By Zhihwi Dauda Esq. (LL. B, B.L, LLM & ACIT) and Amina Bello (LL. B, BL)

  • INTRODUCTION:

The introduction of the Fiscalisation system in Nigeria’s Value Added Tax (VAT) administration, as mandated by Section 158 of the Nigeria Tax Act 2025[1], marks a significant shift in the country’s approach to tax compliance and revenue collection. This system, which involves the use of electronic devices or software to record and transmit VAT data, aims to enhance transparency, accuracy, and efficiency in VAT administration. By leveraging technology, the Fiscalisation system seeks to address challenges such as tax evasion, invoice manipulation, and revenue leakage, ultimately boosting Nigeria’s internally generated revenue and promoting economic growth.

The implementation of the Fiscalisation system, set to take effect from January 1, 2026, is expected to have far-reaching implications for VAT-registered businesses, tax authorities, and the broader economy. As taxpayers’ express concerns about the implications of these changes, there is a growing need to understand the system’s requirements, potential impact on operations, and the adjustments needed to comply with the new system. This analysis examines the concept of Fiscalisation, the legal framework for the Fiscalisation system in VAT administration in Nigeria, with a view to identifying the challenges and suggesting a way forward.

  • THE CONCEPT OF FISCALISATION:

The word Fiscalisation was first used in the writing of H. C. Dent in the year 1886[2] but meaning has since evolve over time. The word Fiscalisation is an internationally used term that describes in one word the progressive development of legal regulations for the use of electronic recording systems.[3] Fiscalisation is “the vehicle that facilitates the documentation and online availability of business transaction data that, in turn, allows a tax administration to analyse those data to improve tax compliance.”[4] Fiscalisation is also define as “the systematic process of utilizing electronic devices or specialized software to record, store, and transmit tax-related data, thereby facilitating seamless integration with the tax authority’s system. This process encompasses the electronic capture of sales data by business entities, secure storage of transactional information, real-time transmission of data, and the deployment of certified devices or software to ensure the integrity and authenticity of the data, ultimately enabling efficient tracking of transactions and payments.”

It is worth noting that Section 202 of the Nigeria Tax Act, (NTA) 2025[5] which provide for general interpretation did not define the concept “Fiscalisation” even though Section 158 (2) of the NTA 2025[6] has define the ‘Fiscalisation system”. For the purpose of this article and in line with Fiscalisation in VAT administration, Fiscalisation can be as “the legal requirement for taxable persons to adopt and implement an electronic system (comprising hardware, software, or communications network) to record, invoice, and report taxable supplies in real-time or near-real-time to the tax authority, as stipulated in Section 158 of NTA 2025”

  • LEGAL FRAMEWORK FOR ENFORCEMENT OF FISCALIZATION SYSTEM IN VAT ADMINISTRATION:

The legal foundation for the fiscalisation of Value Added Tax (VAT) operations in Nigeria is firmly established under the combined provisions of the Nigeria Tax Act, 2025[7] and the Nigeria Tax Administration Act, 2025[8] as follows:

