded monitoring mechanisms, while the Federal Inland Revenue Service (FIRS) continues to strengthen data matching across financial institutions. This shift means discrepancies between declared revenue and actual banking transactions are easier to detect. The Hidden Risks Affecting Lagos Companies Many companies assume that because they have not received audit letters, they are compliant. This assumption is dangerous. Common exposure areas include: • Under-remitted VAT• Withholding tax not deducted on contractor payments• Payroll inconsistencies• Failure to file CAC annual returns• Mismatch between turnover declared and bank inflows With Lagos hosting the largest concentration of SMEs, real estate firms, and trading companies in Nigeria, the enforcement spotlight is intense. Why Directors Should Be Concerned Regulatory exposure is not just corporate risk — it can become director-level liability. Board members must now demand periodic compliance health checks to ensure internal control systems are robust. The Way Forward Businesses should: Compliance is no longer reactive. It is strategic risk management.

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Why Nigerian Businesses Must Take Tax & Regulatory Compliance More Seriously in 2026

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In Nigeria’s evolving regulatory environment, tax and compliance obligations are no longer routine administrative tasks. They have become critical risk management priorities for businesses of all sizes. With the continued enforcement drive by the Federal Inland Revenue Service (FIRS), increased data integration across government agencies, and tighter monitoring from regulators such as the Corporate Affairs Commission (CAC), non-compliance is now more visible — and more costly. For many Nigerian companies, especially SMEs, compliance gaps are not deliberate. They often stem from poor record-keeping, misunderstanding of tax obligations, or failure to keep up with regulatory updates. However, ignorance no longer protects businesses from penalties. The Shift From Reactive to Proactive Enforcement In recent years, FIRS has strengthened its audit and enforcement mechanisms. Tax authorities now leverage banking data, VAT filings, withholding tax records, and third-party reporting systems to identify discrepancies. Businesses that previously operated below regulatory radar are now receiving compliance queries, back-tax assessments, and penalty notices. The era of “we will fix it when they ask” is over. Common Compliance Risks Businesses Face Why Compliance Is Now a Business Advantage Forward-thinking companies are beginning to treat compliance as a strategic asset rather than a burden. Strong compliance systems: In an economy where access to funding and credibility are essential, clean compliance records enhance corporate reputation. What Businesses Should Do Immediately Prevention is significantly cheaper than defending a regulatory investigation. The Bigger Picture Nigeria’s fiscal landscape continues to evolve. As government revenue targets increase, enforcement intensity will likely rise further. Businesses that delay compliance reform may find themselves facing avoidable financial and reputational damage. The question is no longer whether regulators will enforce compliance — but whether your business is prepared.

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TAX ADVISORY NOTICE FOR BUSINESSES AND INDIVIDUALS IN NIGERIA 2026

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ANNUAL PERSONAL INCOME TAX RETURNS (SELF-ASSESSMENT)Individuals, Professionals & Business Name Owners1️⃣ Correct Statutory DeadlineThe legal filing deadline is:31 March of every year — NOT 30 MarchThis is based on the Personal Income Tax Act requirement that taxpayers file returns within 90 days from the commencement of a new year of assessment.Tax authorities (LIRS, FCT-IRS and others) consistently confirm:All individuals must submit annual tax returns on or before March 31 each year 2️⃣ Who Must File? (Compulsory for Everyone)The annual return is mandatory for:• Employees (PAYE earners)• Sole proprietors / Business name owners• Professionals & freelancers• Informal sector operators (traders, artisans)• Individuals with multiple income sourcesThe return must disclose total income from all sources for the previous year. 3️⃣ Employees Under PAYE — Still Required to FileEven if tax is deducted monthly:PAYE covers only employment income.You must still declare:• Business income• Rent• Consultancy• Side hustle earnings• Investment income• Online income• Foreign incomeIf no additional income exists → No additional tax arisesBut filing remains compulsory. 4️⃣ Business Name Owners — How Tax Is AssessedA registered business name is NOT taxed separately.Legally:The profit of a business name is assessed in the hands of the individual owner.Therefore, the owner must declare:• Business profit• Other personal income• Combined total incomeThis is why it is called Personal Income Tax, not Business Name Tax. 5️⃣ Informal Sector AssessmentsPresumptive assessments (₦20,000 – ₦100,000 levies etc.) are not final taxation.The March filing allows the tax authority to:• determine actual income• regularise assessment• charge additional tax where applicable 6️⃣ Penalties for Failure to FileA. Under Personal Income Tax (Existing Law)Failure to file returns attracts:₦50,000 penalty for individuals B. Under the New Tax Reform / Tax Administration FrameworkThe new regime significantly increases sanctions:• ₦100,000 first month• *₦50,000 each additional month *Also:• False or incomplete returns → ₦50,000 – ₦500,000 fines 7️⃣ Key Practical MeaningThe filing is primarily a declaration obligation, not merely payment.Even if:• You paid PAYE• You paid informal tax• You earned nothing extraYou must still file the annual return. 📅 Filing Deadline31 March 2026 Need Assistance?We can prepare and submit your returns professionally.

