Business

Tax Applies to Profits, Not Assets, Savings, Adedeji Clarifies

Published

1 week ago

January 15, 2026

The Gleamer

….Reassures citizens no deductions from bank accounts

….Low-income earners to benefit from exemptions on food, transport

…Tax reforms focus on profits, modernisation, simpler compliance

By Joel Ajayi

The Executive Chairman of the Nigeria Revenue Service (NRS), Dr Zacch Adedeji, has sought to allay rising public concerns surrounding Nigerias recently implemented tax reforms, firmly dismissing speculation that funds held in bank accounts may be subjected to taxation.

Speaking on Tuesday during Journalists Hangout, a current affairs programme on TVC, Adedeji emphasised that neither the former tax regime nor the new legal framework empowers any authority to levy taxes on bank balances, savings, transfers or account holdings. He stressed that the countrys tax system remains fundamentally profit-based.

Whether under the old tax law or the new one, nobody has any business with your personal bank account, whether you are an individual or a company, he said.

Tax is calculated as a percentage of your profits. Assets and savings are not taxed; only profits and returns are.His remarks follow widespread rumours suggesting that the reforms, effective from 1 January 2026, would enable automatic debits from bank accounts based on transaction descriptions, balances, or transfers.

Adedeji described such claims as sheer misinformation, stating unequivocally that no law authorises tax authorities to direct banks to deduct money merely because funds are transferred or retained.

There is no law that allows anyone to go into your bank account and tax you simply because you transfer or keep money, he reiterated, adding that personal transfers, gifts, and movement of funds between accounts are not, by default, taxable events.

He further debunked suggestions that transaction narrations could trigger tax deductions, noting that no existing tax legislation – old or new – contains such provisions.Adedeji also clarified that the transition from the Federal Inland Revenue Service (FIRS), to the Nigeria Revenue Service (NRS), represents a comprehensive institutional reform rather than a mere change of nomenclature.

The overhaul, he explained, aims to modernise tax administration, simplify compliance, and enhance efficiency.

Transition provisions were embedded in the law signed in June 2025, with a January 2026 commencement date to give citizens and businesses sufficient time to adjust.Addressing anxieties surrounding the newly introduced development levy, the NRS chief stated that it does not constitute a fresh tax.

Rather, it consolidates existing earmarked taxes, such as the education tax and police trust fund levy, into a single charge. This consolidation, he noted, reduces multiplicity, eases planning for businesses, and still channels funding to education, security, and other development priorities.

Previously, we had several earmarked taxes – education tax, police trust fund and others – which made planning difficult for businesses, he explained.

With the development tax, these are consolidated into one item, simplifying compliance while still supporting those key sectors.Adedeji emphasised that the reforms were deliberately structured to protect poorer Nigerians.

He pointed out that essential goods and services absorbing the bulk of low-income expenditure, particularly food and transportation, are exempt from transactional taxes.If you consider the exemption list, about 90 per cent of the disposable income of low-income earners goes on food and transport, he said.

These items are exempted from transactional taxes.

He further disclosed that workers on lower salary bands would notice reduced tax deductions in their January payslips.Responding to calls for suspension of the new tax laws, Adedeji maintained that such demands were inconsistent with democratic principles. Suspension of law has no place in a democracy.

Once a law is passed, it becomes law, he said, warning that suspension would create a legal vacuum since the previous tax laws had already been repealed.

On criticisms reportedly raised by KPMG, he explained that government preferred constructive engagement over confrontation.

He confirmed that he had met with representatives of the firm to discuss areas of concern, saying it was natural for people to misunderstand aspects of new legislation. Feedback, he stated, remains welcome as part of ongoing implementation.He further clarified that existing tax clearance certificates remain valid and reaffirmed that withholding tax constitutes a prepaid tax, not an additional charge.

Proper filing, he said, would ensure that any withheld sums are credited against final liabilities.Adedeji added that taxation of digital asset activities applies only to realised profits, not to underlying capital. He highlighted that the reforms have eliminated minimum tax provisions that compelled payment even when businesses made losses.

Where there are losses, you do not pay tax, because tax is imposed only on profits, he said.

According to him, the overarching objective of the reforms is to harmonise Nigerias tax system, reduce manual processes, and deepen the use of technology and revenue intelligence, ultimately fostering a fairer, more transparent and efficient regime.

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Business

VAT on Banking Services: Setting the record straight

Published

1 day ago

January 21, 2026

The Gleamer

By Arabinrin Aderonke

In recent days, Nigerians have been inundated with reports suggesting that the Federal Government has introduced Value Added Tax (VAT) on banking services such as electronic transfers, fees and commissions. Understandably, this has triggered anxiety among citizens already grappling with economic pressures.
However, the truth is far less dramatic than the headlines suggest.

Contrary to widespread claims, VAT on banking services is not new. It was not introduced by the Nigeria Tax Act, 2025, and it does not represent an additional financial burden on bank customers.
For decades, Nigeria’s VAT framework has applied to fees, commissions and charges for services rendered by banks and other financial institutions.

What has changed is not the law, but enforcement.
The Nigeria Revenue Service (NRS) has been compelled to clarify this point following a wave of misinformation that blurred the line between service charges and actual funds transferred. VAT is not, and has never been, charged on the amount of money a customer transfers or withdraws.

Rather, it applies strictly to the service fee imposed by the bank.

This distinction is critical. When a customer transfers ₦10,000 or ₦1 million, VAT is not deducted from the transferred sum. It is calculated only on the small service charge associated with the transaction.

Interest earned on savings accounts and fixed deposits also remains exempt, as it does not constitute a supply of goods or services under the law.

Equally important is what VAT does not cover. Basic food items, essential goods, medical and pharmaceutical products, as well as educational services, remain firmly exempt under the Nigeria Tax Act, 2025. These protections were deliberately preserved to shield ordinary Nigerians from unnecessary hardship.

So why the sudden public concern?The answer lies in improved compliance and enforcement. Financial institutions are being reminded of their obligation to remit VAT already charged and collected. This renewed focus has created the false impression of a new tax, when in reality, it is the implementation of an existing one.

Tax reforms often attract controversy, especially in times of economic strain. Yet clarity must prevail over confusion. Spreading inaccurate information undermines public trust and distracts from the real conversation Nigeria must have about transparency, accountability and effective tax administration.

The Nigeria Revenue Service has made it clear that the Nigeria Tax Act, 2025, does not introduce any new VAT burden on ordinary citizens, particularly in sensitive areas such as savings, food, healthcare and education.

As Nigerians, we deserve honest explanations not alarmist headlines. In a democracy, scrutiny is healthy, but it must be anchored on facts.

The task before us is not to fear taxation, but to demand that taxes already in place are administered fairly, communicated clearly, and used responsibly for national development. That is the conversation worth having.

Arabinrin Aderonke Atoyebi is the Technical Assistant on Broadcast Media to the Executive Chairman of the Nigeria Revenue Service.

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