  • Section 158 of the NTA 2025[9] provides the principal statutory basis for Fiscalisation by mandating that: “every taxable person making a taxable supply shall implement the fiscalisation system deployed by the Service in accordance with the Nigeria Tax Administration Act 2025.” This provision establishes the legal framework imposing legal obligation for taxable persons to integrate approved fiscal devices or digital invoicing solutions into their sales and accounting processes as a condition for VAT compliance.
  • Section 158(2) of the NTA 2025[10] defines the “Fiscalisation system” to include: “fiscal equipment, electronic devices, software solution or a communication system involving secured network, or any such combination of the components for electronic invoicing and data transfer as the service may prescribe or deploy” This provision establishes that the “Fiscalisation system” encompasses a range of technologies and tools, including: Fiscal equipment (specialized hardware); Electronic devices; Software solutions and Secure communication networks. These components are used for electronic invoicing and data transfer, enabling real-time tracking of transactions and VAT payments. The tax authority (the Service) has flexibility to prescribe or deploy these components, allowing for adaptability in implementing the Fiscalisation system.
  • Section 153(1) & (4) of the NTA 2025[11] complements this obligation by empowering the Service to require taxable persons to issue electronic tax invoices in respect of all taxable supplies. The section further stipulates the minimum content of such invoices, including the Tax Identification Number (TIN) of the supplier, a sequential invoice number, description of goods or services supplied, VAT amount charged, and the date of transaction. Therefore, the community reading of Sections 153 and 158 of NTA 2025 create an enforceable framework that links electronic invoicing with fiscalisation, thereby establishing a transparent digital trail for the assessment and remittance of VAT.
  • The Nigeria Tax Administration Act, 2025 provides the administrative and operational framework for implementing fiscalisation. The NTAA 2025[12] vests in the Service the power to deploy and regulate electronic fiscal systems, approve fiscal devices, prescribe integration standards, and enforce compliance through administrative penalties.
  • Section 71 (1) of Nigeria Tax Administration Act 2025[13] provide the legal framework for the deployment of technology in tax administration including VAT operation in Nigeria. The section provides thus: “(1)A relevant tax authority may deploy technology to automate tax administration processes including tax assessment, collection, accounting and information gathering. (2) A relevant tax authority may deploy any technology, including third party payment processing platform or computer application to collect or remit taxes due on the supply of digital services to any person in Nigeria whether or not such supply originates from within or outside Nigeria, provided that nothing in this subsection shall be construed as empowering the tax authority of a State to collect tax from a non-resident or in respect of cross-border transactions.”  This provision above empowers tax authorities (Nigeria Revenue Service-NRS) to leverage technology to automate and modernize tax administration processes, including assessment, collection, and information gathering. It also enables them to use technology, such as third-party payment platforms or apps, to collect taxes on digital services supplied to Nigerians, regardless of the supplier’s location. However, it maintains that state tax authorities can’t collect taxes from non-residents or on cross-border transactions, limiting that power. This further strength the power of Tax Authority to enforce Fiscalisation system in VAT administration in Nigeria.
  • Section 4(3)(b) Nigeria Revenue Service (Establishment) Act 2025[14] provides thus: “The Service shall carry out such other activities  as are necessary or expedient for the discharge of all or any of the functions under this act: (b)deploying appropriate technology or digital platforms to automate any of its tax administration processes or h carrying out any of its functions under this Act. This provision provide the legal framework granting the Nigeria Revenue Service  the power to undertake activities necessary for discharging its functions under the Act, specifically including the deployment of technology or digital platforms to automate tax administration processes and carry out its functions, in order word it vested the Nigeria Revenue Service powers to enforce Fiscalisation in collection of all form of tax administer by it to which Value Added Tax is just one of them.

A closer look at these provisions of the relevant Tax Acts in item (1) to (6) above reflect a deliberate policy shift by the Federal Government toward a digitised VAT compliance architecture, aimed at improving transparency, enhancing tax administration efficiency, and curbing the pervasive challenge of under-remittance and tax evasion. The fiscalisation regime is designed to ensure that every taxable supply is electronically captured and transmitted to the Service at or near the point of sale. This model aligns with global best practice in consumption tax administration, mirroring systems already in use in jurisdictions such as Kenya, Ghana and Rwanda.

In practical terms, taxable persons are required to deploy Service-approved fiscal devices or integrate compatible software capable of issuing compliant e-invoices, maintaining sequential numbering, and transmitting transaction data securely to the Service’s database. Businesses must ensure that their invoicing, accounting, and point-of-sale systems are upgraded to meet the technical specifications to be prescribed by the Service under forthcoming fiscalisation regulations.

In sum, the introduction of fiscalisation under the NTA 2025 represents a significant reform in Nigeria’s VAT framework. It transitions the VAT system from manual reporting to a technology-driven compliance model, ensures greater visibility of taxable transactions, and strengthens the Service’s enforcement capabilities. The integration of statutory and administrative provisions across both Acts demonstrates a coherent legal architecture that underpins Nigeria’s move toward a modernised, transparent, and digitally monitored VAT ecosystem.

  • OFFENCES AND PENALTIES FOR FAILURE TO USE FISCALISATION SYSTEM: there are generally two major offences directly sanction in related to Fiscalisation system for VAT Administration namely: failure to grant access for Fiscalisation and failure to use Fiscalisation system as provided below:
  1. Failure to grant access for Fiscalisation under Section 103 of the Nigeria Tax Administration Act 2025[15] provide thus: “A person who refuses to grant access to the relevant tax authority  to deploy technology after 30 days of receipt of the notice under this Act is liable to an administrative penalty of =N=1,000,000 for the first day of default and =N=10,000 for each subsequent day of default.”

