Cross-border payments pose the highest tax compliance risk in Nigeria – Bujeti Founders

The implementation of Nigeria’s 2025 Tax Act, effective from January, has sparked a shift in the country’s business software market, creating a new sense of urgency around building preventive infrastructure rather than fixing problems after they arise.

The tax overhaul, which was signed into law on June 26, 2025, comprises four key pieces of legislation: the Nigeria Tax Act (NTA) 2025, Nigeria Tax Administration Act (NTAA) 2025, Nigeria Revenue Service (Establishment) Act (NRSEA) 2025, and Joint Revenue Board (Establishment) Act (JRBEA) 2025.

In November 2025, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, announced that Nigeria had entered agreements with over 100 countries to collect data on remote workers for tax enforcement purposes.

MoreStories

Subnational debt: 11 states, FCT borrow N373.06 billion in nine months

February 24, 2026

Top 10 Registrars serving Nigeria’s listed companies

February 24, 2026

Oyedele emphasized that all remote workers in Nigeria, regardless of their company or country, are required to declare their income.

But how feasible is this ambitious goal?

In an exclusive interview with Nairametrics, Cossi Achille Arouko, CEO of Bujeti – a platform that automates the application of local taxes, including withholding tax (WHT) and value-added tax (VAT) – along with COO Samy Chiba, discuss the challenges and risks of tax compliance in cross-border payments.

**Nairametrics: What gaps or challenges did the 2025 Tax Act reveal for Nigerian businesses, especially SMEs? **

Cossi Achille Arouko: The Act didn’t create new problems, it exposed structural ones that businesses had been patching over with manual workarounds.

The biggest gap is procedural, not conceptual. Most SMEs understand they need to pay tax, what they struggle with is the mechanics, knowing which rate applies to which transaction, tracking what they’ve collected versus what they’ve withheld, and keeping tax funds separate from operating capital.

The Act compressed the timeline for all of these. What used to be reconciled at year-end now needs to happen transaction by transaction. And it introduced asymmetric consequences.

Businesses with turnover below N50 million pay zero CIT, but if they miss a filing deadline, they lose that exemption entirely. So you have this paradox – lower burden, higher procedural stakes.

The companies that benefit most from the reforms are also the most exposed to compliance failure because they lack infrastructure.

**Nairametrics: Which types of businesses are most affected by the new tax rules, and why? **

Samy Chiba: Service businesses like consultancies. Also, agencies, software companies, logistics providers—are particularly exposed because their transactions often involve withholding tax.

Every time they pay a vendor or contractor, they’re required to verify the counterparty’s TIN status and apply the correct WHT rate. If the vendor doesn’t have a valid TIN, the rate is higher. That verification step used to be informal. Now it’s mandatory, and non-compliance triggers penalties.

Retail and e-commerce businesses face complexity on the VAT side. They’re collecting VAT from customers, but they also need to track input VAT on their purchases and reconcile the difference. When you’re processing hundreds of transactions monthly, spreadsheets break down quickly. Then there are businesses operating across multiple states or countries, they’re managing different tax jurisdictions simultaneously, which multiplies the risk of misclassification.

The Act doesn’t care if you made an honest mistake. The penalty structure treats errors as intentional.

**Nairametrics: How do cross-border operations or multiple jurisdictions complicate tax compliance for African SMEs? **

Samy Chiba: Cross-border adds layers of ambiguity that manual systems can’t handle. Let’s say a Nigerian business has clients in Kenya and Ghana. Each country has different VAT rates, different thresholds for registration, different filing calendars. If they’re using spreadsheets, someone has to manually remember which rate applies to which client, which currency the transaction was in, and what the exchange rate was on the day of payment.

Then there’s the permanent establishment question. If a Nigerian company does enough business in Kenya, it might trigger PE status and owe Kenyan taxes. Most SMEs don’t know when that threshold is crossed because they’re not tracking transaction volume by jurisdiction in real time. They find out during an audit, which means penalties and back taxes.

Transfer pricing is another one. If a Nigerian company invoices its Kenyan subsidiary, tax authorities in both countries want to ensure the pricing is arm’s length. Proving that requires documentation at the transaction level. If your records are fragmented—some in QuickBooks, some in spreadsheets, some in email—you can’t reconstruct the justification six months later.

The irony is that cross-border is where SMEs have the most growth opportunity, but it’s also where compliance risk is highest. So businesses either avoid expansion, or they expand and hope they don’t get audited.

**Nairametrics: Can you share real examples of compliance mistakes that businesses commonly make? **

Cossi Achille Arouko: The most common mistake we see isn’t dramatic, it’s applying the wrong rate. A business pays a contractor N100,000 and withholds 5% WHT when the correct rate is 10% because the vendor doesn’t have a TIN. That’s a N5,000 underpayment. Multiply that across dozens of transactions monthly, and by the time FIRS audits them, they owe penalties on top of the shortfall.

Another thing is, businesses collect VAT from customers and deposit it into their main operating account. Two weeks later, they need to cover payroll or restock inventory, so they spend it. When remittance is due, the money’s gone. They either scramble to find cash elsewhere—which creates a liquidity crisis—or they miss the deadline and pay penalties.

We’ve seen companies lose more in fines than they would have spent on proper infrastructure.

Then there’s the filing exemption misunderstanding. A business qualifies for zero-rate CIT because their turnover is below N50 million, so they assume they don’t need to file anything.

Wrong, filing is mandatory. Six months later, they’ve lost their exemption status and owe back taxes they weren’t prepared for.

**Nairametrics: How do penalties and shortened reporting windows affect day-to-day operations and cash flow? **

Samy Chiba: Penalties don’t just hurt financially; they create operational drag. When a business gets hit with a N200,000 penalty for late filing, that’s money that would have gone to hiring, marketing, or inventory. But the bigger issue is the time cost. Finance teams spend hours reconstructing transaction histories, chasing receipts, and trying to prove what happened three months ago.

