A new legislative proposal has been introduced in Nigeria that aims to enhance tax compliance within the country’s financial sector.
The proposed bill will require all individuals involved in banking, insurance, stock-broking, or any other financial services to provide a Tax Identification Number (TIN) before they can open a new account or continue operating an existing one.
This move is part of broader efforts by the Nigerian government to improve revenue collection and ensure that all participants in financial activities are properly registered for tax purposes.
The bill, titled *“A Bill for an Act to Provide for the Assessment, Collection of, and Accounting for Revenue Accruing to the Federation, Federal, States, and Local Governments; Prescribe the Powers and Functions of Tax Authorities, and for Related Matters,”* outlines comprehensive measures aimed at increasing accountability in the financial sector and promoting tax compliance across the country.
According to the document, which was obtained from the National Assembly and is dated October 4, 2024, this provision will make it mandatory for anyone engaging in financial services to supply a valid TIN as a prerequisite for banking activities.
The bill clearly states: “A person engaged in banking, insurance, stock-broking, or other financial services in Nigeria shall make the provision of a tax ID, a precondition for opening a new account or operating an existing account.”
The introduction of this requirement is seen as part of a larger government strategy to boost the efficiency of tax collection in Nigeria and ensure that individuals and businesses meet their tax obligations.
By linking tax registration to financial services, the government aims to close loopholes that allow individuals and companies to avoid or underreport taxes.
The bill also extends its scope to cover foreign individuals or entities that do business in Nigeria. According to the proposed law, any non-resident person who supplies taxable goods or services to Nigerian residents or earns income from Nigeria must also register for tax purposes and obtain a TIN.
This provision targets foreign businesses and professionals who may be conducting operations in Nigeria but are not currently registered for tax purposes.
However, it also provides exceptions for non-residents who earn passive income from investments in Nigeria.
While these individuals will not be required to register for a TIN, they will still need to provide relevant information to the appropriate tax authorities.
This distinction is designed to ensure that foreign investors who derive income passively, such as through dividends or interest, are not overburdened by the new tax registration requirements.
Another aspect of the bill is its empowerment of tax authorities to automatically issue a TIN to individuals who are required to register but fail to do so.
If a person neglects to apply for a TIN, the relevant tax authority has the power to register them and issue a TIN on their behalf.
Once the tax authority takes this action, it must promptly notify the individual of their registration and the issuance of their TIN.
The legislation also establishes strict penalties for non-compliance. Individuals or businesses that fail to register for tax purposes in accordance with the new law will be subject to financial penalties.
The bill specifies that a person who does not register for a TIN will face an initial penalty of N50,000 for the first month of non-compliance.
If the failure to register continues, the individual will incur an additional penalty of N25,000 for each subsequent month of non-compliance. These penalties are intended to act as a deterrent and encourage swift compliance with the new regulations.
The proposed bill represents a step forward in Nigeria’s ongoing efforts to modernize and strengthen its tax system. By requiring individuals and businesses engaged in financial services to register for a TIN and linking this requirement to everyday banking activities, the government is hoping to cast a wider net in terms of tax compliance.
This initiative is expected to not only increase the number of people and businesses paying taxes but also improve the overall accountability and transparency of the tax system in Nigeria.
The introduction of this new bill highlights the Nigerian government’s commitment to improving tax compliance and revenue collection.
If passed into law, this legislation will ensure that all individuals and entities engaging in financial services in Nigeria are properly registered for tax purposes.
With the inclusion of non-residents who derive income from Nigeria and the provision for automatic TIN issuance by tax authorities, the bill aims to create a more robust tax framework that leaves little room for evasion.
The penalties for non-compliance further emphasize the importance of adhering to these new regulations, as the government seeks to build a more efficient and accountable tax system for the future.
