Banks to Report Large Transactions to Tax Authorities in Nigeria
The Federal Government of Nigeria has directed banks and other financial institutions to report monthly transactions exceeding N25 million for individuals and N100 million for corporate entities to the tax authorities. This move aims to enhance transparency, improve tax compliance, and strengthen anti-money laundering measures in the financial system.
The directive requires financial institutions to submit quarterly returns to the Federal Inland Revenue Service (FIRS) specifying names and addresses of new and existing customers meeting the transaction thresholds. This will enable the FIRS to track and monitor large transactions, identify potential tax evaders, and improve tax revenue collection.
The move is part of broader efforts to strengthen Nigeria’s anti-money laundering framework and improve financial transparency. Nigeria was listed on the Financial Action Task Force (FATF) grey list in 2023 due to deficiencies in tackling money laundering and terrorism financing. The country has since made progress in addressing these concerns, and this directive is seen as a step towards further improving the financial system’s integrity.
The new tax system will take effect in January 2026, and the FIRS will be renamed the Nigeria Revenue Service (NRS). Banks will also act as third-party debt recovery agents, assisting in tax debt recovery when all legal avenues have been exhausted. This expanded role of banks is expected to improve tax compliance and revenue collection.
The directive is expected to have a significant impact on the financial system, particularly for individuals and businesses with large transactions. It is essential for taxpayers to ensure compliance with the new regulations to avoid penalties and fines. The government is working to implement the new tax system effectively, and stakeholders are advised to stay informed about the developments.
