This article clears up 14 common myths about Nigeria’s 2026 tax laws. It explains that if you earn more than ₦800,000, all income counts, whether it’s from foreign gigs, cash businesses, or side hustles. It also makes it clear that virtual cards don’t hide your identity, FIRS can’t freeze your account without following a 90-day legal process, and having a TIN doesn’t mean you’ll pay higher taxes. In the end, the article advises people to keep proper records, follow official guidelines, and avoid misleading tax advice on social media.

Introduction

Keeping up with the tax updates can sometimes feel overwhelming. Even though the recent changes are meant to move things forward, it takes time to wrap your head around them. WhatsApp messages, Twitter posts, and side street counsel have made most Nigerians think that tax laws are scarier than they actually are. Misinformation is spreading rapidly, both due to anxieties about automatic issuance of penalties when a virtual card is used and arguments that cash businesses cannot be noticed by the FIRS. This article dispels the most prevalent Nigerian tax myths in 2026, with the help of real laws, official FIRS circulars, and how enforcement actually works in practice.

Before we dive in, here are some common myths surrounding Nigeria’s new tax laws in 2026:

Top Myth Verdicts

• Virtual cards hide income from FIRS: FALSE
• Under ₦500k income means no filing: FALSE (The threshold is ₦800k.)
• Cash businesses don't pay tax: FALSE (still taxable)
• FIRS freezes accounts without warning: FALSE
• Getting a TIN triggers heavy taxation: FALSE

Why Do We Need To Address Tax Myths?

Taxes in Nigeria often require special attention because they are easily misconstrued and used to raise confusion and fear, in addition to being prone to misinformation. Due to the changing tax environment in 2026, social media and word-of-mouth have turned into a breeding ground of unsubstantiated allegations and half-truths.

Tax-related misinformation creates both emotional distress and financial loss. Incorrect guidance leads taxpayers to overpay out of caution or under-file out of ignorance, resulting in audits, penalties, and lost deductions.

In this article, we debunk 14 of the most common Nigerian tax myths in 2026, using the actual law (PITA), FIRS guidance, and how enforcement truly works.

Who Pays Tax Myths

• Myth: Only office workers pay tax

Verdict: FALSE

Reality: All income is taxable, regardless of where it comes from. This includes salaries, business profits, professional fees, rental income, dividends, interest, and even income from your side hustle. The law doesn't differentiate between someone working a 9-to-5 job and a freelancer earning through online platforms or a small business owner dealing in cash.

Why it matters: Many freelancers, gig workers, and small business owners operating outside traditional corporate structures mistakenly believe they are exempt. This oversight can lead to significant penalties, interest on unpaid taxes, and a visit from FIRS when they eventually catch up. Whether you're paid via Payoneer, bank transfer, crypto, or direct cash, it's income. FIRS doesn't care about the payment method; they care that you've earned it.

Source: Personal Income Tax Act (PITA) Section 3 states that income tax shall be payable upon the income of any individual from any source whatever.

• Myth: Under ₦500k means you don’t need to file

Verdict: FALSE

Reality: The filing threshold is ₦800,000, not ₦500,000. Under Section 37 of PITA, individuals earning ₦800,000 or more per annum (after consolidating relief allowances) are legally required to file their tax returns.

Why it matters: Many individuals with side gigs or small businesses fall into this ₦300k to ₦500k bracket and mistakenly think they're off the hook. Earning ₦400k annually from side gigs? You must file. The penalty for not filing? A minimum of ₦50,000 for individuals, plus 10% of the unpaid tax for each year of default. This is where confusion comes from, as old social media posts often cite outdated figures or misinterpret the consolidated relief allowance.

• Myth: Foreign income isn’t taxable

Verdict: FALSE. Here's what's actually in the law regarding your international earnings.

Reality: If you are a tax resident in Nigeria, your worldwide income is subject to Nigerian tax.

Nigerian tax law operates on a residence-based taxation principle. An individual is considered a tax resident if they reside in Nigeria for 183 days or more in any 12 months.

That includes:

• Remote salaries from foreign companies
• Freelance income from overseas clients
• Platform earnings from YouTube, Upwork, Fiverr, etc.
• Influencer revenue or ad revenue from social platforms
• Consultancy fees from clients abroad.

Example: If you earned $5,000 from an Upwork gig and the exchange rate was ₦1,450 to $1 on the date of receipt, your taxable income is ₦7.25 million. This must be declared in Naira based on the income receipt date. While double taxation treaties can offer relief, the income is fundamentally taxable in Nigeria if you're a resident.

