Introduction

On June 26, 2025, President Bola Ahmed Tinubu GCFR of the Federal Republic of Nigeria signed four bills into law.

This brought the tax reforms to fruition, signaling the beginning of the most audacious fiscal transformation in decades.

The four landmark tax reform laws enacted are:

The Nigeria Tax Act (NTA)
The Nigeria Tax Administration Act (NTAA)
The Nigeria Revenue Service Act (NRSA)
The Joint Revenue Board Act (JRBA)

These reforms are set to take full effect from January 1, 2026. It aims to:

Simplify the country’s tax system
Enhance compliance
Promote fairness in the tax system
Boost revenue generation across the three tiers of government in Nigeria.

For internal audit practitioners in banks and other financial institutions, this new tax landscape presents both unique challenges as well as opportunities.

The reforms introduce sweeping changes, such as:

The consolidation of multiple levies into a single Development Levy
The mandatory adoption of electronic fiscal systems
The imposition of a minimum effective tax rate for large corporations operating in multiple jurisdictions.

These shifts demand recalibrating audit strategies, deeper engagement with tax compliance processes, and a proactive approach to risk management.

This piece explores the key provisions of the 2025 tax reforms and extracts their implications for internal auditors in Banks and other financial institutions.

The aim is to provide the insights needed to navigate the evolving regulatory landscape safely and strengthen organizational compliance.

In addition to contributing meaningfully to governance and fiscal accountability in the post-reform era.

Important Changes in the New Tax Laws

Internal Auditors, specifically those working in Banks and other Financial Institutions, need to fully understand what is changing and especially how it affects them.

This is crucial before planning audit strategies and compliance actions.

The following are key areas that they should be aware of.

For staff/employees, the applicable rates for Pay as You Earn (PAYE) have changed. The Consolidated Relief Allowance (CRA) (₦200,000 or 1% Gross Income (whichever is higher) + 20% of Gross Income) has been abolished. It has been replaced with a New progressive income tax bracket, full exemption of ₦800,000 annual income, and new rent relief (lower of ₦500,000 or 20% of rent paid). The new rates to be applied on taxable income (after allowable deductions like NHF, NHIS, pension, and life assurance) are as follows:

o First ₦0–₦800,000 ⇒ 0%

o ₦800,001–₦3,000,000 ⇒ 15%

o ₦3,000,001–₦12,000,000 ⇒ 18%

o ₦12,000,001–₦25,000,000 ⇒ 21%

o ₦25,000,001–₦50,000,000 ⇒ 23%

o Above ₦50,000,000 ⇒ 25%

During the audit of Payroll, Internal Auditors should ensure that the new rates are applied appropriately.

Under S56(b) of the Nigeria Tax Act 2025, the company income tax rate remains at 30%. However, it shall be reduced to 25% effective from a date to be determined by an executive order of the President on the advice of the National Economic Council. Internal Auditors should watch out for any updates and ensure full compliance by the Financial Control department.
There is also an Introduction of a 4% levy (on assessable profits) replacing many separate levies (such as Tertiary Education Tax, IT Levy, etc.).
Capital Gains Tax is no longer at a flat rate of 10%. Capital gains tax is now aligned based on the applicable income tax rate.
S147 of the Nigeria Tax Administration Act defines a “small business as a business that earns gross turnover of N100,000,000.00 or less per annum with a total fixed asset of less than N250,000,000.00. Provided that any business providing professional services shall not be classified as a small business.
The Federal Inland Revenue Service (FIRS) is renamed/re-mandated as NRS and given expanded powers and a unified procedural framework. Internal Auditors should ensure that this change is effected on applicable documents and platforms.
VAT rate remains at 7.5% with zero-rate or exemption of many essential goods/services (food, education, health, public transport) in the new regime. Penalties for non-compliance are strengthened. For instance, S100(2) prescribes an administrative penalty of N5,000,000.00 for a statutory body or company that awards a contract to an unregistered (for tax purposes) person. Internal Auditors should ensure that no contract is awarded to unregistered vendors.

Audit Risks Under the 2025 Nigerian Tax Reforms

The 2025 tax reforms recognize the important role of technology in everyday life.

It introduces a more digitized tax environment, which presents several audit risks that should be of concern to internal auditors:

The reforms introduce expanded digital tax-filing, enhanced cross-reference databases (TIN, NIN, BVN linkages), and broader tax scopes (including digital assets, non-resident service providers). This increases compliance burdens.
Additionally, the mandatory use of Electronic Fiscal Systems (EFS) for recording taxable supplies requires auditors to validate the system’s integrity and ensure reconciliation with general ledger records.
Auditors should review whether the bank has implemented systems and controls to capture required tax information/identification (TIN, BVN, NIN linkage, beneficial ownership, etc.)
Banks and other multinationals may be subject to the windfall tax on realized foreign-exchange gains (or gains from dealing in FX/revaluation) for FY2023-2025. The retrospective application (to profits already taxed under CIT) entails the risk of double taxation, penalties, and contingent liabilities.
Auditors should assess whether the bank has identified and measured its exposure to windfall tax.
- Thereafter, check the completeness and accuracy of the underlying FX gains data: realized vs unrealized, combined/trading vs separate, etc. (Differences in reporting may lead to audit risk)
The tax regime emphasizes stronger penalty/interest regimes for non-compliance, and more expansive disclosure obligations (e.g., beneficial ownership, controlled foreign companies), which raise documentation and audit trail requirements. For instance, under S107 of the Nigeria Tax Administration Act (NTAA) prescribes penalties for failure to remit tax deducted at source.
Attention should be paid to the accuracy and timeliness of filing tax returns and other issues to avoid regulatory sanctions.
The reforms raise uncertainty (transitional issues) around prior exemptions (for example, inter-bank and foreign-currency interest) where the law is silent/ambiguous, possibly leading to exposure. For instance, non-resident entities with a Permanent Establishment (PE) in Nigeria may face broader tax liabilities, including offshore components. Auditors must evaluate contract structures and revenue attribution.
Long-term intercompany loans now attract stamp duty. Auditors must scrutinize loan/facility documentation for compliance.

