Tax Compliance in Nigeria: Complete 2025 Guide for SMEs

By Ngozi Uche | Updated: November 2025

Tax compliance in Nigeria is often the difference between a business that scales and one that bleeds cash on penalties. If you run an SME, you juggle sales, staff, and operations—yet missing a single VAT filing or PAYE remittance can trigger fines, bank holds, or even audit headaches. This expert guide (10+ years working with Nigerian SMEs) shows you exactly how to stay compliant, protect your cash flow, and keep lenders and investors confident. Our focus keyword is tax compliance in Nigeria, and you'll see practical steps tailored to small businesses.

Why Tax Compliance in Nigeria Matters for SMEs

Late returns and unpaid liabilities choke cash flow. Banks ask for evidence of VAT/PAYE remittances before granting loans. Corporate customers demand WHT credit notes. Staying ahead of obligations reduces risk, unlocks financing, and keeps your reputation clean.

• Fines stack quickly: VAT late filing attracts daily interest; PAYE penalties differ by state but hurt margins.
• Contracts at risk: Many procurement teams request tax clearance and WHT credit notes before payment.
• Bank compliance: Lenders and payment processors review CAC + TIN + VAT/PAYE evidence before onboarding.

Registration: Set Up Your Tax Foundation

Before you file, register correctly. This is the first pillar of tax compliance in Nigeria.

1. CAC Incorporation: Required for TIN and bank accounts.
2. TIN (Tax Identification Number): Obtain from FIRS (often auto-generated on newer CAC certificates).
3. VAT Registration: Mandatory when turnover exceeds ₦25m; voluntary registration is allowed and can help with input VAT claims.
4. PAYE Setup: Register with your State Internal Revenue Service (SIRS) to remit employee PAYE.
5. WHT & Stamp Duty: No separate registration, but ensure your bank stamp duty and WHT obligations are understood.

Keep soft copies (PDF) of CAC docs, TIN, VAT certificate, and SIRS PAYE registration in a shared drive for onboarding vendors or banks.

Know Your Core Taxes (What, When, How)

Here are the main taxes that affect SMEs and how to treat them.

VAT (Value Added Tax) – 7.5%

• Charge VAT on vatable supplies; issue VAT-compliant invoices showing TIN and VAT number.
• File and pay monthly by the 21st of the following month via FIRS e-filing or approved banks.
• Claim input VAT on allowable business expenses; keep receipts showing supplier TIN.

CIT (Companies Income Tax)

• Small companies (turnover ≤ ₦25m): 0% CIT; Medium (₦25m–₦100m): 20%; Large (>₦100m): 30%.
• File annual returns within six months after financial year-end.
• Consider quarterly instalments to spread cash impact.

PIT/PAYE (Personal Income Tax for Employees)

• Deduct PAYE monthly using the graduated PAYE rates; remit to the relevant SIRS (Lagos, FCT, etc.).
• Typical remittance window: by 10th–15th of the following month (confirm your state rule).
• Issue pay slips and keep schedules; they are audit evidence.

WHT (Withholding Tax)

• Deduct 5% (services) or 10% (rent, dividends) on qualifying payments.
• Remit monthly to FIRS or SIRS, depending on the transaction.
• Collect and give WHT credit notes—vendors need them to offset their CIT/PIT.

Stamp Duty & Others

• Stamp duty may apply on share capital increases, leases, and certain bank transactions.
• Industry-specific levies (e.g., NSITF, ITF) may apply if you meet staff thresholds.

Filing Calendar & Cash Flow Planning

Tax compliance in Nigeria gets easier with a predictable calendar.

Set calendar reminders and assign an owner. Pair filings with a cash flow forecast so tax outflows do not surprise payroll or inventory purchases.

Systems, Evidence, and Audit Readiness

• Invoice discipline: Show TIN, VAT number, address, and clear line items.
• Receipts and schedules: Save e-receipts for VAT/PAYE/WHT; store WHT credit notes.
• Books: Use simple tools (e.g., Wave, Zoho Books, Excel with controls) to track sales and input VAT.
• Reconciliations: Monthly VAT reconciliation (output vs input), payroll vs PAYE schedule, bank vs ledgers.

Sector-Specific Tips

Services & Agencies

Clients will withhold WHT; insist on credit notes. Factor WHT into pricing so margins survive the deduction.

E-commerce & Retail

Track VAT on online sales; ensure POS/aggregators provide VAT reports. Keep proof of input VAT on inventory for claims.

Contractors/Consultants

Expect 5% WHT on fees. Maintain clean invoices and follow up for credit notes to offset future taxes.

Penalties, Audits, and How to Stay Safe

• Late VAT/PAYE: Daily interest and penalties; chronic default can trigger account liens.
• Wrong rates: Misapplied WHT or PAYE bands can lead to back taxes.
• No evidence: Missing e-receipts or credit notes makes reconciliations painful in audits.
• Fix quickly: If you miss a filing, submit ASAP and engage FIRS/SIRS to agree on penalties rather than wait.

Actionable Compliance Checklist

• Obtain CAC, TIN, VAT certificate, PAYE registration.
• Set monthly reminders for VAT (21st), PAYE (state deadline), WHT (monthly).
• Standardize invoices with TIN/VAT details.
• Store all e-receipts, credit notes, and schedules in a shared folder.
• Reconcile VAT, payroll, and bank monthly.
• Review pricing to account for WHT and VAT where applicable.
• Engage a tax professional yearly for a mini-audit.

Conclusion: Tax compliance in Nigeria does not have to drain your time. With the right setup, calendar, and documentation, you can avoid penalties, keep cash flowing, and earn trust with banks and enterprise customers. For expert help, find a vetted accountant or tax consultant on 9jaDirectory and keep your business future-proof.

FAQs

1) When must I register for VAT?
Once your annual turnover exceeds ₦25m, registration is mandatory; you can also register voluntarily to claim input VAT.

2) How often do I file VAT and PAYE?
VAT is monthly by the 21st with FIRS; PAYE is monthly to your State IRS (often by the 10th–15th—confirm locally).

3) What if I miss a deadline?
File and pay immediately, expect penalties/interest, and keep proof of payment. Engage FIRS/SIRS early to resolve outstanding items.