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‎Ignoring a Tax Demand Letter in 2026: Legal Consequences Explained‎

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1. Introduction

‎One of the most persistent misconceptions among taxpayers in Nigeria is the belief that ignoring a tax demand letter carries no real consequence unless and until a court of law pronounces on the liability.

‎That belief is no longer correct.

‎With the enactment of the Nigeria Tax Reform Acts, 2025, particularly the Nigeria Tax Administration Act, 2025 (NTAA 2025), the legal consequences of ignoring a tax demand notice have become direct, immediate, and enforceable — even without court involvement.

‎This advisory explains the legal effect of ignoring a tax demand letter in 2026, the expanded enforcement powers of tax authorities, and the rights taxpayers risk losing through inaction.

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CAPITAL ALLOWANCE UNDER NIGERIA’S TAX REFORM

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WHAT BUSINESSES MUST KNOW FROM 2026
Nigeria’s tax landscape has entered a decisive new phase with the enactment of the Nigeria Tax Act, 2025, which takes effect from 1 January 2026. One of the most significant changes introduced by the Act is the complete overhaul of the capital allowance regime, a development with far-reaching implications for corporate taxpayers, investors, and financial reporting.
This article highlights the legal framework, structural changes, applicable rates, and compliance expectations under the new capital allowance regime, based strictly on the gazetted provisions approved by the National Assembly.

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NRS Releases Official Timeline for Nationwide E-Invoicing Rollout

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A Major Digital Reform in Nigeria’s Tax Administration Framework The Nigeria Revenue Service (NRS) has formally issued a Public Notice detailing the structured implementation timeline for the nationwide rollout of its E-Invoicing & Electronic Fiscal System (EFS), also known as the Merchant Buyer Solution (MBS). This reform marks a significant milestone in Nigeria’s digital tax transformation agenda and is designed to enhance transparency, strengthen revenue monitoring, reduce leakages, and promote voluntary compliance. The initiative is being implemented under the leadership of the Executive Chairman, Zacch Adedeji, and is backed by statutory authority under: Structured Phased Rollout Framework The implementation will follow a structured five-stage approach: Each stage is tied to defined turnover thresholds and carefully sequenced timelines to ensure orderly transition across taxpayer categories. Implementation Timeline by Taxpayer Category 1.Large Taxpayers Annual Turnover: Above ₦5 Billion The MBS officially went live for Large Taxpayers on 1st August 2025, following extensive stakeholder consultations and a pilot deployment that commenced in January 2025. In recognition of transitional considerations, implementation was extended to November 2025. Timeline Summary: Most large entities have commenced successful transmission of invoice data to the MBS platform. 2.Medium Taxpayers Annual Turnover: ₦1 Billion – ₦5 Billion Medium taxpayers will enter structured onboarding in 2026. Timeline Summary: Businesses within this category are advised to begin ERP system assessment and integration planning immediately. 3 Emerging Taxpayers Annual Turnover: Below ₦1 Billion Smaller businesses are scheduled for onboarding beginning 2027. Timeline Summary: The phased structure demonstrates regulatory sensitivity to scale and operational readiness. Important Regulatory Notes Strategic Implications for Businesses The e-invoicing regime will significantly alter Nigeria’s compliance landscape: 1. Real-Time Transaction Visibility Invoice data will be transmitted electronically to the tax authority, reducing manual intervention and manipulation. 2. Stronger Audit Trail Digital authentication enhances record integrity and supports risk-based audits. 3. ERP & Accounting System Integration Businesses must ensure their accounting systems are compatible with NRS integration requirements. 4. Increased Transparency Artificial expense inflation, VAT under-declaration, and fictitious invoicing schemes will become increasingly difficult. Conclusion The NRS phased e-invoicing rollout represents a structural reform in Nigeria’s tax ecosystem. It aligns Nigeria with global best practices in digital fiscal monitoring while strengthening domestic revenue mobilisation without increasing tax rates. Early preparation will position businesses for seamless compliance. Delayed action may expose organisations to operational disruption once enforcement begins. Professional readiness is now imperative.

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