Compliance Strategies for Internal Auditors

It’s a fact that the tax reforms come with new challenges and risks. To mitigate these risks and ensure alignment with the new tax regime, internal auditors must adopt.

The following strategies will help protect their various organizations from exposure arising from regulatory sanctions:

Stakeholder Engagement: Collaborate with tax teams, Information Technology departments, Human Resources, and external advisors to maintain an integrated compliance approach.
Documentation and Recordkeeping: Reinforce documentation protocols to support claims for exemptions, incentives, and reliefs. Additionally, the timely filing of relevant returns should be further strengthened.
Capacity Building: Upskill finance, human resources, and Audit teams on the new tax laws and the implications on the organization. Auditors should specifically build capacity around digital taxation, virtual asset compliance, and cross-border tax rules.
Policy Alignment: Ensure internal tax policies align with the new laws, especially around changes in Development Levy, CGT, digital asset taxation, and other areas.
System Audits and Data Analytics: Conduct regular reviews of fiscal devices and integrate data analytics to detect anomalies in VAT filings and revenue recognition.

Applicable Sanctions and Enforcement Mechanisms

The Nigeria Tax Administration Act (NTAA) introduces stringent penalties for non-compliance.

Below are some of the applicable penalties as they relate to Banks and multinational corporations:

Offences with Relevant Section of NTAA/NTA	Applicable Penalty/Sanction	Relevant notes for banks
NTAA S100(1) – Failure to Register for Tax/ obtain Tax Identification	₦50,000 for the first month; ₦25,000 for each subsequent month of default.	Banks must ensure customer accounts, vendor records, etc, have valid Tax IDs and that the bank itself is registered.
NTAA S100(2) – Award of Contract to an Unregistered Person.	₦5,000,000 penalty.	Banks engaging in vendor contracts must ensure their counterparties are registered to avoid this penalty.
NTAA S101 – Failure to File Returns or knowingly Filing of inaccurate or incomplete returns.	₦100,000 for the first month; ₦50,000 for each subsequent month of default.	Banks must file all relevant returns (CIT, PAYE WHT, etc) timely and accurately.
NTAA S102 – Failure to Keep/Provide Books & Records when request	Company: ₦50,000; Individual: ₦10,000.	Banks should ensure their tax-bookkeeping, internal controls, and documentation interfaces meet the record-keeping requirements.
NTAA S103 – Refusal to Grant Access to Deploy technology after 30days of notice under this act.	₦1,000,000 on first day of default (after notice); ₦10,000/day thereafter.	Banks must be ready for electronic system links with tax authorities; non-compliance carries a heavy penalty.
NTAA S104 – Failure to process taxable supply through fiscalisation (e-invoicing) System where required.	₦200,000 + 100% of tax due + interest at the prevailing Central Bank of Nigeria (CBN) MPR.	If a bank has relevant taxable supplies subject to the fiscalisation system, it must comply to avoid this penalty.
NTAA S105 – Failure to Deduct Required Taxes	40% of the amount not deducted.	For banks: withholding tax (WHT) on payments (interest, fees) must be properly deducted; failure attracts a 40% penalty on the omitted amount.
NTAA S107 (1) – Failure to Remit Tax Deducted by the 21st day of the month immediately succeeding the month the amount was deducted.	(a) amount deducted/withheld but not remitted. (b) administrative penalty of 10% per annum of that amount (c) Interest at prevailing CBN MPR.	Critical for banks that deduct WHT on e.g., interest or fees, but fail to remit to the tax authority.
NTAA S108(1)(c) (Default of Notice Compliance) Failure to comply with tax notice / attend/provide answer to summons.	₦100,000 on first day of default + ₦10,000 for each subsequent day.	Banks must respond promptly to inquiries/requests from the tax authority to avoid this penalty.

Conclusion

The 2025 Nigerian tax reforms mark a pivotal shift in the country’s fiscal policy and regulatory landscape.

The role of Banks and other financial institutions cannot be downplayed in ensuring the successful implementation of the reforms.

For internal auditors, the reforms require a proactive, strategic approach to risk assessment, compliance monitoring, and stakeholder engagement.

This ensures their organizations play their part successfully.

By understanding the intricacies of the new tax laws and aligning audit practices accordingly, auditors can play a critical role in safeguarding organizational integrity.

It will enhance transparency and support Nigeria’s broader economic objectives.

Abdul-Raheem Momoh FCA CISA CFE

Internal Audit Lead at TAJBank

Gatekeepers News is not liable for opinions expressed in this article, they’re strictly the writer’s