It entails that if a person or business refuses to grant access to the relevant tax authority to deploy technology (such as e-invoicing or fiscalisation systems) within 30 days of receiving a notice, they’ll face an administrative penalty. ₩1,000,000 for the first day of default and ₩10,000 for each subsequent day of default. The provision aims to ensure compliance with tax technology deployment, enabling efficient tax collection and administration.

  1. Failure to use Fiscalisation system under Section 104 of the Nigeria Tax Administration Act 2025[16] provide thus: “A taxable person that fails to process a taxable supply through the Fiscalisation system is liable to an administrative penalty of =N=200,000 plus 100% of the tax due and an interest at the prevailing Central Bank of Nigeria Monetary Policy rate per annum.”

The provision outlines the penalty for failing to process taxable supplies through Nigeria’s Fiscalisation system, it is wort noting that, it is different thing to grant access to Tax authority for deployment of Fiscalisation System and it is another different ball entirely to use the Fiscalisation system to collect VAT. Therefore, If a taxable person (business) fails to comply, they’ll face three faces penalty: firstly- Administrative Penalty: ₩200,000, secondly- Additional Penalty: 100% of the tax due and thirdly- Interest: At the Central Bank of Nigeria’s Monetary Policy rate per annum. The goal is to ensure businesses comply with the Fiscalisation system, enabling accurate tax collection and reporting.

  • CHALLENGES THAT CAN LIMIT VALUE ADDED TAX FISCALIZATION

While the Fiscalisation framework introduced under the Nigeria Tax Act, 2025 and the Nigeria Tax Administration Act, 2025 marks a significant advancement in the digitalisation of VAT administration, several practical, legal, and systemic challenges could impede its successful implementation. It is imperative to anticipate these challenges, as they have both compliance and enforcement implications that may ultimately affect the effectiveness of the Fiscalisation regime these challenges are.

