A Practical Compliance & Planning Guide for New Businesses
Tax laws in Nigeria are evolving rapidly, and startups — especially small and medium enterprises (SMEs) — must stay ahead of changes to avoid penalties, optimise tax planning, and ensure long-term growth.
At Faturoti Taiwo & Co., Chartered Accountants, we work with startups to decode complex tax reforms, interpret new legislation, and apply effective strategies that keep businesses compliant and financially efficient. This guide highlights the key Nigerian tax law changes coming into effect between 2025 and 2026 — and what you must know as a startup founder.
1. Expanded Digital Tax Compliance by FIRS
The Federal Inland Revenue Service (FIRS) is expanding digital tax administration to improve compliance and tracking.
What This Means for Startups:
- Mandatory online filing for more tax types
- Increased use of digital systems for VAT, PAYE, and CIT
- Stronger integration with online payment platforms
Action Step:
Start using digital accounting and invoicing tools (e.g., QuickBooks, Zoho Books, Sage) now — this will make compliance smooth and reduce errors during returns.
2. Revised VAT Reporting and Enforcement
Value Added Tax (VAT) remains a cornerstone of Nigeria’s indirect tax regime, but enforcement is tightening in 2025/26.
Key Changes:
- Stricter definitions of taxable supplies
- Enhanced FIRS scrutiny on zero-rating claims
- Digital trail requirements for VAT invoices
Action Step:
Ensure your VAT reporting processes include accurate digital records and contemporaneous documentation. Consider professional support to avoid VAT penalties.
3. Personal Income Tax (PIT) Clarifications for Self-Employed
The tax treatment of personal income — especially for freelancers and solopreneurs (common in startup ecosystems) — is being clarified with updated guidelines.
What to Expect:
- Clearer definitions for allowable expenses
- New FIRS/LIRS expectations on self-assessment
- Ongoing requirement for TIN registration for all taxable individuals
Action Step:
Register for a Tax Identification Number (TIN) if you haven’t already, and ensure all earnings are reported accurately each year.
4. Enhanced Penalties and Interest for Late Filing
Penalties for late filing of tax returns, PAYE remittance, VAT submissions, and Corporate Tax have become more punitive for the 2025/26 filing years.
What Startups Should Know:
- Late CIT returns attract escalating fines
- VAT late-filing fines and interest can accumulate fast
- PAYE late remittance is a common FIRS audit trigger
Action Step:
Maintain a strong tax calendar and use professional support to avoid fines that can cripple cash flow.
5. Increased Focus on Transfer Pricing Compliance
Transfer pricing rules — designed to ensure transactions between related parties reflect market value — are being more strictly enforced.
Why It Matters:
Startups that work with related companies (even foreign-based founders or investors) must:
- Prepare Transfer Pricing Documentation
- Justify inter-company pricing
- Be prepared for FIRS scrutiny
Action Step:
If you operate across borders or transact with related entities, speak with a tax professional early.
6. Withholding Tax (WHT) Reporting Improvements
Withholding Tax — deducted at source on certain payments — will face more rigorous reconciliation requirements.
What Startups Should Expect:
- Timely remittance deadlines enforced
- Detailed reporting standards
- Higher compliance monitoring
Action Step:
Ensure WHT is correctly deducted and remitted on time — especially for consulting fees, rent, legal services, and contractor payments.
7. Simplified Tax Incentives & Startup Reliefs
To support early-stage businesses, certain incentives are being clarified or expanded:
✔ Pioneer Status Relief
✔ Small Company Relief (on corporate taxes)
✔ Grants or tax credits for R&D activities (sector dependent)
Action Step:
Discuss with your accountant whether your startup qualifies and how to claim these incentives.
8. Enhanced Payroll Regulations
2025/26 payroll rules require stricter documentation, reconciliation, and pension compliance.
Startup Considerations:
- PAYE remittance deadlines must be strictly met
- Accurate employee records are essential
- Pension and employee benefits must be handled correctly
Action Step:
Use a professional payroll service or accountant to avoid penalties.
9. Cash Flow Impact from Tax Timing Changes
Some startups may see timing changes in tax obligations, affecting cash flow — especially around VAT and quarterly remittances.
Action Step:
Forecast your tax payments monthly and build reserves so tax liabilities don’t disrupt operations.
10. Local Government & State Tax Enforcement
State Internal Revenue Services (e.g., LIRS, Oyo IRS, Ogun IRS) are also updating tax enforcement practices.
What Startups Should Know:
- State-level PIT and business levy compliance is still critical
- Additional state filing and documentation may be required
- Local penalties can apply in addition to federal fines
Action Step:
Register with both federal and state tax authorities as required.
How Faturoti Taiwo & Co. Helps You Stay Compliant (2025/26)
Change doesn’t have to be stressful. We support startups with:
✔ Tax registration (TIN, VAT, PAYE, CIT)
✔ Digital accounting setup & bookkeeping
✔ FIRS & State IRS compliance support
✔ Tax strategy, planning & minimization
✔ Penalty avoidance and audit support
✔ Cash flow & forecasting advice
From early-stage startups to established SMEs, we guide you through every compliance demand.
Contact Faturoti Taiwo & Co. today for a 2025/26 tax readiness review and personalised plan.
Nigeria’s tax landscape is becoming more digital, more enforceable, and more demanding — especially as we approach 2025/26.
For startups, this means:
✔ Staying digitally compliant
✔ Filing accurately and on time
✔ Avoiding costly penalties
✔ Positioning your business for sustainable growth
You don’t have to navigate this alone. With expert guidance from Faturoti Taiwo & Co., you can prepare early and thrive — no matter how tax laws evolve.