Businesses urged to upgrade for Nigeria's digital tax era

Businesses in Nigeria must prepare for a significant shift towards a digital tax administration system, spearheaded by the introduction of electronic invoicing, according to the Nigeria Revenue Service (NRS). This initiative is designed to bolster transaction visibility, curb revenue leakages, and strengthen tax compliance by providing tax authorities with more accurate and accessible business activity records.

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Business environments are becoming very dynamic, which is making it difficult for tax administration bodies to determine what is taxable.

Mohammed Bawa, Project Manager of the National E-Invoicing Project at the NRS, explained at a recent meeting for business leaders that the evolving commercial landscape necessitates adaptation. "Business environments are becoming very dynamic, which is making it difficult for tax administration bodies to determine what is taxable," Bawa stated. He emphasized the critical need for "visibility over all transactions that are being carried out across every sector of the economy."

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There is a need to have visibility over all transactions that are being carried out across every sector of the economy.

The e-invoicing system is intended to bridge the information gap between businesses and tax authorities. By creating digital transaction records, it aims to minimize opportunities for under-reporting revenue, tax fraud, and inaccurate declarations. This move aligns with a global trend, as countries like Kenya, Rwanda, and Zambia have already implemented similar digital tax administration systems.

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Many transactions today are being done electronically, making it difficult for tax administration bodies to have insight and visibility over these transactions. The e-invoicing seeks to address that gap.

Olumide Akinsola, Director of DigiTax Nigeria, highlighted that while the e-invoicing requirement is mandatory, its implementation will be gradual to facilitate business adaptation. He noted that the digital system offers benefits to companies, including improved audit trails, simplified tax claims, and reduced disputes with tax authorities. However, he cautioned that invoices not issued through the approved e-invoicing framework could impact businesses' ability to claim value-added tax credits. The rollout will commence with large taxpayers (annual turnover of N5 billion and above), followed by medium taxpayers, and eventually extend to smaller businesses.

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For businesses, your processes become easier, your claims are easier to prove, your refunds are easier to justify, and your audits are easier to do.