Tax filing errors remain a persistent challenge in Nigeria, where many taxpayers continue to incur avoidable penalties due to mistakes in documentation, computation, and reporting.

Despite ongoing reforms and the rollout of digital filing systems, gaps in tax awareness and record-keeping have left individuals and businesses exposed, particularly among small enterprises and self-employed professionals.

According to Uboh Sunday & Co., a significant share of penalties imposed annually stems from recurring errors that reflect weak compliance systems rather than the complexity of tax laws. As filing cycles peak, these underlying issues become more pronounced, increasing the likelihood of costly mistakes.

Below are some of these tax filing issues and their penalties:

Missing filing deadlines

Failure to meet statutory deadlines remains one of the most widespread compliance issues. Monthly filings, such as Value Added Tax (VAT) and Withholding Tax (WHT), which are typically due by the 21st of the following month, are frequently missed.

For individuals, the March 31 deadline for annual personal income tax returns presents particular challenges, especially for those with multiple income streams.

Companies are also required to file within six months of their financial year-end, yet delays remain common.

Section 101 of the Nigeria Tax Administration Act (NTAA) 2025 stipulates that failure to file returns attracts a penalty of N100,000 for the first month, plus N50,000 for each subsequent month the failure continues.

Incorrect tax computations

Errors in tax calculations are another major source of penalties. These include misapplying tax rates, failing to account for allowable deductions, or incorrectly computing taxable income.

Some taxpayers underestimate their liabilities, leading to underpayment and subsequent penalties, while overpayment can tie up cash flow unnecessarily, a particular concern for small businesses.

Section 101 of the NTAA 2025 treats the filing of incorrect returns with the same severity as non-filing, making taxpayers liable for the same penalties as for missed deadlines.

Poor record-keeping and incomplete documentation

Weak documentation practices continue to undermine the accuracy of tax filings. Many businesses operate without proper bookkeeping systems, making it difficult to determine actual income, expenses, and tax liabilities.

The absence of supporting documents such as invoices, receipts, and contracts can lead to legitimate deductions being disallowed during audits, inflating tax liabilities, and increasing exposure to penalties.

Section 102 of the NTAA 2025 specifies that failure to maintain books and records, or to provide them when requested, attracts a penalty of N10,000 for individuals and N50,000 for companies, highlighting the importance of robust record-keeping practices.

Failure to remit collected taxes

Collecting taxes such as VAT or WHT from customers or vendors without remitting them to the appropriate authorities is considered a serious compliance breach. This issue is particularly prevalent among small and medium-sized enterprises, where internal controls may be weak.

Section 107(1)(a–c) of the NTAA 2025 states that failure to remit tax deducted, collected, or withheld by the due date attracts a penalty and interest equivalent to the amount of tax not remitted, an administrative penalty of 10 percent per annum of the unremitted amount, and interest at the prevailing Central Bank of Nigeria Monetary Policy Rate.

This applies to VAT, WHT, and other collected amounts not paid by the 21st of the month following deduction or collection.

Withholding tax (WHT) mismanagement

Closely related to remittance failures is the improper handling of withholding tax. Common mistakes include failing to deduct WHT where required, deducting incorrect amounts, or neglecting to obtain credit notes after remittance.

Without proper documentation, businesses cannot claim WHT credits, leading to higher effective tax burdens and additional compliance risks.

Section 105 of the NTAA 2025 specifies that failure to collect, deduct, or withhold tax due brings a penalty of 40 percent of the amount not deducted.

Failure to file ‘nil’ returns

A persistent misconception among taxpayers is that returns need only be filed when there is income or profit to report. However, tax authorities require returns to be submitted even in periods of inactivity.

Failure to file ‘nil’ returns is treated as non-compliance and attracts the same penalties under Section 101 of the NTAA 2025 as for missed filings.

This issue is common among startups and dormant businesses that assume they are exempt from filing obligations.

Misclassification of employees and expenses

Incorrect classification of workers and expenses continues to create compliance risks. Some businesses classify employees as independent contractors to avoid Pay-As-You-Earn (PAYE) obligations, while others improperly categorise personal expenses as business costs.

These practices not only distort tax filings but also increase the likelihood of audits and penalties when discrepancies are identified.

Inaccurate income declaration

Failure to declare all sources of income remains a key issue, particularly among individuals with multiple income streams. Earnings from freelance work, consulting, investments, or side businesses are often omitted from filings.

This results in incomplete tax returns and exposes taxpayers to penalties if discrepancies are uncovered during reviews or audits.

As Nigeria’s tax net expands, experts warn that underreporting income is becoming increasingly risky.

Overall, the surge in errors during filing season reflects a broader challenge of low tax awareness and weak compliance systems.

With deadlines fast approaching, taxpayers are advised to start early, maintain proper records, and seek professional guidance where necessary. Addressing these common errors is critical not only to avoiding penalties but also to improving overall compliance in Nigeria’s tax system. (BusinessDay)

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