With the recent updates to Nigeria’s banking tax law, many individuals and businesses are filled with questions and rightly so. From concerns about deductions to fears of EFCC investigations, here are the most common questions Nigerians are asking, answered simply and clearly.
1️⃣ Will the new tax affect all transactions?
Yes the new tax applies to both individual and corporate bank accounts, covering deposits, withdrawals, transfers, and certain electronic transactions. However, small transfers below the threshold (₦10,000) may be exempt in some cases, depending on your bank’s internal policy and transaction type.
2️⃣ What percentage will be deducted?
The current rate under review suggests:
- Individuals: Around 0.5% to 0.75% per eligible transaction.
- Corporate accounts: Between 1% and 1.5%, depending on the transaction volume and business type.
Banks automatically deduct this charge and remit it to the Federal Inland Revenue Service (FIRS).
3️⃣ Can I still make huge transactions without getting flagged by EFCC?
Absolutely as long as your transactions are legitimate and traceable.
Large transactions don’t automatically trigger EFCC involvement. However, unusual or suspicious patterns, like sudden large inflows or frequent international transfers without clear sources, can raise red flags under AML (Anti-Money Laundering) laws.
✅ Tip: Always keep your transaction records and invoices clean. Transparency is your best defense.
4️⃣ Why did the government introduce this law?
Nigeria’s government aims to broaden its revenue base beyond oil dependency.
With the rise of cashless transactions and digital banking, the government wants to ensure everyone contributes fairly to national development.
It’s also meant to curb tax evasion and promote better accountability within the financial ecosystem.
5️⃣ How does this affect ordinary Nigerians?
For everyday users, this might feel like an extra burden, but the actual deduction per transaction is relatively small.
The key impact will be on high-frequency users, businesses, and those who make bulk payments regularly.
In the long term, if properly managed, it could help stabilize Nigeria’s economy, improve public infrastructure, and reduce reliance on foreign borrowing.
6️⃣ Do other countries do this too?
Yes! Many countries impose similar transaction-based levies:
- India has a Transaction Tax (TT) on securities.
- South Africa enforces banking and digital transaction levies to support public funding.
- Ghana introduced the E-Levy, charging 1.5% on mobile money and digital transfers.
Nigeria is not alone this is part of a global shift towards digital financial regulation.
7️⃣ What should individuals and businesses do now?
✅ For individuals:
- Track your transaction history regularly.
- Use digital wallets and low-fee banking platforms when possible.
- Stay informed about threshold updates.
✅ For businesses:
- Consult your accountant for proper tax planning.
- Update your corporate compliance with FIRS.
- Consider separating operational and revenue accounts to monitor deductions easily.
8️⃣ Can the policy change again?
Yes — banking and tax policies evolve as the economy changes. The government may adjust rates, limits, or exemptions based on feedback and economic realities. Always follow official updates from the CBN or FIRS.
What are the transaction thresholds?
| Account Type | Monthly Transaction Threshold | Action by Bank |
|---|---|---|
| Individual Accounts | ₦25,000,000 and above | Bank reports transaction details to FIRS |
| Corporate Accounts | ₦100,000,000 and above | Bank reports to FIRS |
⚠️ Important: These thresholds are for reporting, not tax deductions. Your money won’t be automatically taxed just because you cross these figures.
💸Will taxes be deducted automatically from my account?
No. The new law does not mean automatic deductions. Instead, it enforces compliance monitoring.
If you earn taxable income salary, business profits, interest, or dividends those remain subject to personal income tax or corporate tax as usual. But your bank account balance itself isn’t taxed directly.
📊What are the standard tax rates in Nigeria now?
| Tax Type | Individuals | Corporate Entities |
|---|---|---|
| Personal Income Tax (PIT) | Progressive from 7% to 24% depending on income level | — |
| Corporate Income Tax (CIT) | — | 30% for large companies (₦100m+ annual turnover) |
| Small Business Tax | — | 0% for small companies (turnover under ₦25m/year) |
| Withholding Tax (Dividends, Interest, Royalties) | 5–10% | 10% |
These rates are not new the latest law focuses on better tracking and compliance through banks.
💳Will tax be removed when I hit the threshold or when I make a transaction?
Neither. The threshold is for reporting purposes only.
Your bank only notifies FIRS if your cumulative transactions exceed ₦25m (individual) or ₦100m (corporate) in a month. That does not trigger an automatic deduction or debit.
Taxes still apply based on your declared income, not your bank transfers.
💡 What Happens When Your Account Exceeds the Threshold and Is Reported to FIRS?
When your bank account transactions exceed the set monthly threshold, here’s what actually happens behind the scenes:
| Account Type | Monthly Threshold | What the Bank Does | What FIRS Does |
|---|---|---|---|
| Individual | ₦25 million (total inflow/outflow per month) | Bank automatically flags and reports your transaction details to FIRS | FIRS reviews your financial activity for possible tax compliance |
| Corporate (Business) | ₦100 million (total inflow/outflow per month) | Bank flags and submits report to FIRS | FIRS cross-checks your filings, business registration, and declared income |
🏦 Step-by-Step What Happens:
- The Bank Monitors Your Account Activity
- Every month, your bank system tracks total credits and debits.
- Once your total inflows or outflows hit ₦25m (individual) or ₦100m (corporate), the account is automatically flagged in their reporting system.
- The Bank Sends a Compliance Report to FIRS
- The report includes basic data:
- Account name
- BVN/TIN
- Transaction volume (not every single detail)
- Type of account (individual or corporate)
- The report includes basic data:
- FIRS Uses the Information for Tax Review
- The FIRS compares the reported figures with your declared income or business tax filings.
- If what you reported in your tax returns doesn’t match the scale of your transactions, you may get:
- A compliance notice (to provide proof or explanation)
- A request for tax clarification (especially for undeclared income)
- In some cases, a desk audit or investigation
- No Money Is Deducted Automatically
- It’s not an instant debit or hidden tax.
- It’s more of a “red flag” system for cross-checking tax evasion and undeclared earnings.
- If You’re Compliant, Nothing Happens
- If you’ve declared your earnings, paid your due taxes, or the transactions are legitimate (loans, transfers, asset sales, etc.), the report leads nowhere further.
🧾 Example
Let’s say:
- You’re a freelancer or small business owner.
- You receive ₦30 million in total payments in a month.
✅ If you’ve filed tax returns showing your income sources and business registration → FIRS sees your report and moves on.
❌ If you’ve never filed any tax return but suddenly move ₦30m through your account → FIRS might send a compliance alert asking you to regularize your tax status.
⚙️ Why FIRS Collects This Data
The goal isn’t to punish, but to:
- Widen the tax base — bring more people and businesses into the formal tax system.
- Reduce evasion — many high earners operate outside tax radar.
- Improve fairness — ensure everyone contributes their share to national revenue.
💡 Summary
| Key Point | Meaning |
|---|---|
| Thresholds | ₦25m (individual) / ₦100m (corporate) monthly |
| Trigger | Bank auto-reports transactions to FIRS |
| Action | FIRS reviews your tax compliance, not deducts money |
| Risk | Non-filers may face compliance notices or audits |
| Safe Zone | Stay transparent, file taxes, keep transaction records |
In Conclusion
The new tax law may seem tough at first, but with transparency and awareness, Nigerians can navigate it easily. It’s not about punishing bank users it’s about building a fairer financial system.
If properly enforced and monitored, this policy could bring balance between individuals, corporate entities, and the nation’s economic growth.
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