Businesses will need to upgrade their tax and accounting systems as Nigeria transitions to a digital tax administration regime driven by electronic invoicing, the Nigeria Revenue Service has said.
The e-invoicing framework is being introduced in phases to improve transaction visibility, curb revenue leakages and strengthen tax compliance by giving authorities access to more accurate records of business activities.
Speaking at an e-invoicing compliance breakfast meeting for chief executives, chief financial officers, heads of tax and other finance leaders in Lagos on Tuesday, the Project Manager of the National E-Invoicing Project at the Nigeria Revenue Service, Mohammed Bawa, said businesses must adapt to a changing commercial environment in which more transactions are conducted electronically.
“Business environments are becoming very dynamic, which is making it difficult for tax administration bodies to determine what is taxable,” Bawa said. “There is a need to have visibility over all transactions that are being carried out across every sector of the economy.”
He said e-invoicing would help close the information gap between businesses and tax authorities by creating digital records of transactions and reducing opportunities for turnover under-reporting, tax fraud and inaccurate tax declarations.
According to Bawa, the initiative is part of a global shift towards digital tax administration, with countries such as Kenya, Rwanda and Zambia already implementing similar systems.
“Many transactions today are being done electronically, making it difficult for tax administration bodies to have insight and visibility over these transactions,” he said. “The e-invoicing seeks to address that gap.”
The NRS official said the system would also standardise invoice formats across businesses and enable company accounting platforms to interact directly with government tax systems.
The Director of DigiTax Nigeria, Olumide Akinsola, said e-invoicing is mandatory, but its implementation would be gradual to give businesses time to prepare for the transition.
He said the digital system would benefit companies by improving audit trails, simplifying tax claims and reducing disputes with tax authorities.
“For businesses, your processes become easier, your claims are easier to prove, your refunds are easier to justify, and your audits are easier to do,” Akinsola said.
He, however, noted that invoices issued outside the approved e-invoicing framework could affect businesses’ ability to claim value-added tax credits.
The rollout will begin with large taxpayers recording annual turnover of N5bn and above, followed by medium-sized taxpayers with turnover between N1bn and N5bn, before extending to emerging businesses.
The Nigeria Revenue Service said the initiative marks a major step in Nigeria’s transition from electronic tax services to an automated tax ecosystem in which businesses and government platforms can exchange information seamlessly.
The authority said the ultimate goal of the initiative is to expand the tax base, improve transparency and strengthen domestic revenue mobilisation.
