Late VAT Filing Penalties in Nigeria: What You'll Pay and How to Avoid Them

Missing VAT filing deadlines in Nigeria can be expensive. The Nigeria Revenue Service (NRS), formerly known as FIRS, imposes significant penalties on businesses that fail to file or pay VAT on time. This guide explains the penalty structure and provides practical strategies to stay compliant.

VAT Filing Deadline Reminder

VAT returns must be filed by the 21st of the month following the transaction period. For example:

• January transactions → File by February 21st
• June transactions → File by July 21st

Both filing and payment must be completed by this deadline.

Penalty Structure for Late Filing

Late Filing Penalty

If you fail to file your VAT return by the 21st:

Offense	Penalty
First month late	₦50,000
Each subsequent month	₦25,000
Maximum penalty	12 months (₦325,000)

These penalties apply regardless of whether you owe VAT or have a credit balance.

Late Payment Penalty

If you file on time but pay late:

Penalty Type	Rate
Initial penalty	10% of VAT due
Interest	CBN Monetary Policy Rate + spread

As of 2024, the interest rate is approximately 18-20% per annum, calculated daily.

Example: 3-Month Late Filing with Payment

A business owes ₦100,000 in VAT for January but files and pays in May:

Penalty Component	Amount
Late filing (1st month)	₦50,000
Late filing (2nd month)	₦25,000
Late filing (3rd month)	₦25,000
Late payment (10%)	₦10,000
Interest (4 months @ 20% p.a.)	₦6,667
Total penalties	₦116,667

The original ₦100,000 tax bill has grown to ₦216,667—more than double!

Failure to Register Penalties

If your business exceeds the ₦25 million threshold but fails to register:

Offense	Penalty
Failure to register (1st month)	₦10,000
Each subsequent month	₦5,000
Plus	Back-dated VAT assessment with interest

NRS (Formerly FIRS) can assess VAT on all taxable supplies made since you should have registered, plus interest.

Penalty for Nil Returns

Even if you have no VAT transactions for a month, you must file a nil return. Failure to file a nil return by the deadline attracts the same penalties as late filing with transactions.

Additional Compliance Offenses

Failure to Issue VAT Invoices

If you don't issue proper VAT invoices:

• Penalty: ₦5,000 per transaction
• Can accumulate quickly with many transactions

Incorrect VAT Return

Filing an incorrect return (whether intentional or not):

• 10% of underpaid VAT
• Plus interest from the original due date
• Potential criminal charges if fraud is suspected

Failure to Keep Records

Not maintaining proper records for the required 6 years:

• Penalty: Up to ₦50,000
• Potential disallowance of input VAT claims

How Penalties Are Collected

NRS (Formerly FIRS) can enforce penalties through:

1. Direct assessment added to your tax liability
2. Withholding from refunds or credits
3. Bank account garnishment for persistent non-compliance
4. Legal action for large outstanding amounts
5. Travel restrictions for directors in extreme cases

Strategies to Avoid Penalties

1. Set Up a Filing Calendar

Mark these dates in your calendar:

• 15th of each month: Begin preparing VAT return
• 18th of each month: Final review and approval
• 20th of each month: Submit and pay (one day buffer)

2. Maintain Real-Time Records

Don't wait until month-end to record transactions. Keep your books up-to-date throughout the month to make filing easier.

3. Automate Reminders

Use automated systems to remind you of deadlines. Finora sends you:

• 7-day advance warning
• 3-day reminder
• Same-day alert if not filed

4. File Nil Returns Promptly

If you have no transactions, file your nil return early in the month. Don't wait until the deadline.

5. Separate VAT Funds

Keep collected VAT in a separate account. This ensures you always have funds available for payment and reduces the temptation to use VAT money for operations.

6. Use Professional Help

If you're struggling with compliance, engage a tax professional or use accounting software designed for Nigerian tax requirements.

What to Do If You're Already Late

Step 1: File Immediately

Stop the clock on additional monthly penalties by filing as soon as possible, even if you can't pay yet.

Step 2: Calculate What You Owe

Determine the total amount including:

• Original VAT
• Late filing penalties
• Late payment penalties (if applicable)
• Interest to date

Step 3: Pay What You Can

If you can't pay everything, pay what you can. Partial payment stops additional late payment penalties from accruing on the amount paid.

Step 4: Request a Payment Plan

For large outstanding amounts, you may be able to negotiate a payment plan with NRS (Formerly FIRS). Contact their office with:

• Your financial records
• A proposed payment schedule
• Commitment to current compliance

Step 5: Avoid Future Lapses

Put systems in place to prevent recurrence. The penalties for repeat offenders can be more severe.

NRS Penalty Waivers

In limited circumstances, NRS (Formerly FIRS) may waive penalties:

• Natural disasters affecting your business
• System failures during online filing
• First-time offenders (at NRS discretion)
• Voluntary disclosure of errors before audit

To request a waiver:

1. Write a formal letter to NRS
2. Explain the circumstances
3. Provide supporting evidence
4. Show your compliance history
5. Demonstrate corrective measures taken

Waivers are not guaranteed and are granted at NRS's discretion.

How Finora Prevents Late Filing

Finora is designed to eliminate late filing penalties:

Automated Deadline Tracking

Finora tracks all your tax deadlines:

• VAT returns (21st monthly)
• WHT remittances
• CIT installments
• PAYE payments

Smart Reminders

Receive timely notifications:

• Email alerts 7 days before deadline
• Dashboard warnings
• Mobile push notifications (if app installed)

One-Click Filing Preparation

Generate your VAT return in seconds:

• All data pre-populated from your transactions
• Automatic calculation of input and output VAT
• NRS-compliant format ready to submit

VAT Liability Forecasting

See your estimated VAT payable throughout the month. No surprises at filing time.

Historical Compliance Tracking

Monitor your filing history:

• All returns filed on time
• Any late filings highlighted
• Trend analysis for your VAT position

Frequently Asked Questions

Can interest be waived even if penalties aren't?

Interest is generally not waived as it represents the time value of money owed to the government. Penalties may be waived in genuine hardship cases.

What if I can't afford to pay my VAT?

File on time to avoid filing penalties. Then contact NRS (Formerly FIRS) to discuss payment options. Continuing to ignore the obligation will only increase the amount owed.

Do penalties apply to VAT credits?

Yes, late filing penalties apply even if you have a VAT credit (input exceeds output). The filing obligation exists regardless of whether you owe money.

Can penalties exceed the tax owed?

For small VAT amounts, penalties can indeed exceed the original tax. This is why even businesses with modest VAT liabilities must prioritize timely filing.

Is there a grace period after the 21st?

No. The deadline is strict. There is no grace period, even if the 21st falls on a weekend or holiday.

Conclusion

VAT penalties in Nigeria can quickly escalate from minor inconvenience to significant financial burden. The combination of fixed filing penalties, percentage-based payment penalties, and accumulating interest means that even short delays can be costly.

The best strategy is prevention. With proper systems, reminders, and real-time record keeping, you can file accurately and on time every month.

Finora makes this automatic. Our platform tracks deadlines, prepares returns, and alerts you before you're at risk of penalties.

---

Never pay late filing penalties again

Get started for free and let Finora's automated reminders and one-click filing keep you compliant with NRS (Formerly FIRS) deadlines.

Try Finora Free →