In a major development affecting both individuals and businesses, Nigerian banks are now required to report customer accounts with monthly transactions exceeding ₦5 million to the Federal Inland Revenue Service (FIRS). This directive, recently announced by the National Orientation Agency (NOA), forms part of the 2025 Tax Reform Act aimed at enhancing tax compliance and promoting fiscal transparency.
Key Highlights of the Reform
Under Section 30 of the Act, commercial banks must submit monthly reports of high-value transactions to FIRS and other relevant tax authorities. The objective is to strengthen oversight, reduce tax evasion, and align Nigeria’s tax system with global best practices.
The NOA emphasized via its official social media channel that this measure is a strategic move to ensure all taxable income is accurately reported and accounted for—particularly from the informal and high-net-worth segments of the economy.
Expanded Tax Relief for Low-Income Earners
In addition to enhanced reporting requirements, the reform introduces several taxpayer-friendly provisions:
- Personal Income Tax Exemption Raised: Individuals earning up to ₦800,000 annually (₦66,667 monthly) are now exempt from personal income tax, up from the previous ₦500,000 threshold.
- Capital Gains Exemption: Under Section 31, capital gains from the sale of a primary residence are no longer taxable.
- Compensation Exclusion: Section 50 exempts up to ₦10 million in compensation for injury, job loss, or defamation from taxable income—offering greater financial protection to individuals in difficult circumstances.
Revised VAT Sharing Formula Starting 2026
From 2026, a new Value-Added Tax (VAT) revenue distribution model will take effect:
- Federal Government: 10% (down from 15%)
- State Governments: 55% (up from 50%)
- Shared: 50% equally, 20% based on population, 30% based on consumption
- Local Governments: 35% (unchanged)
This new model is designed to reward states that generate higher consumption levels, such as Lagos and Rivers, encouraging state governments to drive local economic activity and boost internally generated revenue.
Implications for Taxpayers and Financial Institutions
The dual focus on improved revenue collection and equitable redistribution signals a significant shift in Nigeria’s tax policy. Analysts suggest that these reforms could expand the country’s tax base without overburdening low-income earners.
However, concerns around data privacy have also been raised. Financial institutions and privacy advocates are urging the government to issue clear guidelines to ensure customer data is protected and that the new reporting system is not misused.
Looking Ahead
With implementation set to begin in 2026, businesses and individuals are encouraged to review their financial activities and ensure full compliance. Our firm is closely monitoring developments and is available to support clients in understanding how these changes may affect their tax obligations and financial strategies.
For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
