Nigeria Tax Reform Act 2025: Avoiding Tax Penalty for Business On Unregistered Business

According to Section 100(2) of the Nigeria Tax Administration Act, 2025, “A statutory body or company who awards a contract to an unregistered person shall be liable to pay an administrative penalty of ₦5,000,000.”

To avoid falling into this trap, you must first understand who is an unregistered person?

An unregistered person means any individual, business, or company carrying on business in Nigeria without being registered with the tax authority and without a valid Tax Identification Number (TIN).

Even if a business has a CAC certificate but hasn’t registered for tax, it’s still considered unregistered for this purpose.

Any company that awards a contract to a vendor not registered under Nigerian tax laws meaning they have no valid Tax Identification Number (TIN) will face an automatic ₦5 million penalty.

And that’s not all. Payments to such vendors will also be disallowed as deductible expenses, which means you’ll pay higher company income tax.

Any company that awards a contract to a vendor not registered under Nigerian tax laws meaning they have no valid Tax Identification Number (TIN) will face an automatic ₦5 million penalty.

For Instance

A Company pays ₦30 million to a contractor who is not tax-registered.

Consequence: ₦5 million penalty, plus the ₦30 million expense is disallowed for tax purposes increasing the firm’s tax liability.

What Companies Must do:
1. Verify vendor TINs before engagement — make it a mandatory procurement step.
2. Update vendor onboarding forms to include CAC and FIRS registration details.
3. Train finance and procurement teams on the 2025 compliance rules.
4. Engage a qualified tax advisor to review your vendor list and plug compliance gaps before year-end.
5. Always request CAC and TIN documents before onboarding vendors.
6. Make vendor verification a mandatory control in your procurement process.
7. Educate your procurement, finance, and audit teams on this new rule.

From now on to 2026 and beyond, companies doing things right will enjoy significant tax savings while those that ignore compliance will pay dearly for it.


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