Tax season in Nigeria comes with a flood of WhatsApp forwards, Twitter threads, and well-meaning advice from that uncle who "knows someone at FIRS." The problem? Most of it is completely wrong—and believing these myths could cost you real money or even land you in legal trouble.
Under the Nigeria Tax Act 2025, tax compliance is more important than ever. FIRS has new enforcement powers, better tracking systems, and a clear mandate to expand the tax net. The old assumptions no longer hold.
In this comprehensive guide, we'll debunk the 12 most dangerous tax myths circulating in Nigeria, give you the facts backed by law, and help you stay on the right side of FIRS.
Why These Myths Are Dangerous
Tax myths spread because they tell us what we want to hear: "You don't have to pay." "They can't catch you." "Everyone does it." But here's the reality:
- FIRS collected ₦10.1 trillion in 2024—they're not playing around
- The Tax Act 2025 introduced new penalties and enforcement mechanisms
- Digital tracking is improving rapidly—crypto, bank transfers, online payments
- Tax audits can go back 6 years—today's mistake is tomorrow's problem
Let's separate fact from fiction.
Myth #1: "I Earn Under ₦800K, So I Don't Need to File"
❌ The Myth: "If my income is below the tax-free threshold, I can ignore taxes completely."
✅ The Truth: While you may owe ₦0 in tax, you may still have filing obligations—especially if you have a TIN or receive income from multiple sources.
Why this matters: The ₦800,000 threshold is the point at which your tax liability starts. But having no tax liability isn't the same as having no filing requirement.
If you're registered for tax (have a TIN), you should still file a nil return. This keeps you in good standing and creates a paper trail if FIRS ever questions your income sources.
Source: Nigeria Tax Act 2025, Section 34
Myth #2: "Bank Transfers Get Taxed"
❌ The Myth: "Every transfer into my account triggers a tax. That's why I use cash."
✅ The Truth: Bank transfers are NOT taxed. Tax is on income—the money you earn—not on the movement of money between accounts.
The confusion: People mix up "stamp duty" (the ₦50 charge on transfers over ₦10,000) with income tax. They're completely different things.
- Stamp duty = A small fee on the transfer itself (₦50)
- Income tax = Tax on the money you earned (15-25% depending on amount)
If your friend sends you ₦500,000 as a gift, there's no income tax. If a client pays you ₦500,000 for work, that's taxable income regardless of whether they pay cash or transfer.
Source: Stamp Duties Act; Nigeria Tax Act 2025
Myth #3: "Cash Income Is Invisible to FIRS"
❌ The Myth: "If I collect payments in cash, FIRS can never know about it."
✅ The Truth: FIRS has multiple ways to detect unreported income—lifestyle audits, third-party data, customer records, and whistleblower reports.
How they catch you:
- Lifestyle audits: If your spending doesn't match your declared income, red flags go up
- Third-party reporting: The person paying you might report the expense on their taxes
- Bank deposits: Even if you receive cash, you eventually deposit it somewhere
- Whistleblowers: Disgruntled employees, competitors, or even family members can report you
Cash doesn't make income invisible—it just makes you feel safe while the risk accumulates.
Source: Nigeria Tax Act 2025, Sections 68-72 (Enforcement Powers)
Myth #4: "Freelancers Don't Pay Tax"
❌ The Myth: "Tax is only for people with formal jobs. Freelancers are exempt."
✅ The Truth: Freelancers are absolutely subject to personal income tax. Self-employment doesn't mean tax-free.
What the law says: Personal Income Tax applies to "income derived from or received in Nigeria by any individual." That includes:
- Freelance design, writing, or development work
- Consulting and professional services
- Online gig economy work (Upwork, Fiverr, etc.)
- Remote work for foreign companies
The silver lining: Freelancers can deduct legitimate business expenses—equipment, software, home office, internet—which can significantly reduce your tax bill.
Source: Nigeria Tax Act 2025, Section 3 (Charge of Tax)
Myth #5: "Only Employed People Pay Tax"
❌ The Myth: "If I don't have an employer deducting PAYE, I don't owe anything."
✅ The Truth: Everyone with taxable income pays tax. Employees have it deducted automatically (PAYE). Self-employed individuals must calculate and pay directly.
Types of taxable income:
- Employment income (salary, bonuses, allowances)
- Business/trade income
- Professional income (doctors, lawyers, consultants)
- Rental income
- Investment income (dividends, interest)
- Capital gains (on certain assets)
The only difference is who does the paperwork. Employers handle PAYE automatically. Everyone else is responsible for their own compliance.
Source: Nigeria Tax Act 2025, Section 4 (Income Subject to Tax)
Myth #6: "Gifts From Family Are Taxable"
❌ The Myth: "If my parents send me money, I have to pay tax on it. Even wedding gifts are taxed."
✅ The Truth: Nigeria has NO gift tax. Money received as a genuine gift—from anyone—is not taxable income.
What's NOT taxable:
- Money from parents, siblings, extended family
- Wedding gifts and contributions
- Birthday money
- Inheritance (separate laws apply)
- Donations from friends
The exception: If a "gift" is actually payment for services rendered, it's taxable. Calling your freelance income a "gift" doesn't make it tax-free.
Source: Nigeria Tax Act 2025 (No gift tax provision)
Myth #7: "FIRS Can't Track Cryptocurrency"
❌ The Myth: "Crypto is anonymous. FIRS has no way to know about my Bitcoin gains."
✅ The Truth: Crypto is increasingly trackable. Major exchanges share data with regulators, and converting to Naira creates a paper trail.