Virtual Card & Digital Payment Myths

• Myth: Virtual cards help avoid taxes

Verdict: FALSE

Reality: Virtual cards do not offer anonymity for tax purposes. They are issued by financial institutions (like Squareme), which are subject to Know-Your-Customer (KYC) regulations and have a complete paper trail of all transactions.

Examples: Squareme requires BVN verification to issue virtual cards. Every transaction you make, every dollar you load, and every merchant you pay is recorded. Your virtual card statement is actually your best tax documentation, not a tool to hide income.

Consequences: FIRS has data analytics that are more advanced and has a data-sharing agreement with local and international payment platforms. Attempts to conceal income through the use of virtual cards may result in a 300 percent penalty on the tax under-declared, and possibly criminal prosecution for tax fraud.

Truth: Cards aid compliance, don't hide income

• Myth: Every transaction is taxed

Verdict: FALSE

Reality: There is no separate "per-transaction tax" on the mere act of using your card in Nigeria. What actually exists: Value Added Tax (VAT) on the purchase of goods and services, which is usually included in the price you pay. When you buy a Notion subscription, for example, you pay the service fee plus 10% VAT, which is remitted by the service provider. This is a consumption tax, not a tax on the transaction itself.

What doesn't exist: Nigeria does not have a direct equivalent of India's comprehensive Tax Deducted at Source (TDS) system specifically for digital payments. The common confusion stems from the existence of Nigeria's general Withholding Tax (WHT) system and recent efforts to tax the digital economy, which operate differently from India's specific digital-focused TDS rules.

• Myth: FIRS taxes wallet balances

Verdict: FALSE

Reality: FIRS taxes income (when you earn it) and consumption (when you spend on taxable goods/services). It does not tax the balance of funds held in your digital wallet or bank account.

Clarification: Your N500, 000 in your Squareme wallet does not pay taxes just by standing there. Tax is paid at the time you earn that money (income tax) or at the time you use that money on things that are taxable (VAT). In case your wallet balance is generating interest, this interest would be treated as income and may be subject to taxation, but the balance itself is not.

Enforcement Myths

• Myth: FIRS freezes accounts without warning

Verdict: FALSE

Reality: FIRS cannot arbitrarily freeze your bank account. There is a detailed legal process that involves multiple stages and considerable timelines, typically taking 90+ days, before such an extreme measure can be taken.

Actual steps:

• Assessment: FIRS first assesses your tax liability.
• Notice of Assessment: You receive a formal Notice of Assessment.
• 30-day Objection Period: You have 30 days to object to the assessment if you disagree.
• Appeal: If the objection is unresolved, you can appeal to the Tax Appeal Tribunal (TAT).
• Court Order: Only if all these avenues are exhausted, and you still refuse to pay, FIRS can seek a court order to enforce collection, which may include freezing accounts.

Example- You would have received several letters, emails, and SMS messages from FIRS, and you would have plenty of time to repay and remit your dues before any enforcement measure, such as the freezing of your accounts, takes place. This does not happen suddenly without any notice.

• Myth: Jail for small tax debts

Verdict: FALSE

Reality: People are not jailed for honest errors or even minor tax owed. Tax-related crimes can only be served through jail time in serious cases of tax fraud, evasion, or intentional misrepresentation, and not merely owing money or having an error in your filing.

What in fact happens: FIRS generally charges interest on outstanding balances, penalties (such as 10 per cent per annum on late payment), and will negotiate with you on payment schedules, in the case of tax debt.

Fraud vs. error: Reporting N2 million of income and not N2.5 million because of an accounting mistake? You will likely get fines and interest. Making no income when you have received N20 million in an established company on purpose? That is a form of tax fraud, which may result in a jail sentence.

• Myth: Getting a TIN triggers heavy taxation

Verdict: FALSE

Reality: TIN (Tax Identification Number) is simply a special identifier that FIRS generates for individuals and businesses to use in taxation. It is your BVN for money transactions or your NIN for identity. The issue of receiving a TIN does not necessarily raise the volume of your tax liability or put you under high taxation.

What is important: Your tax amount is determined by your income level, applicable allowances, and tax rates, not by the existence of your TIN. Getting one simply means FIRS knows you exist in their system (which they probably already do, especially if you have a BVN or bank account). In fact, not having a TIN can lead to higher penalties (an additional 5% penalty on assessments) and restrict your access to various government services and financial transactions.

Example: Obtaining a TIN for your freelance business doesn't increase your income or raise your tax rate. It just formalizes your identity with the tax authority.

