NRS (FIRS) Tax Penalties in Nigeria: Complete Guide to Fines and Interest

Non-compliance with Nigerian tax laws comes at a cost. The Nigeria Revenue Service (NRS, formerly FIRS) imposes penalties ranging from fixed fines to percentage-based charges, plus interest on unpaid taxes. Understanding these penalties helps you avoid them and know your exposure when issues arise.

Overview of Nigerian Tax Penalties

Types of Penalties

Category	Description
Late filing penalties	Fines for missing filing deadlines
Late payment penalties	Charges for delayed tax payment
Interest	Time-value charge on unpaid taxes
Under-declaration penalties	Fines for understating tax liability
Non-compliance penalties	Fines for failing to meet obligations
Criminal penalties	Severe cases involving fraud

Penalty Philosophy

Nigerian tax penalties aim to:

• Encourage timely compliance
• Compensate government for delayed revenue
• Deter evasion and fraud
• Ensure fairness to compliant taxpayers

VAT Penalties

Late Filing of VAT Returns

Due Date: 21st of following month

Offense	Penalty
First month late	₦50,000
Each additional month	₦25,000
Maximum	No statutory cap

Example: Filed 3 months late:

• Month 1: ₦50,000
• Month 2: ₦25,000
• Month 3: ₦25,000
• Total penalty: ₦100,000

Late Payment of VAT

Offense	Penalty
Late payment	5% of tax due
Plus interest	At prevailing CBN rate

Example: VAT due: ₦500,000, paid 2 months late

• Late payment penalty: ₦25,000 (5%)
• Interest (assume 21% p.a.): ₦17,500 (2/12 × 21% × ₦500,000)
• Total additional cost: ₦42,500

Failure to Register for VAT

Offense	Penalty
Non-registration	₦50,000 first month
Continuing offense	₦25,000 each additional month
Plus: Full VAT liability	From when registration should have occurred

Failure to Issue VAT Invoice

Offense	Penalty
Not issuing invoice	₦50,000 per invoice

Failure to Notify Change of Address

Offense	Penalty
Not notifying within 90 days	₦25,000

WHT Penalties

Failure to Deduct WHT

Offense	Penalty
Not deducting WHT	Full WHT amount
Plus penalty	10% of WHT not deducted
Plus interest	At prevailing rate

Example: Payment of ₦1,000,000 should have had 10% WHT deducted:

• WHT not deducted: ₦100,000
• Penalty (10%): ₦10,000
• Total liability: ₦110,000 plus interest

Failure to Remit WHT

Offense	Penalty
Late remittance	10% of amount
Plus interest	At prevailing rate

Failure to File WHT Returns

Offense	Penalty
Late filing	₦25,000 first month
Each additional month	₦5,000

Company Income Tax (CIT) Penalties

Late Filing of CIT Returns

Due Date: 6 months after financial year end

Offense	Penalty
Late filing	₦50,000 first month
Each additional month	₦25,000

Late Payment of CIT

Offense	Penalty
Late payment	10% of tax due
Plus interest	At CBN Monetary Policy Rate

Example: CIT due: ₦2,000,000, paid 6 months late:

• Late payment penalty: ₦200,000 (10%)
• Interest (assume 21% p.a.): ₦210,000 (6/12 × 21% × ₦2,000,000)
• Total additional cost: ₦410,000

Failure to Keep Records

Offense	Penalty
Inadequate records	₦100,000
Plus: Best judgment assessment	NRS (Formerly FIRS) estimates liability

Incorrect Return (Under-declaration)

Offense	Penalty
Understating income	Additional tax assessed
Plus penalty	10% of understated amount
Plus interest	From when tax was due

PAYE Penalties

Failure to Deduct PAYE

Offense	Penalty
Not deducting	Full PAYE amount
Plus penalty	10% of PAYE not deducted
Plus interest	At prevailing rate

Late Remittance of PAYE

Due Date: 10th of following month

Offense	Penalty
Late remittance	10% of amount due
Plus interest	At prevailing rate

Failure to File Annual Returns (Form H1)

Due Date: January 31st

Offense	Penalty
Non-filing or late filing	Varies by state
Typical penalty	₦50,000 and above

Note: PAYE is administered by State Internal Revenue Services, so penalties may vary by state.

Tertiary Education Tax (TET) Penalties

Late Filing

Offense	Penalty
Late filing	Same as CIT
₦50,000 first month	₦25,000 each additional month

Late Payment

Offense	Penalty
Late payment	10% of tax due
Plus interest	At prevailing rate

Capital Gains Tax Penalties

Non-compliance

Offense	Penalty
Failure to file	Varies
Late payment	Interest at prevailing rate

Stamp Duty Penalties

Late Stamping

Offense	Penalty
Stamping after 40 days	Penalty varies
Unstamped documents	May be inadmissible in court

Interest on Unpaid Taxes

General Interest Rate

Interest is typically charged at the Central Bank of Nigeria (CBN) Monetary Policy Rate or a rate set by NRS (Formerly FIRS).