  1. The Technology-Readiness Gap: A Threat to SMEs in Nigeria’s E-Invoicing Roll-Out: A major challenge facing Nigeria’s e-invoicing implementation is the technological readiness gap, particularly among small and medium-scale enterprises (SMEs). Many businesses, especially in the informal and semi-formal sectors, lack the necessary infrastructure, including reliable internet, power supply, and compliant accounting software, to support real-time electronic invoicing and data transmission as mandated by Section 158 of the NTA 2025. This infrastructure disparity across Nigeria may hinder uniform implementation and exclude a significant segment of taxable persons, ultimately weakening the Fiscalisation system’s integrity.
  2. Compliance Cost and Integration Burden (Financial Risk): Another key challenge lies in the cost of compliance and system integration. Fiscalisation demands the deployment of approved fiscal devices, software, and secure communication channels as prescribed by the Service. For many businesses, especially those operating with narrow margins, the acquisition, maintenance, and periodic upgrading of such systems may impose an additional financial burden. This could result in resistance, under-reporting, or attempts to circumvent the system altogether. Tax Authority Litigation officers should anticipate some pocket of disputes arising from the enforcement of penalties under Section 104 the NTAA 2025, particularly where taxpayers argue that the cost of compliance or infrastructural limitations made implementation impracticable, even though this excuse will not save the defaulting taxpayer based on the express provision of the law.
  3. Data Protection and Cybersecurity Risks in Fiscalisation Infrastructure: A further challenge concerns data protection and cybersecurity. Since fiscalisation relies heavily on the electronic transmission of sensitive commercial data between taxpayers and the Nigeria Revenue Service, issues relating to confidentiality, data integrity, and system vulnerability become paramount. Breaches of data or unauthorised access could expose taxpayers’ financial information, potentially leading to litigation on privacy or data protection grounds under the Nigeria Data Protection Act, 2023. The Nigerian Revenue Service (NRS) will therefore need to ensure that the fiscalisation infrastructure complies with national cybersecurity standards and that adequate safeguards are in place to protect taxpayer data.
  4. Resistance to Change and Weak Tax-Culture: (A Barrier to Fiscalisation Acceptance) Resistance to change and low tax culture also pose significant obstacles. Nigeria’s tax compliance environment has historically been characterised by limited voluntary compliance and weak enforcement mechanisms. The introduction of a real-time monitoring system may be perceived by some taxpayers as intrusive or burdensome, thereby prompting deliberate non-compliance or manipulation of reporting systems. Effective stakeholder sensitisation, public education, and transparent communication from the Service will be essential to mitigate such resistance and promote acceptance of the Fiscalisation regime.
  5. Institutional Capacity Constraints within the Nigeria Revenue Service: Risks to Effective Enforcement and Audit: A potential constraint is institutional capacity within the NRS Fiscalisation requires a high level of technical competence, system monitoring, and continuous audit capability. The Service must ensure that its personnel are adequately trained to handle electronic data analysis, monitor fiscal device integrity, and respond promptly to system anomalies. Inadequate institutional readiness may undermine enforcement efforts, weaken audit trails, and delay prosecution of offenders, thereby eroding confidence in the system.
  6. Jurisdictional Overlaps and Inter-Agency Coordination Risks in Fiscalisation Implementation: Jurisdictional and inter-agency coordination challenges may arise. Since fiscalisation intersects with ICT infrastructure, data regulation, and business registration systems, successful implementation will depend on effective collaboration between NRS, the National Information Technology Development Agency (NITDA), the Corporate Affairs Commission (CAC), and the Ministry of Finance. A lack of harmonisation of data standards and overlapping regulatory mandates may generate administrative conflicts and litigation concerning regulatory competence.
  • SUGGESTED SOLUTION TO THE CHALLENGES: To ensure the effective implementation of VAT fiscalisation under the Nigeria Tax Act, 2025 (NTA 2025) and the Nigeria Tax Administration Act, 2025, the Nigeria Revenue Service must adopt a multi-dimensional strategy that addresses infrastructural, institutional, legal, and behavioural barriers. The objective is not to guarantee compliance but also to foster voluntary participation, safeguard taxpayer data, and reinforce public confidence in the fiscalisation regime. The solutions are as follows.
  1. Strengthening Digital Infrastructure and SME Support for Effective Fiscalisation Roll‑out: A fundamental solution lies in strengthening digital infrastructure and providing technical support for taxpayers, particularly small and medium-sized enterprises (SMEs). The government, through the Ministry of Communications, Innovation and Digital Economy and in partnership with private service providers, should expand broadband access, stabilise power supply, and subsidise or facilitate access to approved fiscal devices. NRS could also establish a Tax Digitalisation Support Fund or adopt a phased roll-out that allows smaller businesses to transition gradually, in line with their operational capacity. Such interventions would help to close the technological gap that currently threatens uniform compliance.
  2. Establishing a Clear and well define Regulatory Framework under NTA 2025 and NTAA 2025: Equally important is the development of a clear and comprehensive regulatory framework under Nigeria Tax Act 2025 and Nigeria Tax Administration Act 2025. The NRS should issue detailed regulations and implementation guidelines specifying device standards, approved software interfaces, invoicing formats, and reporting procedures. These subsidiary instruments will provide legal certainty, minimise ambiguity, and pre-empt litigation over the scope of NRS’s fiscalisation powers. Early publication of such regulations, followed by stakeholder consultations, will promote transparency and public trust in the process.
  3. Incentive‑Based Compliance Model to Offset Fiscalisation Costs for SMEs: To address the cost of compliance, NRS may consider adopting an incentive-based compliance model. This could include tax credits, staggered implementation deadlines, or government-supported leasing schemes for approved fiscal devices. The Service may also negotiate with certified technology vendors to provide affordable, cloud-based fiscalisation solutions. Encouraging local production of fiscal devices would not only reduce costs but also stimulate domestic innovation and job creation in the technology sector.
  4. Prioritising Data Protection and Cybersecurity in Fiscalisation Infrastructure: Given the sensitivity of electronic tax data, data protection and cybersecurity must be treated as a priority. NRS should ensure that its fiscalisation infrastructure is aligned with the Nigeria Data Protection Act, 2023 and relevant cybersecurity standards. Establishing a dedicated Tax Data Security Unit within the Service, responsible for monitoring data integrity, encryption protocols, and system audits, will strengthen public confidence. The Service should also execute data-sharing agreements with partner agencies to ensure that taxpayer information is handled strictly for lawful and administrative purposes.
  5. Building Institutional and Human Capacity for Digital Tax Enforcement and Litigation: To mitigate institutional and human-capacity limitations, NRS must invest in continuous staff training on digital tax systems, forensic audit, and electronic evidence management. The introduction of fiscalisation changes the nature of tax audits from document-based verification to real-time digital monitoring. Litigation officers, in particular, must be well-versed in the evidential use of electronic fiscal data to defend assessments and enforcement actions in court. A structured capacity-building programme, possibly in collaboration with the National Judicial Institute and tax law faculties, would ensure that both NRS staff and judicial officers understand the new digital compliance environment.
  6. Public Enlightenment and Stakeholder Engagement: Promoting Acceptance and Voluntary Compliance in Fiscalisation: Public enlightenment and stakeholder engagement will also be vital. Fiscalisation should not be perceived as punitive but as an administrative innovation that benefits both the government and taxpayers. NRS should embark on sustained awareness campaigns, workshops, and consultations with business associations, professional bodies, and industry regulators. This approach will promote voluntary compliance and reduce disputes arising from misunderstanding or misinformation.
  7. Institutionalising a Permanent Inter‑Agency Fiscalisation Steering Committee: Inter-agency coordination must be institutionalised. Since fiscalisation cuts across ICT, finance, data protection, and trade regulation, there is a need for a permanent Inter-Agency Fiscalisation Steering Committee comprising representatives from NRS, the Ministry of Finance, NITDA, NCC, CAC, and the Office of the National Security Adviser. This committee would harmonise data standards, streamline reporting obligations, and resolve jurisdictional conflicts that may otherwise lead to administrative inefficiencies or litigation.
  8. Strengthening Enforcement and Dispute‑Resolution Procedures under the NTAA 2025: From a legal perspective, the Service should strengthen its enforcement and dispute-management framework. Clear procedures should be established for handling objections, appeals, and technical disputes arising from fiscalisation. Sections 86–88 of the NTAA 2025 on penalties and enforcement can be complemented with administrative rules providing for warnings, grace periods, and graduated sanctions. This will ensure that enforcement is firm yet proportionate, reducing the likelihood of successful judicial challenges.
  • CONCLUSION:

The introduction of the Fiscalisation system in Nigeria’s Value Added Tax (VAT) administration, as mandated by Section 158 of the Nigeria Tax Act 2025, marks a significant shift towards a technology-driven compliance model. This system aims to enhance transparency, accuracy, and efficiency in VAT administration, addressing challenges such as tax evasion, invoice manipulation, and revenue leakage. The Fiscalisation system requires taxable persons to adopt electronic systems for recording, invoicing, and reporting taxable supplies in real-time, ensuring greater visibility of taxable transactions and strengthening the Service’s enforcement capabilities. While challenges such as technology gaps, compliance costs, data protection risks, and institutional capacity constraints may impede implementation, solutions such as strengthening digital infrastructure, establishing clear regulations, incentivizing compliance, prioritizing data security, building institutional capacity, and promoting public awareness can ensure successful implementation. Ultimately, the Fiscalisation system has the potential to enhance revenue collection, strengthen public confidence, and align Nigeria’s VAT administration with international best practices in digital taxation

[1] Nigeria Tax Act (NTA) 2025 No. 7, S.158

[2] https://www.oed.com/dictionary/fiscalization_n?tl=true Accessed on 5th November 2026

[3] JB Fiscal Consulting. “Collection on Fiscalisation – the progressive development of legal regulations for the use of electronic recording systems” https://www.vatupdate.com/2022/03/02/collection-on-fiscalization-the-progressive-development-of-legal-regulations-for-the-use-of-electronic-recording-systems/ Accessed on 5th November, 2026

[4] IMF eLibrary “How to implement elkectronic fiscal reporting (Fiscalisation) available at <https://www.elibrary.imf.org â€ș article-A001-en> Accessed on 6th November, 2025.

[5] Nigeria Tax Act (NTA) 2025 No. 7, S.202

[6] Nigeria Tax Act (NTA) 2025 No. 7, S.158(2)

[7] Nigeria Tax Act (NTA) 2025 No. 7

[8] Nigeria Tax Administration Act (NTAA) 2025 No. 5

[9] Ibid foot note 1.

[10] Ibid foot note 6.

[11]Nigeria Tax Act (NTA) 2025 No. 7, S.153(1) & (4)

[12] Ibid foot note 8

[13] Nigeria Tax Administration Act (NTAA) 2025 No. 5, S.71

[14] Nigeria Revenue Service (Establishment) Act 2025 No.4, S.4(3)(b)

[15] Nigeria Tax Administration Act (NTAA) 2025 No. 5, S.103

[16] Nigeria Tax Administration Act (NTAA) 2025 No. 5, S.103

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