FIRS to start out monitoring financial institution transactions for VAT deduction

Nigeria’s Federal Inland Income Service (FIRS) has developed a real-time portal to trace all VAT-eligible digital transactions and is mandating integration from banks, card schemes, fintechs, and cost service suppliers, based on an inner presentation seen by TechCabal, a part of an aggressive push to plug tax leakages within the fast-growing digital financial system.

“This technique represents a transformative leap in transaction visibility. By monitoring VAT-eligible actions in actual time, we’re fostering a good and clear digital market for all stakeholders,” Zacch Adedeji, the chief chairman of FIRS, stated in an announcement. 

Referred to as the ‘Transaction Monitoring System,’ the portal requires monetary establishments to route transactions by way of it, giving FIRS real-time visibility into VAT-eligible funds and the place deductions might apply.

The transfer marks a significant shift in how the tax company enforces compliance within the monetary companies trade. Integrating with the portal will allow FIRS to robotically assess taxpayer thresholds and reconcile invoices. Whereas the company is not going to gather taxes instantly by way of the portal, it is going to use it to observe transactions in actual time by way of a centralised dashboard. 

“Nigeria’s digital financial system has skilled exponential development, reworking how companies function and course of transactions,” FIRS stated within the assertion. “Nonetheless, this enlargement has outpaced conventional tax monitoring strategies, creating gaps in transaction visibility and compliance.”

The company constructed the “platform (to) give attention to real-time information assortment, monitoring and making certain full transparency within the digital world,” the assertion added. FIRS additionally claims that it’s utilizing “encryption and AI-driven validation to keep up transaction integrity.”

Monetary establishments are being requested to connect with the portal as a result of they’ll precisely doc taxes on hundreds of thousands of micro-transactions, as banks should solely report transactions above ₦5 million ($3,200). By plugging the establishments in, the tax company captures the only largest leakage level for consumption taxes and may audit tax declarations in opposition to financial institution information. The company also can standardise all info on taxable transactions. 

In June 2025, President Bol Tinubu’s administration enacted new tax legal guidelines that empower the tax company to automate tax processes. Beneath Part 71 of the Tax Administration Act, the company can now deploy know-how to deal with tax evaluation, assortment, accounting, and information gathering. The legislation additionally imposes steep penalties for non-compliance beneath Part 103. ₦1 million ($652) for the primary day of failure to grant system entry and ₦10,000 ($6.5) for every further day of default.

However these legal guidelines will take impact in January 2026, so the company is counting on Part 25(4) of the FIRS Act, which provides it the identical energy with a 30-day discover to the taxpayer.

Whereas accumulating transaction information to enhance tax compliance is authorized, that information just isn’t a definitive indicator of tax legal responsibility. Earlier than counting on monetary information, the tax company cross-checks it in opposition to self-assessments, the place people and companies can declare deductions. If somebody earns ₦5 million ($3,265) yearly, they don’t seem to be taxed on the whole quantity, as eligible deductions cut back the taxable earnings.

How does it work? 

Throughout a number of Zoom conferences with monetary establishments, FIRS officers offered the company’s plan and roadmap for integrating the Transaction Monitoring System into their digital infrastructure, based on one one who attended the conferences. To onboard, establishments should register instantly on the portal and combine through APIs earlier than activating their dashboard. 

In a typical transaction movement, as soon as a cost is acquired, monetary establishments should first share the transaction information through API with FIRS’ VAT Rev Guarantee system, the company’s tech-enabled instrument to make sure all VAT is precisely calculated and promptly remitted, earlier than sending it to the portal.

For cost service suppliers (PSPs) like Paystack and Flutterwave, if VAT just isn’t collected at checkout, they need to calculate VAT on the overall transaction worth. If VAT is included at checkout, PSPs are required to submit both the service provider’s VAT or the PSP’s VAT quantity alongside the transaction information. All establishments should file each the VAT quantity and the gross cost worth for client funds. 

To facilitate this, PSPs will log in to a safe admin portal to share real-time transaction information, together with the VAT element, for each retailers and prospects. The information is then grouped accordingly and pushed to the Transaction Monitoring System. A streamlined help channel is on the market for dealing with refunds.

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