Tax offences, penalties and enforcement: the figures and the powers

A company files its return four months late, pays its tax three months late, cannot produce its books when asked, and refuses the Service access to its system for two weeks. Each failure has its own penalty, and the penalties add up. A director who knew about it may face a fine or prison. The revenue can also take goods, sell land, sue, or stop a ship.

Exam questions give a set of facts and ask for the penalty on each, so the figures have to be exact.

This topic covers the penalties for late filing, for failing to keep or produce records, for obstructing access, for late payment, for bank and broker returns, the personal liability of officers, and the methods the revenue uses to recover tax. The previous topic covered the TIN and registration. The next covers tax audit and investigation.

Key terms in plain English

Syllabus check

This topic is in syllabus area B, tax administration. It covers:

• penalties for late filing, records and payment
• personal liability of officers
• methods of recovering tax

CAMA 2020 and tax compliance

The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.

The rules in more depth

Penalties for returns and records

Books and records (section 63)

Every company, even an exempt one, must keep books and records with enough information on all transactions. They must be in English, in the format the Service prescribes; a record in another language must be translated at the company’s cost by a sworn translator on request.

If the Service thinks the books are inadequate, it may require the company to keep records in a form it states. The direction can be objected to and appealed like an assessment. Books must be kept for at least six years after the year of assessment to which the income relates.

The Service may use technology to gather information, and must give 30 days’ notice before it accesses a taxpayer’s information system. The taxpayer may explain why access is refused, and the Service may withdraw the notice if the reason is good.

Other returns

A bank delivers a quarterly return to the Service within seven days of the return date, with the names and addresses of new customers, and reports deposits above ₦5,000,000 (individuals) and ₦10,000,000 (corporate customers).

A stockbroker on the floor of the exchange files a return within seven days of each month end, giving primary market transactions (type of offer, services, tax deducted, VAT) and secondary market transactions (number and value, commission, tax deducted, VAT).

Late payment

If tax assessed is not paid on time, the company pays a penalty of 10% a year of the tax, and interest at the bank lending rate from the due date. The penalty and interest are payable within one month of the demand notice, and failure to pay within that month is an offence.

Where the tax is paid in instalments, the last instalment must be paid by the filing date, and unpaid sums after the due date bear penalty and interest.

Confidentiality

A person in the administration of the Act, or with access to taxpayer information, must treat it as secret and confidential (section 50 of the FIRS Act, as amended by the Finance Act 2021).

Enforcement by the revenue

1. Distraint on goods. The Service may distrain on the taxpayer’s goods, chattels, bonds or securities, and on land, premises and places he owns. If the taxpayer does not pay the tax, costs and charges within 14 days of the goods being kept, they may be sold, and the tax and costs recovered.
2. Court action. The Service may sue for the tax in a court of competent jurisdiction.
3. Ship owners. If a ship owner or charterer is in default for more than three months, the Service issues a certificate to the Customs, which may deny clearance, that is, detain the ship. The tax must be final and conclusive, the notice of assessment and a demand notice must have been served, and the company must have failed to pay in time.
4. Additional assessment. Within the year or six years after, as often as necessary; the six years can restart on each further finding.
5. Back duty assessment. Where there is fraud, wilful default or neglect, the Service may assess additional tax without time limit, although a Tax Appeal Tribunal decision has said that fraud, wilful default or neglect must first be established by a tribunal or court.
6. Best of judgement and jeopardy assessments where returns are unsatisfactory or missing, or in urgent cases such as an impending sale or liquidation.

Rewards for early payment

A company that pays its tax 90 days before the due date for filing gets a bonus credit against future tax: 2% of the tax paid if a medium-sized company, and 1% for any other company. Unpaid tax at the due date attracts interest and penalties.

Currency and timing

Tax is paid in the currency of the transaction. Tax assessed by the Service is due within 30 days of the notice, and in any case by 14 December of the assessment year for any balance still due then. If an objection is lodged, the tax in dispute is held back, but the company pays the provisional tax or the undisputed tax, whichever is higher.

Offences under the Personal Income Tax Act, for comparison

For individuals, sole traders, partners and trustees, the offences are in the Personal Income Tax Act. Failing to deduct tax at source on rent, interest, dividend or directors’ fees, or to remit it within 30 days, brings a penalty of 10% or ₦5,000, whichever is higher, plus the tax and interest. An employer who fails to deduct PAYE owes the amount with 10% a year and interest as a debt to the revenue.