The shortened windows make this worse. Under the old system, businesses could wait until quarter-end or year-end to clean things up. Now, remittance windows are monthly, and the margin for error is tight. If your accountant is slow to respond, or if your records are fragmented across multiple tools, you’re behind before you start. We’ve seen businesses delay vendor payments just to preserve cash in case they miscalculated their tax liability. That creates trust issues with suppliers and slows down operations.

Cash flow becomes unpredictable. You think you have N500,000 available, but N150,000 of that is actually tax funds you’ve collected. If you spend it, you’re borrowing from FIRS without realizing it. When remittance is due, you either raid your working capital or default.

**Nairametrics: How do SMEs typically track and manage taxes internally, and why do these methods often fail? **

Cossi Achille Arouko: Most SMEs use a combination of Excel, bank statements, and memory. Someone manually logs transactions, applies tax calculations based on what they think the rate is, and hopes the numbers match when filing time comes. The failure modes are predictable: formulas break when you add new columns, transactions get logged to the wrong category, and there’s no version control, so if two people edit the sheet, data gets overwritten.

The bigger issue is that spreadsheets don’t enforce rules. If someone accidentally applies 7.5% VAT to a transaction that should be exempt, the spreadsheet doesn’t stop them. If they forget to withhold tax on a vendor payment, there’s no alert. Compliance depends entirely on the person remembering to do the right thing, in the right order, every single time. That works until the team grows, someone goes on leave, or the business scales past a few dozen transactions monthly.

Then there’s the reconciliation problem. At month-end, they’re trying to match bank statements to spreadsheet entries to physical receipts. If anything’s missing, they either guess or omit it from the report. Both options expose them to penalties.

**Nairametrics: What role do accountants, advisors, or banks play in tax compliance, and where do they fall short? **

Samy Chiba: Accountants are essential for interpretation, understanding how the law applies to edge cases, advising on deductions, handling audits. But they’re expensive and reactive. A small business might pay N50,000–N150,000 monthly for an external accountant who reviews transactions after they’ve happened.

By that point, mistakes have already been made. If the business withheld the wrong tax rate three weeks ago, the accountant can flag it, but fixing it is complicated and sometimes impossible.

Banks play almost no role in compliance. They’re transaction facilitators. They’ll let you send N100,000 to a vendor without asking if you withheld tax. They’ll let you spend tax funds because, to them, it’s just money in your account. There’s no logic layer between your intent and the payment execution.

Advisors tend to be inconsistent. A business might consult someone during tax season, get advice, then not hear from them for six months. When the rules change, like they did with the 2025 Act, there’s a gap between when the law takes effect and when the advisor updates the business. That gap is where compliance failures happen.

**Nairametrics: Have you observed businesses accidentally mismanaging tax funds? What usually causes this? **

**Cossi Achille Arouko: **All the time. Here’s the typical pattern: a business collects N500,000 in VAT over two weeks. That money sits in their main account alongside revenue, expenses, and everything else.

The founder sees a N2 million balance and feels comfortable. Then, payroll is due, or a supplier needs to be paid urgently, so they transfer N800,000. They didn’t realize N500,000 of their balance was tax funds. When remittance is due three weeks later, they’re N300,000 short.

What causes it? Lack of separation. Commingling tax funds with operating capital makes it invisible. The account balance looks healthy, but it includes liabilities. It’s like thinking you have N1 million in savings when N400,000 of it is actually rent you haven’t paid yet.

The second cause is timing mismatch. Businesses collect VAT from customers immediately, but they pay their own suppliers on credit terms—maybe 30 or 60 days later. So the cash is in the account, available to spend, even though it’s earmarked for remittance.

Without a forcing function to separate it, the temptation is to use it. By the time FIRS expects payment, the money’s been absorbed into operations.

**Nairametrics: What practical mechanisms or features in Bujeti’s solution are designed to prevent mistakes or manage risk for users? **

Samy Chiba: Three core mechanisms: automation, separation, and immutability.

Automation means taxes are calculated at the point of transaction. You’re not doing math manually or looking up rates in a reference document. The system knows that a professional service invoice requires 5% WHT, or that a VAT-exempt product should have 0% VAT applied.

You select the transaction type, and the calculation happens automatically.

Separation is the Tax Vault. Every time tax is collected or withheld, the funds move into a dedicated account that’s ring-fenced from operating capital. Your team can see the balance, but they can’t accidentally spend it on payroll or inventory. When remittance is due, the money is already there. No liquidity scramble. No borrowing from future cash flow to cover past liabilities.

Immutability means transaction records can’t be altered retroactively. Once a payment is made or an invoice is issued, the record is locked. That creates a clean audit trail, which matters during NRS reviews or when you’re fundraising and investors want to see your financial hygiene. It also prevents the ‘we’ll fix it later’ mindset that causes compliance drift.

We also built country-based tax tagging for businesses operating across jurisdictions. If you’re invoicing a Kenyan client, the system only shows Kenyan taxes. You can’t apply Nigerian VAT by accident. And we track both collected and withheld taxes separately, because NRS cares about the distinction—one is money you owe from customers, the other is money you’ve deducted from vendors. Both need to be remitted, but they’re reported differently.

The last piece is human support. Tax compliance isn’t one-size-fits-all. Every business has edge cases: industry-specific exemptions, unusual transaction types, regulatory gray areas. So alongside the software, users get access to tax experts who can provide context when decisions need to be made. The platform handles the mechanics. The experts handle the judgment calls.

Add Nairametrics on Google News

Follow us for Breaking News and Market Intelligence.