New tax rule authorises lifestyle audit to detect hidden income

The Federal Government has authorised tax authorities to examine taxpayers’ lifestyles, assets, business locations and financial transactions to estimate undeclared business earnings under the Nigeria Presumptive Tax Regulations, 2026.

The regulations, published in the Federal Government’s Official Gazette dated 13 May, 2026, empower revenue agencies to assess businesses whose actual incomes cannot be reliably determined because of inadequate financial records or the concealment of relevant information.

A copy of the regulations, obtained by The PUNCH on Friday from the website of the Joint Revenue Board, shows that tax officials can rely on several indicators, including information gathered from communities, to estimate business turnover where adequate financial records are unavailable.

Specifically, Regulation 10(2) states, “In the absence of adequate information, turnover shall be estimated based on best of judgement of the Relevant Tax Authority, taking into account several factors including the nature of business, lifestyle of the taxpayer, assets, location, association or community intelligence, and the volume of electronic and cash transaction.”

The provision effectively allows tax authorities to consider a business owner’s spending patterns and assets when determining taxable turnover, although such assessments must comply with the regulations and remain subject to taxpayers’ rights to challenge them.

The regulations, issued as Statutory Instrument No. 24 of 2026, were made pursuant to Section 29 of the Nigeria Tax Act, 2025, and took effect on 1 January, 2026.

They were signed by the then Minister of Finance and Coordinating Minister of the Economy, Wale Edun, on the advice of the Joint Revenue Board.

Under the framework, businesses and individuals whose incomes cannot be established with reasonable accuracy may be assessed using estimated turnover rather than conventional income calculations.

Regulation 3 identifies affected taxpayers as persons whose businesses lack adequate transaction records and those whose income cannot be determined because of “deliberate withholding, concealment, or misrepresentation of relevant information.”

However, the regulations provide exemptions for small operators, while establishing a one per cent tax on the annual turnover of other businesses covered by the presumptive tax regime.

Regulation 6(2) expressly excludes “any taxable person whose actual or estimated turnover from trade or business for the relevant year of assessment does not exceed twelve (12) million naira.”

For businesses exceeding the exemption threshold and otherwise liable under the regime, Regulation 6(3) provides that they “shall be assessed to income tax at the rate of one percent (1 per cent) of their actual or estimated turnover.”

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This means an eligible business assessed at N20m annual turnover would face a presumptive income tax liability of N200,000, even where its actual profit cannot be established.

The regulations also prescribe a method for estimating annual business turnover from daily sales.

Regulation 10(3) states that where only daily turnover can reasonably be estimated, annual turnover must be calculated using the estimated number of working days, which must not exceed 300 days annually.

Consequently, a business estimated to generate N50,000 daily over 300 working days would have an annual turnover of N15m and a presumptive tax liability of N150,000, subject to the applicable exemptions.

The framework also provides for a two per cent presumptive tax on the consideration received from certain transactions giving rise to chargeable capital gains.

Regulation 7 covers disposals involving land, buildings, movable assets, shares and intangible property, except where specifically exempted under the Nigeria Tax Act, 2025.

It requires affected individuals to remit the tax within 30 days of concluding the transaction or receiving payment, whichever occurs earlier.

The document further exempts several categories of informal businesses, including akara and roasted yam sellers, roasted plantain vendors, groundnut sellers, mobile barbers, manual tailors, local cobblers and newspaper vendors.

Others include wheelbarrow pushers, roadside car washers, phone-charging operators, sachet water hawkers, recharge card sellers and small-scale garri processors.

Regulation 4 provides that eligible businesses may obtain tax exemption stickers or certificates from the relevant tax authority free of charge. The documents are valid for one year and renewable following confirmation of continued eligibility.

The regulations also strengthen taxpayer identification by allowing revenue authorities to register persons without Tax Identification Numbers and assign them identification numbers.