Common Tax Filing Errors in Nigeria and Their Penalties Explained
- Tax filing errors remain widespread in Nigeria due to weak compliance systems
- Missing deadlines and incorrect filings attract significant financial penalties
- Experts urge early filing, proper documentation, and professional guidance
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology, and macroeconomic trends in Nigeria.
Tax filing errors continue to pose a major challenge in Nigeria, with individuals and businesses incurring penalties due to mistakes in documentation, computation, and reporting, according to tax advisory firm Uboh Sunday & Co.
Despite ongoing reforms and the introduction of digital filing systems, gaps in tax awareness and record-keeping remain widespread, particularly among small businesses and self-employed professionals.
Source: Facebook
The firm noted that a significant portion of penalties imposed annually arises from repeated filing errors, reflecting weak compliance systems rather than the complexity of tax laws.
As filing deadlines approach, these issues tend to become more pronounced, increasing the risk of costly mistakes for taxpayers. As reported by Business Day, below are the major tax filing deadlines and their penalties
1. Missed filing deadlines
Failure to meet statutory deadlines is one of the most frequent compliance issues.
Monthly filings such as Value Added Tax (VAT) and Withholding Tax (WHT), typically due by the 21st of the following month, are often missed.
For individuals, the March 31 deadline for annual returns under the Nigeria Tax Administration Act 2025 presents challenges, especially for those with multiple income streams.
Companies are also required to file within six months after their financial year-end, yet delays remain widespread.
Under the law, failure to file returns attracts a penalty of N100,000 for the first month and N50,000 for each subsequent month of default.
2. Errors in tax computation
Incorrect tax calculations are another major source of penalties.
Common issues include applying the wrong tax rates, failing to account for allowable deductions, and miscalculating taxable income.
The law treats incorrect filings with the same severity as non-filing, meaning affected taxpayers are subject to similar penalties.
3. Poor record-keeping and incomplete documentation
Weak documentation practices continue to undermine tax compliance.
Many businesses lack proper bookkeeping systems, making it difficult to determine accurate income and expenses.
The absence of supporting documents, such as invoices and receipts, can lead to disallowed deductions during audits, increasing tax liabilities.
Failure to maintain records attracts penalties of N10,000 for individuals and N50,000 for companies under the Act.
4. Failure to remit collected taxes
Tax experts also highlighted the failure to remit collected taxes as a serious compliance breach.
Businesses that deduct or collect VAT or WHT but fail to remit them to authorities risk penalties, including the full amount not remitted, an additional 10 per cent annual charge, and interest tied to the monetary policy rate of the Central Bank of Nigeria.
This issue is particularly common among small and medium-sized enterprises with weak internal controls.
5. Withholding tax mismanagement
Improper handling of withholding tax is another recurring problem.
Some businesses fail to deduct WHT where required, deduct incorrect amounts, or do not obtain credit notes after remittance.
Without proper documentation, companies are unable to claim WHT credits, increasing their effective tax burden.
The law prescribes a penalty of 40 per cent of the amount not deducted.
6. ‘Nil’ returns not filed
Tax authorities require returns to be filed even when there is no income or business activity.
However, many startups and dormant businesses fail to submit ‘nil’ returns, assuming they are exempt.
This misconception leads to penalties, as non-filing is treated the same regardless of business activity.
Source: Twitter
7. Misclassification and income underreporting
Incorrect classification of employees and expenses also creates compliance risks.
Some firms classify employees as contractors to avoid Pay-As-You-Earn (PAYE) obligations, while others mislabel personal expenses as business costs.
In addition, failure to declare all income sources, especially from freelance work, investments, or side businesses, remains a key issue.
Experts warn that as Nigeria’s tax system expands, underreporting income is becoming increasingly risky.
Simple guide to filing your tax returns
Legit.ng earlier reported a step-by-step guideline for filing tax returns, including the filing process and the necessary documents to be uploaded.
Failure to declare all income sources and file on time may result in penalties and fines.
Authorities advised early filing to avoid last-minute delays and to allow sufficient time to resolve any issues that may arise during submission.
Source: Legit.ng