How crypto gets tracked:
- Exchanges (Binance, Quidax, etc.) maintain records and may share with regulators
- Bank transfers to/from exchanges are logged
- International information sharing agreements (OECD CRS)
- Blockchain analysis tools used by tax authorities worldwide
What's taxable:
- Trading profits when you sell crypto for more than you paid
- Crypto received as payment for work
- Crypto mining income
Source: Nigeria Tax Act 2025; FIRS Guidelines on Digital Assets
Myth #8: "Small Businesses Don't Need to File"
❌ The Myth: "My business is too small for FIRS to care about. Only big companies file."
✅ The Truth: All businesses have filing obligations. Small businesses (under ₦25M turnover) have simplified requirements, but "no filing" isn't an option.
Business classification under Tax Act 2025:
- Small: Under ₦25 million turnover → 0% CIT, simplified filing
- Medium: ₦25M - ₦100M turnover → 20% CIT
- Large: Over ₦100M turnover → 30% CIT
Even at 0% CIT, you still need to:
- Register for tax (get TIN)
- File annual returns
- Keep proper records
- Pay other applicable taxes (PAYE, VAT if applicable)
Source: Nigeria Tax Act 2025, Section 23 (Company Income Tax Rates)
Myth #9: "Tax Is 30% of Everything I Earn"
❌ The Myth: "If I make ₦5 million, government takes ₦1.5 million. That's why people don't pay."
✅ The Truth: Nigeria uses progressive tax brackets. On ₦5M income, your effective rate is about 12-14%—not 30%.
2026 Personal Income Tax Brackets:
| ₦0 - ₦800,000 | 0% |
| ₦800,001 - ₦3,000,000 | 15% |
| ₦3,000,001 - ₦12,000,000 | 18% |
| ₦12,000,001 - ₦25,000,000 | 21% |
| ₦25,000,001 - ₦50,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Example on ₦5M income:
- First ₦800K = ₦0 tax
- Next ₦2.2M (₦800K to ₦3M) = ₦330,000 tax
- Remaining ₦2M = ₦360,000 tax
- Total: ₦690,000 (13.8% effective rate, not 30%)
Source: Nigeria Tax Act 2025, First Schedule
Myth #10: "I Paid Tax Once, I'm Good Forever"
❌ The Myth: "I registered and paid something years ago. My TIN is active, so I'm compliant."
✅ The Truth: Tax is an annual obligation. You must file every year you have taxable income.
What annual compliance looks like:
- Track all income throughout the year
- Calculate your tax liability
- File your return by March 31
- Pay any tax due
- Keep records for 6 years
A TIN that hasn't filed in years is a red flag, not a shield. FIRS can (and does) identify dormant TINs with unexplained income sources.
Source: Nigeria Tax Act 2025, Section 37 (Returns)
Myth #11: "You Can Bribe Your Way Out of Tax Problems"
❌ The Myth: "If FIRS comes, you just 'settle' them and the problem goes away."
✅ The Truth: FIRS has modernized significantly. Bribing officials is a criminal offense that adds to your problems, not solves them.
Why this doesn't work anymore:
- FIRS has centralized digital systems—one corrupt officer can't erase records
- Audit trails make it harder to hide transactions
- Whistleblower programs incentivize reporting corruption
- The Corrupt Practices Act creates additional criminal liability
The safer, cheaper, and smarter path? Just pay your legitimate tax. It's usually less than you think.
Source: Corrupt Practices and Other Related Offences Act 2000
Myth #12: "Tax Laws Aren't Really Enforced Anyway"
❌ The Myth: "Nobody I know has ever been caught. FIRS is all talk."
✅ The Truth: Enforcement is increasing dramatically. FIRS collected ₦10.1 trillion in 2024—a record—and is under pressure to expand further.
Signs of increasing enforcement:
- TaxProMax platform enables easier identification of non-filers
- Banks now report large transactions automatically
- International information exchange is growing
- Lifestyle audits are targeting visible non-compliance
- The new Tax Act gives FIRS stronger powers
The cost of getting caught:
- Back taxes for up to 6 years
- Penalties of 10-25% of tax due
- Interest at CBN rates
- Potential prosecution for evasion
- Reputational damage
The question isn't whether enforcement is happening. It's whether you'll be caught before you get compliant.
Source: FIRS Annual Reports; Nigeria Tax Act 2025
The Bottom Line
Tax myths persist because they offer comfort. But comfort based on false information is a ticking time bomb.
The truth is simpler than the myths suggest:
- If you earn above ₦800K, you likely owe some tax
- The amount is probably less than you fear (12-18% effective for most people)
- Legitimate deductions can reduce your bill significantly
- Filing correctly protects you from future problems
- The cost of compliance is far less than the cost of getting caught
Frequently Asked Questions
Still have questions? Here are the most common ones we hear:
Do I pay tax on money transferred to my bank account in Nigeria?
No. Bank transfers themselves are not taxed. Tax is only due on the underlying income that generated the money—such as salary, freelance earnings, or business profits.
Is gift money taxable in Nigeria?
No. Nigeria does not have a gift tax. Money received as a gift from family, friends, or anyone else is not taxable. However, if the "gift" is actually payment for work, it becomes taxable income.
What is the tax-free threshold in Nigeria 2026?
The tax-free threshold is ₦800,000 annually. If your total taxable income is ₦800,000 or less, you pay ₦0 in personal income tax.
Do YouTubers and content creators pay tax in Nigeria?
Yes. YouTube AdSense income, sponsorship deals, affiliate commissions, and other creator earnings are all taxable. The good news: you can deduct business expenses like equipment, software, and internet.
What happens if I don't file taxes in Nigeria?
Failure to file can result in penalties of ₦50,000 plus 10% of the tax due, interest charges, and potential prosecution for tax evasion in serious cases.
Need help getting compliant? Create a free KeepAm account and we'll help you calculate your tax, track your income, and file with confidence.
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