A general default carries ₦20,000, and ₦2,000 a day for failing to file a return or keep records. An incorrect return costs ₦20,000 and double the tax undercharged. A false statement costs ₦50,000 for an individual and ₦500,000 for a company, or six months in prison. These are separate from the company penalties above and are used when the question concerns an individual.

Why the penalties are built this way

The penalty for late filing is small after the first month, because its purpose is to make the company file, not to bankrupt it. The penalty for failing to produce books is larger, because without books the Service cannot check the return at all. The daily penalty for blocking access is a pressure device that grows each day until the taxpayer co-operates.

The penalty on late tax is a percentage of the tax, so it grows with the size of the default, and the interest compensates the revenue for the time value of the money. The personal liability of directors, managers and secretaries stops a company from treating the fine as a cost of doing business.

The bonus for early payment is the reverse: it rewards the company that pays early, and it is given only as a credit against future tax, so that the revenue gets its cash early.

A step-by-step answer to a penalty question

1. List the defaults in the facts, each with its own date.
2. Match each with its section and penalty in the table above.
3. Count the months from the due date to the date of compliance, treating the first month at the higher rate.
4. Add a penalty on late tax of 10% a year, and interest, for the same period.
5. State whether an officer is liable, and for what.
6. Add all the amounts and state the total.

1. Late filing.
   ₦25,000 + 3 × ₦5,000 = ₦40,000.
2. Late payment penalty.
   10% × ₦8,000,000 × 5/12 = ₦333,333
   interest: 18% × ₦8,000,000 × 5/12 = ₦600,000.
3. Books.
   ₦100,000 + 2 × ₦50,000 = ₦200,000.
4. Access.
   5 × ₦25,000 = ₦125,000.
5. Total penalties and interest.
   ₦40,000 + ₦333,333 + ₦600,000 + ₦200,000 + ₦125,000 = ₦1,298,333, on top of the tax of ₦8,000,000.

The position from 2026

The Nigeria Tax Administration Act 2025 raised the penalties and added new ones. The penalty for failing to file a return is ₦100,000 in the first month and ₦50,000 for each month the failure continues. There are new penalties for awarding contracts to persons not registered for tax (₦5 million), for refusing the Service access to deploy technology, and for inducing a tax officer.

The Nigeria Revenue Service replaces the FIRS, and the Act requires companies to disclose tax planning arrangements that give a tax advantage. Use the figures above for periods before 2026.

Worked examples

1. First month ₦25,000 + four more months at ₦5,000 = ₦25,000 + ₦20,000 = ₦45,000.
2. A director who connived could be fined ₦100,000 or imprisoned for two years, or both.

1. Under section 55(8), the penalty equals the relief: ₦400,000.
2. The total penalty is ₦445,000.

1. First month ₦100,000 + three months × ₦50,000 = ₦250,000.

1. 12 days × ₦25,000 = ₦300,000.

1. Penalty = 10% × ₦10,000,000 × 6/12 = ₦500,000.
2. Interest = 20% × ₦10,000,000 × 6/12 = ₦1,000,000.
3. Total payable.
   ₦10,000,000 + ₦500,000 + ₦1,000,000 = ₦11,500,000.

1. 3 × ₦1,000,000 = ₦3,000,000.

1. Medium.
   2% × ₦5,000,000 = ₦100,000 credit against future tax.
2. Large.
   1% × ₦5,000,000 = ₦50,000 credit.

1. The 30 days end after 14 December, so the balance is due not later than 14 December 2024.

How to score full marks

• Match each default with its penalty in a table.
• Count months carefully: the first month has the higher amount.
• Add penalties from different defaults, and add penalty and interest on late tax.
• List the enforcement powers in order.

Common mistakes in the exam

• Charging ₦25,000 for every month.
• Confusing the books penalty (₦100,000, ₦50,000) with the filing penalty (₦25,000, ₦5,000).
• Forgetting the daily penalty for blocking access.
• Omitting the 14 day holding period before sale of distrained goods.

Quick revision

• Late return: 25,000 then 5,000 a month.
• Books: 100,000 then 50,000 a month; keep six years.
• Late payment: 10% a year plus interest.
• Recovery: distrain (14 days), sue, ship certificate (three months).

Practice questions

Questions 1 to 10 are multiple choice. Questions 11 to 13 are written. Try each before opening the answer.

Model answers

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