Tax Hack Myths

• Myth: Cash payments mean no tax trail

Verdict: FALSE

Reality: While cash payments might not leave a direct digital transaction trail, FIRS has other methods to detect undeclared income. These include lifestyle indicators and third-party reporting.

How FIRS catches this:

• Lifestyle Audits: Driving a ₦50 million car, living in a prime Ikoyi residence, and posting luxury vacations on Instagram, but filing ₦1 million in annual income? FIRS is increasingly using data from social media, asset registries, and other public sources to investigate lifestyle inconsistencies.
• Third-Party Reporting: Banks automatically report large cash deposits (e.g., above ₦5 million for individuals) to regulatory bodies, which FIRS can access. Business partners, suppliers, and even customers might inadvertently provide FIRS with information that contradicts your filings.

• Myth: File zero income to avoid tax

Verdict: FALSE

Reality: Deliberately filing zero income when you clearly have economic activity is a surefire way to attract FIRS scrutiny and potential penalties for fraud. FIRS investigates inconsistencies and has access to various data points.

Red flags:

• Active social media business: Operating a thriving e-commerce store with significant online presence but reporting no income.
• Registered company with "zero income": A company actively incorporated with CAC, operating for years, but consistently filing nil returns.
• Bank account activity: Significant transactions flowing through your bank accounts that contradict a "zero income" declaration.

FIRS can easily cross-reference your claims with bank statements, social media activity, and industry benchmarks.

• Myth: Accountants make tax disappear

Verdict: FALSE

Reality: Professional accountants optimize your tax position within the bounds of the law; they do not possess magical powers to make legitimate tax liabilities disappear. Their value lies in their expertise in navigating complex tax codes, ensuring compliance, and maximizing legal deductions and reliefs.

Legitimate: A good accountant will:

• Help you identify and maximize all eligible deductions and allowances (e.g., consolidated relief allowance, legitimate business expenses).
• Advise on the most tax-efficient business structure for your operations.
• Strategically time income or expenses where permissible by law.
• Ensure timely and accurate filing to avoid penalties.

Illegal: A bad or unethical accountant might suggest:

• Reporting false expenses.
• Hiding income streams.
• Creating fake invoices. These are illegal activities that can lead to severe penalties for both you and the accountant.

Example: A good accountant might find ₦500,000 in legitimate deductions you missed, thereby reducing your tax liability. They cannot, however, make ₦5 million in legitimate tax vanish.

Compliance Myths

• Myth: You need an accountant to file

Verdict: FALSE

Reality: Although an accountant is the only person who can help you do complex taxes, most Nigerians whose source of income is not complex can self-file their taxes without any difficulties using the FIRS online portal.

Who can self-file:

• Individuals whose primary income is a salary and have minimal, straightforward deductions.
• Freelancers with a single income stream and clear records of expenses.
• Small business owners with simple accounting records.

When you need help:

• You operate multiple businesses.
• You have significant foreign income or investments.
• You employ staff and manage PAYE (Pay As You Earn).
• You have complex deductions, capital gains, or asset sales.

For simple cases, the FIRS portal is user-friendly, and online guides are readily available.

• Myth: Tax clearance is only for government jobs

Verdict: FALSE

Reality: A Tax Clearance Certificate (TCC) is a certificate issued by the FIRS that confirms that all tax liabilities of an individual or a corporate entity have been paid with respect to a particular fiscal year.

Required for:

• Obtaining bank loans or mortgages.
• Applying for certain visas (e.g., UK, USA, Canada).
• Registering a new company or changing directors with the Corporate Affairs Commission (CAC).
• Obtaining or renewing professional licenses and certifications.
• Bidding for government contracts.
• Vehicle registration.

Example: Applying for a Canadian visa? The embassy will typically require 3 years of your Tax Clearance Certificates as proof of tax compliance. This is a crucial document for legal and financial standing.

Conclusion

The world of Nigerian tax law can indeed be complex, but the pervasive myths make it unnecessarily scarier than it is. We've seen how common misconceptions about who pays tax, how digital payments are treated, and the realities of FIRS enforcement can lead to anxiety, confusion, and even costly mistakes.

Don't let viral WhatsApp forwards or uninformed advice drive your financial decisions. Your best defense against misinformation and potential penalties is accurate knowledge, good record-keeping, and honest filing.

Get organised with Squareme! Proper documentation of your income and expenses is your absolute best protection against tax myths and helps you stay compliant. Take control of your financial records today.