Tax Law: N5 Million Fine for Contracts to Unregistered Firms

Companies and statutory bodies that award contracts to unregistered persons will now face a ₦5 million administrative penalty under Nigeria’s tax law.

The provision is contained in the Nigeria Tax Administration Act (NTAA), which stipulates that any taxable person who fails or refuses to register for tax will be penalised ₦50,000 in the first month of default and ₦25,000 for each subsequent month the failure continues.

Under the Act, organisations that award contracts to individuals or entities not registered for tax purposes will be liable to pay the ₦5m penalty.

The law also sets out sanctions for failure to file tax returns or for knowingly submitting incomplete or inaccurate returns. Such offenders are to pay ₦100,000 in the first month of default and ₦50,000 for every additional month the breach persists.

In addition, the Act provides that any taxpayer who, after 30 days’ notice, refuses to grant the relevant tax authority access to deploy technology will be liable to a ₦1 million penalty on the first day of default, with an additional ₦10,000 for each day the refusal continues.

The NTAA further states that failure to process a taxable supply through the fiscalisation system attracts a ₦200,000 penalty, plus 100 per cent of the tax due, alongside interest calculated at the prevailing Central Bank of Nigeria Monetary Policy Rate.

Persons required to collect, deduct or withhold tax but who fail to do so will also be penalised 40 per cent of the amount not deducted, while those who fail to make or properly notify tax attribution face a ₦1 million fine.

The Act adds that offenders convicted under its provisions risk up to three years’ imprisonment, or a fine of not less than the principal tax due plus a penalty of up to 50 per cent, or both.