Starting January 2026, Nigerian banks will be required to report customer accounts with monthly transactions exceeding ₦5 million to the Federal Inland Revenue Service (FIRS) and other relevant tax authorities. This move aims to enhance tax compliance, promote fiscal transparency, and align Nigeria’s tax system with global best practices.
Key Highlights of the New Tax Law
- Transaction Reporting: Banks will report monthly transactions above ₦5 million to FIRS.
- VAT Distribution Model: A new Value-Added Tax (VAT) revenue distribution model will take effect in 2026, with:
- Federal Government: 10% (down from 15%)
- State Governments: 55% (up from 50%)
- Local Governments: 35% (unchanged)
- Tax Relief: Individuals earning up to ₦800,000 annually (₦66,667 monthly) are exempt from personal income tax.
- Capital Gains Exemption: Capital gains from the sale of a primary residence are no longer taxable.
- Compensation Exclusion: Compensation up to ₦10 million for injury, job loss, or defamation is excluded from taxable income.
Implications
This new tax law is expected to improve the government’s ability to track unreported income and enhance revenue generation from the informal and high-net-worth segments of the economy. However, concerns have been raised about data protection, and financial institutions are urging the government to issue clear guidelines to ensure customer data is protected ¹.
What to Expect
As implementation begins in 2026, stakeholders will be watching closely to gauge the impact on compliance rates, government revenue, and consumer behavior. The success of this new tax law will depend on effective implementation and the ability of banks to accurately report transactions.
