Nigeria’s full implementation of sweeping tax reform laws is ushering in a new compliance era for businesses, with payroll, Value Added Tax (VAT) and Withholding Tax (WHT) emerging as the most urgent operational priorities. While the reforms bring modest relief for low-income earners, they also introduce stricter enforcement, automation requirements and stiffer penalties that companies can no longer afford to ignore.
Under the new Nigeria Tax Administration Act (NTA), individuals earning ₦800,000 or less annually are now exempt from income tax, while higher earners face a graduated tax structure capped at 25 per cent. For businesses, this means immediate changes to payroll systems. Speaking at the 2026 Nigeria Economic Outlook in Lagos, PwC Partner for Tax Reporting and Strategy, Kenneth Erikume, warned that payroll logic must be updated before month-end salaries are paid, as errors could trigger costly sanctions.
Erikume explained that employees earning below ₦25 million annually are likely to see an increase in take-home pay, while those above that threshold will face higher tax deductions. This, he said, creates not just a technical payroll challenge but a human capital issue, as companies must decide whether to absorb part of the increased tax burden for higher-paid staff. “Payroll is the most urgent issue and must be addressed immediately,” he stressed.
Beyond payroll, VAT reforms present both risks and opportunities. The new law expands the scope of reclaimable input VAT to include services, fixed assets and overheads, potentially reducing costs by up to 7.5 per cent for many companies. However, Erikume warned that businesses must update their accounting systems to correctly treat VAT as a recoverable asset rather than an expense. Failure to do so could mean missing out on significant savings, even as enforcement tightens through mandatory electronic invoicing.
Withholding Tax compliance has also become far more unforgiving. Companies that fail to deduct or remit WHT correctly now face penalties of up to 40 per cent, plus interest and possible criminal liability. Experts, including corporate lawyer Nneoma Agwu-Okoro, have urged firms—especially fintechs and high-volume transaction businesses—to automate tax processes, strengthen vendor verification through Tax Identification Numbers (TINs), and maintain clear audit trails. In a system increasingly driven by data cross-checks and automation, proactive compliance is no longer optional but essential for survival.
source: punch