Component	Rate
Base rate	CBN Monetary Policy Rate
Current (approximate)	21% per annum
Calculation	Simple interest on outstanding amount

How Interest Accumulates

Example Calculation:

• Tax due: ₦1,000,000
• Due date: June 30, 2025
• Payment date: December 31, 2025
• Days overdue: 184 days (6 months)
• Interest rate: 21% per annum

Interest = ₦1,000,000 × 21% × (184/365) = ₦105,863

Criminal Penalties

Tax Evasion

For serious offenses involving fraud:

Offense	Penalty
Tax evasion	Fine and/or imprisonment
Maximum imprisonment	Up to 5 years
Fine	Up to ₦200,000 (in addition to tax due)

Fraudulent Documents

Offense	Penalty
False documents	Fine and/or imprisonment
Aiding tax evasion	Criminal prosecution

Director Liability

Situation	Consequence
Company default	Directors may be personally liable
Fraudulent activity	Criminal prosecution of individuals

Penalty Mitigation

Voluntary Disclosure

NRS (Formerly FIRS) may reduce penalties for voluntary disclosure:

Situation	Potential Benefit
Self-assessment errors	Reduced or waived penalties
Voluntary declaration	Good faith consideration
Before audit notification	Better treatment

Reasonable Cause

Penalties may be waived or reduced if:

• Circumstances beyond control
• Documented genuine reasons
• Good compliance history
• Error correction efforts

How to Request Mitigation

1. Write formal letter to NRS (Formerly FIRS)
2. Explain circumstances
3. Provide supporting documentation
4. Demonstrate good faith
5. Propose resolution

Avoiding Penalties

Best Practices

Practice	Benefit
File on time	Avoid filing penalties
Pay on time	Avoid payment penalties and interest
Keep accurate records	Support your filings
Review before submission	Avoid errors
Use professionals	Expert guidance
Automate calculations	Reduce errors

Common Mistakes to Avoid

1. Missing deadlines - Set reminders
2. Incorrect calculations - Double-check figures
3. Wrong forms - Use current versions
4. Incomplete filings - Include all schedules
5. Payment errors - Verify payment references

When to Seek Professional Help

• Complex tax situations
• Disputes with NRS (Formerly FIRS)
• Large potential penalties
• Voluntary disclosure situations
• Audit representation

Penalty Scenarios

Scenario 1: Small Business VAT Compliance

A business misses VAT filing for 4 months:

Item	Amount
VAT due	₦200,000
Filing penalty (4 months)	₦125,000
Late payment penalty (5%)	₦10,000
Interest (4 months at 21%)	₦14,000
Total liability	₦349,000

Original VAT was ₦200,000, but penalties increased it by 75%.

Scenario 2: CIT Late Filing

Company files CIT 3 months late:

Item	Amount
CIT due	₦5,000,000
Filing penalty (3 months)	₦100,000
Late payment penalty (10%)	₦500,000
Interest (3 months at 21%)	₦262,500
Total liability	₦5,862,500

Penalties added over 17% to the original tax.

Scenario 3: WHT Not Deducted

Company failed to deduct WHT on ₦10,000,000 payment:

Item	Amount
WHT should have been deducted	₦500,000
Penalty (10% of WHT)	₦50,000
Interest (6 months)	₦52,500
Total liability	₦602,500

Plus potential disallowance of expense for CIT purposes.

How Finora Helps You Avoid Penalties

Deadline Management

Feature	How It Helps
Compliance calendar	See all deadlines at a glance
Automated reminders	Email alerts before due dates
Status tracking	Know what's pending
Filing history	Track all submissions

Accurate Calculations

Finora calculates taxes automatically:

• VAT output and input
• WHT on payments
• PAYE on salaries
• CIT computation

Timely Filing Support

Prepare compliant returns:

• Pre-filled data from transactions
• NRS-ready formats
• Export capabilities
• Record keeping

Audit Trail

Complete documentation:

• All transactions recorded
• Supporting documents attached
• User activity logged
• Searchable records

Frequently Asked Questions

Can NRS (Formerly FIRS) waive penalties?

Yes, NRS (Formerly FIRS) has discretion to waive or reduce penalties in certain circumstances, such as reasonable cause, voluntary disclosure, or first-time offenses. Written application with supporting documentation is required.

How do I calculate interest on late payment?

Interest is typically calculated as: Outstanding amount × Interest rate × (Days late / 365). The rate is usually the CBN Monetary Policy Rate, currently around 21% per annum.

Are penalties tax deductible?

No, tax penalties and interest are not deductible expenses for CIT purposes. They are paid from after-tax profits.

What if I can't afford to pay?

Contact NRS (Formerly FIRS) to discuss payment arrangements. It's better to communicate than to ignore the obligation, which will result in additional penalties and interest.

Can directors be personally liable?

Yes, in cases of company default or fraud, directors can be held personally liable for company tax obligations.

Conclusion

Nigerian tax penalties can be substantial:

• Filing penalties accumulate monthly
• Payment penalties are percentage-based
• Interest compounds the cost
• Criminal penalties apply to fraud

Prevention is better than cure:

• Know your deadlines
• Calculate accurately
• File and pay on time
• Keep proper records
• Seek help when needed

Finora helps you avoid costly penalties through automated calculations, deadline tracking, and compliant return preparation.

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