New tax rules force firms to defend tax positions

As Nigeria moves through phases of its tax reform implementation, a shift is quietly taking hold in how businesses approach compliance. Paying taxes is no longer enough. Companies are now expected to show, in clear terms, how those figures were arrived at.

The change is driven by the Nigeria Tax Act (NTA) 2025 and the Nigeria Tax Administration Act (NTAA), which introduce stricter disclosure rules, real-time digital monitoring, and reporting standards that place more weight on transparency and traceability.

Businesses are required to keep detailed records covering transaction intent, pricing structures, and legal tax positions, backed by reconciliation documents that align tax filings with financial statements.

In effect, the system is moving toward a model where the ability to explain and defend tax positions matters just as much as making the payments.

According to Andersen in its article Nigeria’s new tax framework: transparency gains vs sustainability challenges, this goes beyond routine compliance.

Companies are now expected to show that transactions actually took place as recorded, maintain structured tax position files, and ensure consistency across contracts, accounting records, and filings.

What used to be a periodic exercise is fast becoming an ongoing documentation process.

Section 30(1) of the NTAA requires companies to disclose tax planning arrangements that produce a tax advantage without waiting for a request from the authorities. These could include tax reliefs, deferred payments, or reduced tax liabilities.

Many of these are legitimate, but they must now be clearly explained and supported with evidence.

This changes how tax positions are judged. It is no longer enough for them to be legally sound. They also have to be easy to explain, properly documented, and consistent under review.

However, there are concerns about how ready the system is for this transition.

“The institutional framework for managing higher tax revenues has partially improved, but it is not yet fully ready. Digital tools and coordination/transparency mechanisms exist, but capacity, public trust, and full execution are still works in progress,” said Yvonne Afolabi, a tax expert.